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Question

If market demand for a duopoly is given by p=30 - 0.5q and equilibrium quantity supplied by each firm is 1/3 times demand, market price is (MC=0) .

A
10
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B
15
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C
20
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D
30
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Solution

The correct option is A 10
Maximum market demand corresponds to p = 0. Substituting 0 for p in the demand equation, we get the maximum demand as 60.

Hence, each of the firms would supply one-third of 60 i.e. 20 units.
Total equilibrium quantity supplied = 40 units

Equilibrium market price = 10

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