Assume that two companies (A and B) are duopolists who produce identical products. Demand for the products is given by the following linear demand function:

P = 200 −QA −QB

Where QA and QB are the quantities sold by the respective firms and P is the selling price. Total cost functions for the two companies are

TCA = 1,500 + 55QA +Q2A

TCB = 1,200 + 20QB + 2Q2B

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 Firm A, Firm B, and total industry profits at the equilibrium solution found in Part (a).