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wo firms produce the same good and compete against each other in a Cournot market. The market demand for their product is P = 204 - 4Q, and each firm...

wo firms produce the same good and compete against each other in a Cournot market.

The market demand for their product is P = 204 - 4Q, and each firm has a constant marginal cost of $12 per unit.

MR1 = 204 - 8q1 - 4q2. Let q1 be the output produced by firm i, where i = 1,2.


1. Firm 1's reaction function is ­­­­______.


2. In the Cournot equilibrium for this market, each firm will produce ____ units of output, and the market price will be___.


3. Each firm will earn a profit of ___.

Suppose that instead of competing as a Cournot firm, Firm 1 decides to announce its production decision before Firm 2 chooses its output. Thus, Firm 1 acts as a Stackelberg firm. Use the same market demand, P = 2 - 4 - 4Q and marginal cost, $12, as before.


4. Firm 1 will produce ___ units, Firm 2 will produce ____ units, and the market price will be ____.


5. Firm 1's profit will be ____, and Firm 2's profit will be ____.


After a few years of Cournot and Stackelberg competition, the firms decide to collude and maximize their joint profit. They want to determine the total amount of output they should produce, and then each firm will produce half that amount.


6. The firms should produce a total of ___ units, and the market price will then be ____.



I have the solution for this but it is given in Q1, Q2 terms and I am struggling to understand how to solve it

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