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The market demand for a good is represented by P = 400 ?20Q. Firms are symmetric...

The market demand for a good is represented by P = 400 ?20Q. Firms are symmetric with cost functions C = 30q. Assume the firms compete in a Cournot Oligopoly (i.e., simultaneous choices of quantity).

Cooperation: Consider the same demand and cost functions from above, focusing on the case where there are two firms in the market. Suppose the two duopolists agree to a cartel in which they each produce half of the monopoly output. Show that this cannot be an equilibrium. [Hint: what is the best response of one firm if the other produces half of the monopoly output?]

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