In Problem 5, Suppose That Grinch and Grubb Go into the Wine

In Problem 5, suppose that Grinch and Grubb go into the wine business in a small country where wine is difficult to grow. The demand for wine is given by p = $480 - .2Q, where p is the price and Q is the total quantity sold. The industry consists of just the two Cournot duopolists, Grinch and Grubb. Imports are prohibited. Grinch has constant marginal costs of $30 and Grubb has marginal costs of $45. How much Grinch's output in equilibrium?

A) 775
B) 1,162.50
C) 387.50
D) 1,550
E) 2,325

Correct Answer:

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