Assume the two companies (C and D) are duopolists that produce identical products. Demand for the products is give by the following linear demand function:
P = 600-Qc-Qd
where Qc and Qd are the quantities sold by respective firms and P is the selling price. Total cost functions for the two companies are:
TCc = 25,000+100Qc
TCd = 20,000 + 125Qd
Assume that the firms act independently as in the Cournot model (i.e., each firm assumes that the other firm's output will not change).
a) Determine the long-run equilibrium output and selling price for each firm
b) Determine the total profits for each firm at the equilibrium output found in part a.