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The Corleone and Chung families are the only producers of good h in the United States. The market demand for good h is h=1200-20p. The costs of production for each of them are represented by the cost functions C1(h1) = 10h1 and C2(h2) = 20h2, respectively. Suppose both families must choose their output levels simultaneously.
a) Derive their reaction functions.
b) Calculate the Cournot equilibrium in this market. Indicate output levels, market price, and individual profits.
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