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The market demand curve is Q = 38 P. There are two Örms: Örm 1 and Örm 2. One Örm has MC = 2 and the other MC = 5. They choose outputs simultaneously (the Cournot model). (a) Find an equation for 1ís reaction curve. (b) Find an equation for 2ís reaction curve. (c) Plot both reaction curves on the diagram (with Örm 1ís output on the horizontal axis and Örm 2ís output on the vertical axis). (d) What outputs will they choose in equilibrium? (e) Calculate is the DWL in the Cournot equilibrium. (f) Show what a reaction curve diagram would look like for two Örms when one of them has MC = 3 and the other one has MC = 10.
q.a construction company is bidding on a project comprising five high-rise buildings to be erected one after the other.
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