Consider a Cournot duopoly with the following inverse demand function: P = 50 - 0.2Q1 - 0.2Q2. The firms' marginal cost are identical and given by MCi(Qi) = 2. Based on this information firm 1 and 2's reaction functions are

Question

A) r1(Q2) = 4.8 - 0.5Q1 and r2(Q1) = 4.8 - 0.5Q2.

B) r1(Q2) = 4.8 - 0.5Q2 and r1(Q2) = 4.8 - 0.5Q1.

C) Q1 = 25 - 0.75Q2 and Q2 = 25 - 0.75Q1.

D) Q1 = 120 - 0.5Q2 and Q2 = 120 - 0.5Q1.

Answer 1

B) r1(Q2) = 4.8 - 0.5Q2 and r1(Q2) = 4.8 - 0.5Q1.