Question

Suppose there are two firms. boors and cudweiser each selling identical-tasting nonalcoholic beer. consumers of this beer have no brand loyalty so market demand can be expressed as p = 5 - 0.001 ( q_b q_c). boors' marginal revenue function can be written mr = 5 - 0.001 ( 2q_b q_c ) and symmetrically for cudweiser boors operates with out-of-date technology and has constant cost of $4 per unit ( p = mc = $4 ), whereas cudweiser has constant cost of $2 per unit. assuming the firms behave as cournot competitors. in the nash equilibrium. cudweiser will produce ?

Answer 1

In a Cournot competition, Cudweiser will produce a quantity that corresponds to the Nash equilibrium.

Step-by-step explanation:

In a Cournot competition, firms determine their quantity to produce based on the quantity produced by their competitors. Each firm wants to maximize its profit, so they consider the marginal revenue they can gain from selling an additional unit. In this case, Cudweiser's marginal revenue function can be written as MR = 5 - 0.001(2qbqc), where qb and qc are the quantities produced by Boors and Cudweiser, respectively. The Nash equilibrium occurs when both firms' quantities are determined simultaneously and neither has an incentive to deviate from that quantity. Therefore, Cudweiser will produce a quantity that corresponds to the Nash equilibrium.