Question: please answer part 3 2. Initially there is one firm in a market for cars. The firm has a linear cost function: C(q) = 2q.

 please answer part 3 2. Initially there is one firm in

please answer part 3

a market for cars. The firm has a linear cost function: C(q)

2. Initially there is one firm in a market for cars. The firm has a linear cost function: C(q) = 2q. The market inverse demand function is given by P(Q) = 9 - Q. How much profit will the firm make? (ii) Now, a second firm enters the market. The second firm has an identical cost function. What is the Stackelberg equilibrium output for each firm if firm 2 enters second? (iii) Suppose second firm has to spend entry cost (sunk cost) of 10 units, ( i.e. Cz(q2) 292 + 10). How much output level should firm-1 set so that it can deter the ent of the second firm

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