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Assume that there are two firms in an industry, each producing with a constant marginal cost...

Assume that there are two firms in an industry, each producing with a constant marginal cost function of MC = 10. Assume that the demand function for the product is defined as follows: Q = 200 – 2P.

a) Derive the best reaction functions for both firms. (5 marks)

b) Determine the cournot equilibrium quantities and cournot equilibrium price. (5 marks)
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