Suppose we have a duopoly in the production of mineral spring water. Each firm h

ID: 1187746 • Letter: S

Question

Suppose we have a duopoly in the production of mineral spring

water. Each firm has the same cost structure where MC(Q) = 10. The

market demand for mineral spring water is given by: P= 70 -

Q/50

a. Each firm, wishing to maximize profits, assumes that the

other firm will not change his current level of production. What

will be the final level of production for the market (after a

Cournot equilibrium is reached)? How much is produced by each firm?

How much profit is earned by each firm?

b.If we had efficiency in the duopoly, what would

the market quantity and price be? How does this compare to your

answer?

If you can please explain each step as best as possible I would

really appreciate it. One of the answers I got was Q=318.5 and

P=63.63 but please review that too. Also please ignore all "Ã‚" symbols. I dont know how to take them off. Thank you

Q=50*(70-P)..

(Î”.Q/Q)/(Î”.P/P)Ã‚ =50*P/Q=10...

Q=5P.....P=63.63

and Q=318

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