Question

If the market demand for a duopoly is given by p=30 - 0.5q and the equilibrium quantity supplied by each firm is one-third the original market demand, what is the equilibrium market price?

• A. Rs 30
• B. Rs 20
• C. Rs 15
• D. Rs 10

Answer 1

The correct option is D

Rs 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,
$p=30-0.5\times 40=30-20=Rs10$