Find each firm’s reaction function

Reference no: EM131253849

Let's consider a market in which two firms compete as quantity setters, and the market demand curve is given by Q = 4000 - 40P. Firm 1 has a constant marginal cost equal to MC₁ = 20, while Firm 2 has a constant marginal cost equal to MC₂ = 40.

a) Find each firm's reaction function.

b) Find the Cournot equilibrium quantities and the Cournot equilibrium price.

Reference no: EM131253849

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