Question

identical price-setting duopoly firms have constant marginal costs of $20 per unit and no fixed costs. Consumers view the firms' products as perfect substitutes. The market deman Q=120−p. firm 1's price is $ and firm 2 's price is $

Answer 1

In a duopoly market, identical price-setting firms determine their prices based on the market demand function. Using the marginal cost pricing rule, each firm sets its price by equating its marginal cost with the derivative of the demand function. In this case, firm 1 and firm 2 both set a price of $60.

Step-by-step explanation:

In a duopoly market with identical price-setting firms, the firms will set their prices based on the market demand function, where demand is Q = 120 - p. Since consumers view the firms' products as perfect substitutes, the firms will compete to attract customers by lowering their prices.

To find each firm's price, we can use the marginal cost (MC) pricing rule. The MC is given as $20 per unit. Setting MC equal to the derivative of the demand function will give us each firm's optimal price. Solving for p, firm 1's price is $60, and firm 2's price is also $60.