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2. Consider two identical firms in a Cournot competition. The market demand is P = a...

2. Consider two identical firms in a Cournot competition. The market demand is P = a – bQ. TC1 = cq1 = TC2 = cq2 . a. Find the profit function of firm 1. b. Maximize the profit function to find the reaction function of firm 1. c. Solve for the Cournot-Nash Equilibrium. d. Carefully discuss how the slope of the demand curve affects outputs and price.

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