Market for lemonade in town consists of two lemonade stands

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The market for lemonade in a town consists of two lemonade stands (i.e., firms), 1 and 2. An agricultural economist estimates the following market demand for lemonade in this town: Q = 250 - P, where Q is the market quantity and P is the market price. Total costs of the two firms are indicated below: TC1 = 50Q1 (such that marginal cost is constant at 50) TC2 = 50Q2 (such that marginal cost is constant at 50) Acting as Cournot competitors, find and graph the reaction functions of each firm (indicating appropriate horizontal- and vertical-axis intercepts). Determine the Cournot equilibrium output of each producer, as well as each firm’s profit.

Reference no: EM131161177

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