Question 1. Consider a duopoly with rms that offer homogenous products where each has constant marginal cost c. Let DEG] denote market demand. Firms make simultaneous decisions. Let p1 and p2 he the prices of rms 1 and 2 respectively. The demand function of rm i is: Dis} a: a: Pi DilFlael = il p=pj U 11,-. '.':- 15-3- So, customers go to the rm with lowest price ifthere is a tie, sales are split equally. Prot is equal to revenue minus cost. So, if rm i sells q; units at price pi, its prot is Jr:- 2 gm cry 2 grip; - c]. Each rm acts to maximize prot. 1. Show that both rms pricing at marginal cost is an equilibrium. 2. Show that an}.r other pair of prices is not an equilibrium