# Need economics help to Consider an industry consisting of two firms producing an identical product.

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### Question Description

Consider an industry consisting of two firms producing an identical product.  The inverse market demand equation is P = 2 – Q/2.  The total cost equations for firms 1 and 2 are TC1 = Q1 and TC2 = Q2, respectively. Suppose that the two firms are Cournot competitors.  The equilibrium level of output for firm 1 is:

JamesM847
School: University of Maryland

The profit of Firm P1 = PQ1-Q1 =(2-(Q1+Q2)/2)Q1-Q1 = Q1-1/2 Q1^2-Q1Q2/2

The profit of Firm P2 = PQ2-Q2 = (P-1) Q2 = (1-(Q1+Q2)/2)Q2= Q2-1/2 Q2^2-Q1Q2/2

take partial derivative of  dP1/dQ1  and dP2/Q2  and let them = 0, we have

Q1=Q2 = 2/3

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Anonymous
awesome work thanks

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