Question

Suppose that two firms A and B sell water in a market. The market demand function...

Suppose that two firms A and B sell water in a market. The market demand function can be expressed as P = 120 – Q, where Q = qA+qB. For each producer, the marginal cost =average total cost of producing each unit = $30. If the firms behave as Cournot competitors, in the Nash equilibrium, the industry price of water will be

a. $60
b. $20
c. $30

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The correct answer is $60.

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