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2. (30 points 6 each) Consider the linear city model that has length l. Firm 1 is located at .4 miles om the left end and Firm 2 is located .7 miles from the le end. R consumers are uniformly distributed throughout the city. Assume that consumers buy one product 'om the rm 'om which it is able to buy at the lowest cost where cost includes the price the fmn charges and transportation costs. Transportation costs are quadratic such that traveling a distance of d would cost the consumer d2*t. Assume marginal cost=ATC=2 and t=2. Note: you can use the general results 'om the notes to check your work, but you should derive the results yourself for this numeric example. (i) Derive the demand for rm 1. (ii) Derive the demand for rm 2. (iii) Solve for the optimal price rm 1 should charge given rm 2's price: P1(P2) (iv) Solve for the optimal price rm 2 should charge given rm 1's price: P2(Pl) (v) Solve for the Nash equilibrium prices each rm would charge. (vi) If the rms have different prot levels, what explains why one rm has a higher level