Reference for the question below

Suppose that firm 1 has first mover advantage. (Market demand is Q=18-P and both firms have the same cost C(Q)=1/2 Q^2)

Reference for the question below

Suppose that that firm 2 that invests in a new technology that changes it cost structure from firm 1.

Market demand is Q=18-P, firm faces costs C₁ (Q₁) = 1/2 Q₁² and now firm 2 has costs, C₂ (Q₂ )= 1/6 Q₂². Consider a Cournot model again.

a. What is firm 1's best response function?

b. Set up firm 2's profit maximization and solve for firm 2's best response function.

c. Find the equilibrium quantity for firm 1, firm 2, the market quantity, and price.

1. Suppose the market described in this question (Market demand is Q=18-P) has a negative externality.

The cost function C_P (Q) = 1/2 Q² is private cost. We now know the cost of the externality is C_E(Q)=Q²

a. What is the marginal cost of the externality, MC_E?

b. What is the marginal cost to society of production MC_S?

c. What is the Socially Optimal quantity and price?

d. In this case, does market power increase or decrease total social welfare?