Firm 1 and Firm 2 compete by simultaneously choosing quantity. Both firms sell an identical product in a market with inverse demand D(Q) 332 3Q. Firm is cost function is ci (a ) 19a and both firms know each others cost function. They are the only firms supplying this market so Q qi +虹Each firm can choose any gi 0 Answer the following: Write your answers to 2 decimal places a) Firm 1s marginal revenue is a function of its own output choice, gi , and its competitors output choice, what is Firm 1 s marginal revenue when qǐ = 25 and q2 = 25? That is, what is MR1(25, 25)? b) What is Firm ls marginal cost when qi = 25 and q2-25? c) How many units will each firm produce in equilibrium? d) Suppose the firms were to collude and produce a total quantity that maximises their total profit. That is, the two firms act as a monopolist. What total quantity would they produce?
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