Consider a Cournot duopoly with the following inverse demand function: P = 50 ? 0.2Q1 ? 0.2Q2. The firms' marginal costs are identical and are given by MCi(Qi) = 2. Based on this information, firm 1 and 2's reaction functions are:
A. r1(Q2) = 120 ? 0.5Q2 and r1(Q2) = 120 ? 0.5Q1.
B. Q1 = 240 ? 0.5Q2 and Q2 = 240 ? 0.5Q1.
C. r1(Q2) = 120 ? 0.5Q1 and r2(Q1) = 120 ? 0.5Q2.
D. Q1 = 240 ? 0.75Q2 and Q2 = 240 ? 0.75Q1.
Answer: A
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