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1. Two firms produce a homogenous good in a Cournot duopoly. The demand for this good is given by Q= 62 1 - P 15 30 , with Q=q 1 +q2 . Also assume that both firms have the same total cost function, which is C ( q 1 )=4 q 1 and C ( q 2 )=4 q 2.
a. For each firm, derive the best response function below. Show all work.
b. Graphically represent the best response functions for both firms below. Please put q 2 on the x-axis and q1 on the yaxis.
c. Solve for the Nash Equilibrium output of each firm.
d. Solve for the equilibrium price in this market.
e. Solve for the equilibrium profit of each firm.
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