Question: 5. Consider a sequential version of the Cournot competition in exercise 4 assignment #31. Suppose there are two rms engaged in quantity competition. Firm 1

5. Consider a sequential version of the Cournot competition in exercise 4 assignment #31. Suppose there are two rms engaged in quantity competition. Firm 1 (the leader) decides how much to produce. After observing the choice made by rm 1, rm 2 (the follower) decides how much to produce. The inverse demand is P = a Q where Q = 11 + (12. Assume that rm's 2' total cost of production is TO(q,-) = cq, where c the constant marginal cost of productimi. (a) Find the best reSporise functiOn fer rm 2 (the follower) using the rst-order condi- tiOn. Check the second-order corlditiOn. (b) Solve the game by backward induction and determine equilibrium quantities, price, and prots. (0) Compare the quantities of rm 1 and rm 2 in this equilibrium, and the total quantity Q in this equilibrium with the total quantity in the Cournot equilibrium in exercise 4 assignment #3

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