Intel and AMD, the primary producers of computer central processing units (CPUs), compete with each other in the mid-range chip category (among other categories). Assume that global demand for mid-range chips depends on the quantity that the two firms make, so that the price (in euros) for mid-range chips is given by

P 210Q where Q = qIntel +qAMD. and where the quantities are measured in millions. Each mid-range chip costs Intel

60 to produce. AMD's production process is more streamlined; each chip costs it only 48 to produce.

(a) Find each company's profit function, and each company's best-response rule.

(b) Find the Nash equilibrium price, quantity, and profit for each firm.

(c) Suppose Intel acquires AMD. The merged firm wishes to maximise total profits. How many chips should be produced?

(d) What is the market price and total profit for the new firm?