The inverse demand in a Cournot duopoly is P = a - b (Q1 + Q2), and costs are C1(Q1) = c1Q1 and C2(Q2) = c2Q2. The government has imposed a per unit tax of $t on each unit sold by each firm. The equilibrium price of each firm is the same as a situation where: a. each firm’s demand increases by t. b. each firm’s demand decreases by t. c. each firm’s marginal cost increases by t. d. each firm’s marginal cost decreases by t.

Answer rating: 100% (QA)

In a Cournot duopoly firms determine their output levels simultaneously taking into account the outp... View the full answer