The demand functions of two Duopolists are given as: P1 = 105 -2q1- q2
P2 = 35 -q1 - q2
and their respective cost functions are C1= 5q1^2 and C2 = q2^2
a) if Duopolist 1 increases its price by $2, what will be its effect on its profit and output levels?
b) If duopolies 1 reduces the price by $ 2, how much price reduction will be required by the Duopolist 2 to maintain his old level of output?
1
Expert's answer
2020-11-16T07:17:55-0500
a) if Duopolist 1 increases its price by $2, then its profit and output levels will decrease.
b) If duopolist 1 reduces the price by $2, then the same or higher price reduction will be required by the Duopolist 2 to maintain his old level of output.
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