Unformatted text preview: T /2 everywhere you see Q 1 or Q 2 in the Total Cost functions. 4) Take the derivative of profit with respect to Q T and set that equal to zero. Solving for Q T yields the quantity that maximizes industry profit. 5) Plug Q T into the market demand equation to find the industry price. 6) Q T /2 gives you Q 1 & Q 2 . That’s it. Six steps and you’re done. Note: Step 3 only works where the firms’ costs are symmetric. Solving with asymmetric costs is takes a little extra work and we haven’t shown you how, so it won’t come up on the final....
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This note was uploaded on 11/13/2009 for the course ECON 181 taught by Professor Kasa during the Spring '07 term at Berkeley.
- Spring '07