Question: Question 2

Same scenario as above (company x and r)with linear demand function

P = 200 - Qr - Qx

Total cost function for both

TCx = 1,500 + 55Qr + Q²x

TCr = 1,200 + 20Qx + 2Q²r

Using a Cournot model each firm assumes that the other won’t change the price

Determine profits for firm x and firm r, and the total industry profits at the long run equilibrium output selling price