Question: 6 Use a Cobb-Douglas benefit function and a cost function of the form C = aQ^b to characterize an externality problem between two individuals (or

Use a Cobb-Douglas benefit function and a cost function of the form C = aQ^b to characterize an externality problem between two individuals (or groups of individuals). Briefly, describe all the assumptions that you are making. Next find the best-reply functions of each person or group. Then find the Nash equilibrium of this game. Describe what you would have to do to determine whether there is an externality problem or not.

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