Suppose there are only two firms serving your market with the
high-speed Internet access. Market demand...
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Economics
Suppose there are only two firms serving your market with thehigh-speed Internet access. Market demand is estimated to be P = 40– 5(Q1 + Q2). Each firm’s marginal cost is$20.
Suppose each firm maximizes its own profit, treating theother’s quantity as constant. Find an expression for firm 1’soptimal output as it depends on firm 2’s. In equilibrium, whatcommon levels of output will each firm supply?
b. Suppose the two firms decide to collude in setting theiroutputs. What outputs should they set and why?
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