Two firms produce the same good and compete against each other in a cournot market. the market demand for their product is p = 204minus4q, and each firm has a constant marginal cost of $12 per unit. let upper q subscript i be the output produced by firm i, where i = 1,2. then, firm 1's reaction function is

= 24 - 0.5

Explanation:

Given that,

There are two firms in the cournot market,

Market demand for their product ⇒ P = 204 - 4Q

Each firm's constant marginal cost (MC) = $12 per unit

Let and are the output produced by the firm 1 and firm 2.

P = 204 - 4Q

P = 204 - 4( + )

P = 204 - 4 - 4

Total revenue for firm 1 = Price × Quantity()

                                       = 204 - 4 - 4

Marginal revenue for firm 1 = 204 - 8 - 4

MR = MC

204 - 8 - 4 = 12

= 24 - 0.5

Above is the firm 1's reaction function.

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