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Oil Can Henry’s (OCH) and Jiffy Lube (JL) are the only two firms that provide oil...

Oil Can Henry’s (OCH) and Jiffy Lube (JL) are the only two firms that provide oil changes in a local market in a Cournot duopoly (a two-firm oligopoly). The inverse demand curve for oil changes is: P = 100 – 2Q where quantity is measured in oil changes per year in thousands and price is measured in dollars per job. Assume OCH has a marginal cost of $12 per job and JL has a marginal cost of $20.

A. Determine each firm’s reaction curve.

B. How many oil changes will each firm produce in Cournot equilibrium?

C. What will the market price of an oil change be?

D. How much profit does each firm earn?

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