Market Structures

. The inverse demand in a Cournot duopoly is P = a – b (Q 1 + Q 2), and costs are C1 (Q1 ) = c 1 Q 1, and C 2 (Q2) = c 2 Q 2 . The Government has imposed a per unit tax of $t on each unit sold by each firm. The tax revenue is:

A. t times the total output of the 2 firms should there be no sales tax

B. Less than t times the total output of the 2 firms should there be no sales tax

C. Greater than t times the total output of the 2 firms should there be no sales tax

D. None of the above