7. a) its optimal price, holding the price of its competitors constant. b) its best response to the price changes of the competitor firm. c) its optimal level of output, holding the output of the other firm constant. d) the level of output that would optimize profits for all firms. Suppose that firms A and B are Cournot duopolists in the salt industry. The market demand curve can be specified as $P = 200 - Q_A - Q_B$. The marginal cost to each firm is $\40$. Suppose that firm A is producing 100 units. What is firm B's profit-maximizing quantity? Hint (also useful for question 9): the partial derivative of ($c - bX - bY$)X with respect to X is $c - 2bX - bY$. a) 100. b) 60. c) 30. d) 20. 8. Which of the following is not a characteristic of monopolistic competition? a) The market is fragmented.
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To do this, we need to use the power rule of differentiation, which states that the derivative of X^n with respect to X is nX^(n-1). Using the power rule, the partial derivative of (c - 2bX - bY)X with respect to X is: d/dX [(c - 2bX - bY)X] = (c - 2bX - bY) + Show more…
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