The inverse demand in a Cournot duopoly is P = a ? b(Q1 + Q2), and costs are C1(Q1) = c1Q1 and C2(Q2) = c2Q2. The government has imposed a per-unit tax of $t on each unit sold by each firm. The tax revenue is:

A. greater than t times the total output of the two firms should there be no sales tax.
B. t times the total output of the two firms should there be no sales tax.
C. less than t times the total output of the two firms should there be no sales tax.
D. None of the answers is correct.


Answer: C

Economics

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