Problem
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.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.