What are the two rivals reaction functions

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Reference no: EM13733613

There are two gravel suppliers in the Davis area, Hibbert (H) and Davis Lumber (D). They are engaged in Cournot competition, and face the same inverse demand curve for gravel, given by P = 60 - 5Q, where P is in dollars per cubic yard (yard, for short) and Q is hundreds of yards sold per month. D has marginal cost MC = $10 per yard, while H has MC = $20 per yard.

(a) What are the two rivals’ reaction functions?

(b) Graph the two reaction functions, and find the Cournot equilibrium market price as well as the quantities supplied by each firm.

Reference no: EM13733613

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