1. Suppose that the market demand is described by P = A – B(Q+q)
where P is the market price, Q is the output of the incumbent firm,
and q is the output of the potential entrant to the market. The
incumbent’s total cost function is C(Q) = c1Q, whereas the cost
function of the
entrant is C(q) = c2q+F.
a. If the entrant firm observes the incumbent producing Q* units of
output and expects
this output level to be...