Answer to Question #154268 in Microeconomics for Ravi

Question

Suppose there are two profit maximizing firms 1 and 2 producing q1 and q2 units respectively of a homogeneous good. The marginal cost of production for the firms 1 was c and firm 2 was d. The inverse demand function for this good is p = 1 – Q, where p is the price and Q = q1 + q2 is the total output produced by these firms. Suppose the firms choose their outputs simultaneously. In equilibrium, outputs chosen by the firms are:

A) (q1, q2) = ((1-2c- d)/3, (1-2d- c)/3)

B) (q1, q2) = ((1+2c+ d)/3, (1+2d+ c)/3)

C) (q1, q2) = ((1-2c+d)/3, (1-2d+ c)/3)

D) (q1, q2) = ((1+c+ d)/3, (1+d+ c)/3)

Answer 1

Firms producing homogeneous goods produce dependent on market demand.