Suppose a single firm produces all of the output in a contestable market. The market inverse demand function is P = 150 - 2Q, and the firm's cost function is C(Q) = 4Q. Determine the firm's equilibrium price and corresponding profits.
The inverse market demand in a homogeneous-product Cournot duopoly is P = 200 - 3(Q1 + Q2) and costs are C1(Q1) = 26Q1 and C2(Q2) = 32Q2.
a. Determine the reaction function for each firm.
Firm 1: Q1 = - Q2
Firm 2: Q2 = - Q1