Question: Help in showing in showing solution how the substitution happened (rectangle) and how Q1 = Q2 = 60 was arrived at. I am going to

Help in showing in showing solution how the substitution happened (rectangle) and how Q1 = Q2 = 60 was arrived at.

I am going to give a review thanks.

Market demand curve: P = 400-2(Q1+Q2) MC1 = MC2 = 40 Compute reaction function of each firm as below: Equate MRI = MC1 400-4Q1-2Q2 = 40 360-202 = 4Q1 Q1* = 90-0.5Q2 Similarly, Q2* = 90-0.5Q1 Substitute the reaction function of each firm into each other. This gives: Q1 = Q2 = 60 P = $160 Profit of each firm = (P-MC)Q = (160-40)60 = $7200 Market profits = 7200+7200 = $14400

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