Question: = Consider two firms, firm 1 and firm 2, facing the demand curve P = 24 - 2Q, where Q = Q + Q.

$Consider two firms, firm 1 and firm 2, facing the demand curve ( P=24-2 Q ), where ( Q= ) ( Q_{1}+Q_{2} ). The firms c$

= Consider two firms, firm 1 and firm 2, facing the demand curve P = 24 - 2Q, where Q = Q + Q. The firms' cost functions are C(Q) = Q and C(Q) = 2Q. Derive the reaction functions if the firms behave non-cooperatively. a. b. C. d. e. What is each firm's Cournot-Nash-Equilibrium output and profit if they behave non-cooperatively? ( Draw the firms' reaction functions and show the equilibrium. Suppose that both firms have entered the industry as a cartel. What is the joint profit-maximising level of output? How much will each firm produce? How much is the profit of each firm? Compare and explain graphically each firm's Cournot-Nash-Equilibrium output with their new output where firm 2 chooses its output first. Put firm 1's output on the horizontal axis and firm 2's on the vertical axis. (Note: No calculation is required.)

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