OilPro and GreaseTech are the only two firms who provide oil changes in a local market in a Cournot duopoly. The oil changes performed by the two firms are identical, and consumers are indifferent about which firm they will purchase an oil change from. The market inverse demand for oil changes is P = 100 – 2Q, where Q is the total number of oil changes (in thousands per year) produced by the two firms, qO + qG. OilPro has a marginal cost of $12 per oil change, while GreaseTech has a marginal cost of $20. Assume that neither firm has any fixed cost.
How many oil changes will each firm produce in a Cournot equilibrium?
OilPro will produce zhw5AiG32jY= thousand oil changes.
GreaseTech will produce DDH6Tw1RFEk= thousand oil changes.
What will the market price for an oil change be?
The price of oil changes will be $ LOXpWXxH6ie30/5l .
How much profit does each firm earn?
OilPro earns $ GoudNZ/Oz9vIoPjR thousand profit.
GreaseTech earns $ zqXJ9fv1hq+d2wqv thousand profit.