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SCENARIO 3: Consider an industry consisting of two firms producing an identical product. The inverse market...

SCENARIO 3: Consider an industry consisting of two firms producing an identical product. The inverse market demand equation is P = 100 − 2Q. The total cost equations for firms 1 and 2 are TC1 = 4Q1 and TC2 = 4Q2, respectively.

9. Refer to SCENARIO 3. Suppose that the two firms are Cournot rivals. Firm 1’s reaction function is:

a. Q1 = 12 − Q2.

b. Q1 = 12 − 0.25Q2.

c. Q1 = 24 − 0.5Q2.

d. Q1 = 24 − 0.25Q2.

e. None of the above.

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OPTION C IS CORRECT

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