two firms produce a homogenous good, each firm simultaneously decides on its quantity to produce and...

two firms produce a homogenous good, each firm simultaneously decides on its quantity to produce and respectively letting the market determine the price. the market price for both firms is P= 4020-10(q1+q2). firm 1 faces marginal cost c1=40. firm faces marginal cost c2=80.

11.1 write down the profit function for each firm as a function of q1 and q2

.2 Determine the best response function of each firm and draw a graph of the best response curves

.3 determine the quantities produced by each firm at nash equilibrium- indicate on the graph.

.4 what quantities will firm 1 and and 2 produce if they form a cartel? (joint best solution)

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Expert Solution

Graph of Best response function

Rahul Sunny answered 2 years ago

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