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Cournot: Consider a Cournot duopoly in which firms A and B simultaneously choose quantity. Both firms...

Cournot:

Consider a Cournot duopoly in which firms A and B simultaneously choose quantity. Both firms have constant marginal cost of $20 and zero fixed cost. Market demand is given by:

P = 140 − qA − qB.

(a) Derive the best-response functions for each firm and plot them on the same graph.

(b) Calculate the profits of each firm in the Nash Equilibrium outcome.

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