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Homework answers / question archive / Consider the following Cournot competition
Consider the following Cournot competition. The demand curve is p=40Q. Both firm's marginal cost of production is MC=10. Now let firm 1 move first, determine the equilibrium.
(a) Yes, the initial allocation is Pareto efficient as moving from the initial allocation to another location makes B worse off while making A better off.
(b) Since the allocation is Pareto efficient, it lies on the contract curve.
