two firms a and b produce goods a and b, respectively

Project Description:

.two firms a and b produce goods a and b, respectively. the linear demands for the two goods are, respectively,

equation 1

production costs are constant but not equal:

equation 2
•using calculus, derive the equations for best response curves.
•sketch a graph of the two best-response curves. label both axes and response curves.
•if firm a expects firm b to set its prices at \$20, what is firm a’s best response? if firm b predicts firm a will price good a at \$36, what is firm b’s best response?
•what is the nash equilibrium price and quantity for each firm?
•how much profit does each firm earn in nash equilibrium?
•if firm a and firm b set prices of \$22 and \$35 respectively, how much profit does each firm earn? why don’t they choose these prices then?
Skills Required:
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