Question: In a market that operates under quantity competition there are 2 firms (Cournot duopoly). The inverse demand function is P = 150 - Q. The

In a market that operates under quantity competition there are 2 firms (Cournot duopoly). The inverse demand function is P = 150 - Q. The cost structure of firm 1 is given by C1(q1) = 1,000 + 12 q1and that of firm 2 is given by C2(q2) = 2,000 + 6 q2.

Define the profit maximization problem that every firm faces and solve for the best response function. Use this (or the first order condition directly) to answer the following:

The Nash Equilibrium price P* and the Lerner Index for th market is:

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