Determine the reaction function of each firm

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Reference no: EM13204671

Two firms compete in a market to sell a homogeneous product with inverse market demand function as follows:

P = 400 - 2Q

Each firm produces at a constant marginal cost of $50 and has no fixed costs.
Use this information to answer the following questions:

a. Assume the market is characterized by a Cournot oligopoly.
i. Determine the reaction function of each firm.
ii. Determine the equilibrium output level for each firm.
iii. Determine the equilibrium market price.

b. Assume the market is characterized by a collusive behavior (that is, the two firms decided to collude and behave as a monopoly).
i. Determine the market output.
ii. Determine the market price.

Reference no: EM13204671

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