The two carts will set their prices to maximize their bottom-line profit figures, B; profits are determined by revenue (the cart's price times its number of customers) and cost (each cart incurs a cost of $0.25 per coco- nut times the number of coconuts sold).

(a) For each cart, determine the expression for the number of customers served as a function of p, and p. (Recall that Cart 0 gets the customers between 0 and x, or just x, while Cart 1 gets the customers between x and 1, or 1 - x. That is, cart 0 sells to x customers, where axis measured in thousands, and cart 1 sells to (1 - x) thousand.)

(b) Write the profit functions for the two carts. Find the two best-response rules for each cart as a function of their rival's price.

(c) Graph the best-response rules, and then calculate (and show on your graph) the Nash equilibrium price level for coconut milk on the beach.