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Unformatted text preview: marginal revenue equals marginal cost. MR B =1-q A-2q B =MC B =1/2 q B =1/4-1/2 *q A (Firm Bs best reply). Firm A: predicting that q B =1/4 -1/2 q A , firm A knows that P=1-q A-q B =3/4-1/2 q A . To maximize profit, Firm A will choose output such that marginal revenue equals marginal cost. MR A =3/4 q A =MC A =1/2. q A =1/4, q B =1/4-1/2*q A =1/8. P=5/8....
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This note was uploaded on 06/16/2011 for the course ECON 110 taught by Professor Tan during the Spring '07 term at HKUST.
- Spring '07