Please be specific and step by step; answer Q7

7. (16 points) Two firms compete in a market by selling differentiated products. The demand equations are given by the following equations: 91 = 75 - P1 + P2 4 2 92 = 75 - p2 + P1 2 assume that each firm has a marginal cost (and average costs) of 0.~ a. What market model do we use if each firm competes by simultaneously choosing price? b. Are the two goods substitutes? I c. Solve for firm 1's best response function. + d. Solve for the equilibrium price and quantity. I e. Would firm 1 still be able to compete in the market if their marginal costs increased while firm 2's remained at 0? ~