Question

1.Both firms in a Cournot duopoly would enjoy lower profits if:

Multiple Choice

one firm reduced output below the Cournot Nash equilibrium level,
while the other firm continued to produce its Cournot Nash
equilibrium output.

None of the answers is correct.

each firm simultaneously increased output above the Nash
equilibrium level.

the firms simultaneously reduced output below the Nash equilibrium
level.

2.Both firms in a Cournot duopoly would enjoy higher profits if:

Multiple Choice

the firms simultaneously reduced output below the Nash equilibrium
level and one firm reduced output below the Cournot Nash
equilibrium level, while the other firm continued to produce its
Cournot Nash equilibrium output.

one firm reduced output below the Cournot Nash equilibrium level,
while the other firm continued to produce its Cournot Nash
equilibrium output.

the firms simultaneously reduced output below the Nash equilibrium
level.

each firm simultaneously increased output above the Nash
equilibrium level.

Answer #1

Consider a duopoly with two firms with the cost functions:
Firm 1: C1(q1)=5q1
Firm 2: C2(q2)=5q2
The firms compete in a market with inverse demand
p = 300 - 8Q
where Q=q1+q2. The firms compete in a
Cournot fashion by choosing output simultaneously.
What is the Nash-Cournot equilibrium output of firm 1? Round to
nearest .1

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