Suppose the maximum market demand in a duopoly market is 60 and the cost of production is negligible. The equilibrium quantity supplied by each firm is equal to ___

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Solution

For a straight line demand and zero costs, profit maximization occurs when the firms supply exactly half of existing market demand.

Suppose firm A supplies 30 units exactly.
The existing demand is 30. Therefore B would supply half of it i.e. 15 and so on. The quantity supplied can be tabulated below.

$\begin{matrix} F i r m & Q_{s} A & 30 B & 15 A & 22.5 B & 18.75 A & 20.625 B & 19.69 \end{matrix}$

It can be observed that, the equilibrium output for both firms converge to 20

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