Use the data from Exercise 6.1. The best-response curve for Firm 2 is q₂ = 6 − q₁/2, which can be written as q₁ = 12 − 2q₂. 

a. Create a spreadsheet with columns denoted BR₂, q₁, Q, p, and Profit₂. Set the output of Firm 1 in the second column from 0 to 6 in increments of one unit. Fill in the spreadsheet and use the scatterplot option to draw the best-response curve for Firm 2. 

b. Create a new spreadsheet showing the best-response curves for Firm 1 and Firm 2 on the same diagram, with q₂ on the horizontal axis and q₁ on the vertical axis. What is the Nash-Cournot equilibrium price, quantity (for each firm), and profit (for each firm)?

Exercise 6.1

The inverse market demand curve for a duopoly market is p = 14 − Q = 14 − q₁ − q₂, where Q is the market output, and q₁ and q₂ are the outputs of Firms 1 and 2, respectively. Each firm has a constant marginal cost of 2 and a fixed cost of 4. Consequently, the Nash-Cournot best-response curve for Firm 1 is q₁ = 6 − q₂/2.