Question: [Cournot Competition] Consider a game of quantity competition between two firms. Market demand is described by the inverse demand function P=500-8Q. Firm 1 has a
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[Cournot Competition] Consider a game of quantity competition between two firms. Market demand is described by the inverse demand function P=500-8Q. Firm 1 has a constant unit cost of production equal to 90 and firm 2 equal to 70. A. Find the equilibrium price, quantities and the profits if the two firms compete a la Cournot. Represent graphically the reaction functions of the firms and the Nash equilibrium. B. Now imagine that only firm 1 operates in this market. Find the monopoly price, quantity and profit. Show the monopoly quantity in the previous graph. C. Consider that there is Stackelberg competition, and that firm 1 is the Stakelberg's leader. Find the equilibrium price, quantities and the profits of the two firms
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