REVIEW QUESTIONS
1. Suppose that we have two firms that face a linear demand curve p(Y) =
n - bY and have constant marginal costs, c, for each firm. Solve for the
Cournot equilibrium output
for each firm.
Answer: The Cournot equilibrium output for each firm is Y1 = (n-c)/2b and Y2 = (n-c)/2b.