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What is the best response function of acme

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Now suppose ACME is joined in this industry by Betamax Corp. Demand is unchanged from problem 2, (P = 148-2Q). Betamax has access to the same technology as ACME. That is, both ?rms total costs are C(qi) = 10+4qi where qi is the quantity produced by ?rm i. Let Q = qa +qb be the total number of lava lamps produced (i.e., the sum of those produced by ACME and Betamax respectively). Assume that the assumptions of Cournot duopoly competition apply.

1. Write both ?rms' pro?ts as a function of their quantities. That is, what are πa(qa,qb) and πb(qa,qb)?

2. What is the best response function of ACME?

3. What is the best response function of Betamax?

4. Are ACME and Betamax playing a game with strategic substitutes or strategic complements? Explain your answer.

5. What are the quantities produced by each ?rm in equilibrium?

6. What is the equilibrium price of a lava lamp? How does it compare to the price you found in Problem 2?

Problem 2 Answered link: https://www.coursehero.com/qa/wait/18947126/

7. How much pro?t does each ?rm earn in equilibrium?

Reference no: EM132373314

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