Final answer:
In a duopoly with market demand p = 240 - Q and constant marginal costs for Firm 1 and Firm 2 of $20 and $40 respectively, the profit-maximizing output level for each firm is 40 units, based on the given information that MR and MC intersect at this quantity.
Step-by-step explanation:
The subject of this question is Economics, as it involves concepts related to market structures and firm behavior in an oligopoly, specifically a duopoly. The grade level is most suitable for College since it assumes a student's understanding of intermediate microeconomics, including concepts of marginal cost and market demand.
To calculate the output level for each firm in a duopoly facing a market demand of p = 240 - Q where Firm 1 has a constant marginal cost of $20 and Firm 2 has a constant marginal cost of $40, we would need to use the Cournot model of competition. However, in the simplified information provided, it states that both firms' marginal revenue (MR) and marginal cost (MC) intersect at a quantity of 40. This implies that the profit-maximizing level of output for each firm is 40 units, assuming the firms' outputs are strategic substitutes and MR and MC curves typical of the Cournot model are accurate. With this simplified assumption, Firm 1 and Firm 2 would each produce 40 units to maximize profits.