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Consider an industry consisting of two firms producing an identical product. The inverse market demand equation is P = 2 - Q/2.
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:
A) 1.
B) 2/3.
C) 1/3.
D) 1/2.
E) 1/4.
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