DSE 2010 Doubts

[Khagesh]

Q 19: Cournot Duopoly vid P(x)= 5-x , 2 firms. Firm1 has const avg cost =5/2 n firm has 3/2. In equib solve.

How to do dis??

Q20: Y does if all input prices double d min cost of product double?? Shldnt it depend on production func???

Q 25, 26 wat are the answers??!?

[sunny2009]

ques no. 19,
p(x)=5-x
     =5-x1-x2
for firm 1,
revenue=(5-x1-x2).x1
cost=5/2.x1
profit(x1)=revenue-cost
differentiate profit(x1) with respect to x1.....(part 1)

similarly,
find out the profit function for firm 2........
differentiate profit(x2) with respect to x2.....(part 2)

find out the values of x1 and x2 from part 1 and part 2.
u will get the answers as x2=3/2   and x1=1/2

hence both firms r producing positive outcomes with firm 2 producing more than firm 1.