Can someone help me with a hint to solve this problem?? Thanks!!!
"Consider an oligopolistic market with two firms. Each of them produces using a cost function given by c(q)=q2.
The aggregate demand in the market is given by 1000−p.
Suppose that, in order to increase production, the government gives the firms a $100 per-unit produced subsidy. The cost of the subsidy is financed with an identical lump-sum tax on consumers.
What is the total level of production and the equilibrium price in the market?"
I think that the answer could be P=660 and Q=440; but not sure. Am I right?????
1 answer
Sorry, just a clarification, the cost function is c(q)=q^2
5 answers