π = TRt – TCt

∂TRt
MR = ……... (1)
∂Q
∂TC
MC = ……......(2)
∂Q

∂π ∂TRt ∂TC
= -
∂Q ∂Q ∂Q
∂π
i.e., = MR – MC (From equation 1 & 2)
∂Q

At profit maximization condition,

∂π
=0
∂Q
Therefore, 0 = MR – MC
Hence, MR = MC

∂Q P
We know, ղ = X ……... (3)
∂P Q
∂TRt ∂Q ∂P
Also, MR = =P +Q ,
∂Q ∂Q ∂Q
∂P
=P+Qx
∂Q

P 1
MR = P + Q x x
Q ղ
P
Therefore, MR = P +
ղ
1
MR = P (1 + )
ղ
1
i.e., MC = P (1 + ) …………… [ Since, MC = MR]
ղ
Market Curve:

P(Q) = 15 – Q. 

Analysis for firm A:

T Ra = Q a x P
= Q a x (15 - Q a - Q b)
= 15Q a−Q 2a−Q a .Q b

1. (a) Response function for firm A

M Ra = 15-2Q a-Q b

M Ra = MC a

15-2Q a-Q b= 6

Hence,

9-Q b=2Q a

Q a = 4.5 – 0.5Q b

1. (b) Response function for firm B

Analysis for firm B:

T Rb = Q b x P
= Q b x (15 - Q a - Q b)
2
= 15Q b−Q b−Q a .Q b

M Rb = 15-2Q b-Q a

M Rb = MC b

15-2Q b-Q b= 6
Hence,