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Two firms compete in quantities. The firms are perfectly symmetric, which makes the math easy! The...

Two firms compete in quantities. The firms are perfectly symmetric, which makes the math easy! The inverse demand is given by P= 80 − 0.5Q, where Q is total market demand. Each firm has total costs c(q) = 20q.

a) Find the Cournot quantities, price, and profit of each firm.

b) Now calculate the quantities, price and profit of each firm if the two firms equally split the monopoly quantity (i.e. if they collude).

c) Now calculate the quantities, price and profit of each firm i firm 1 cheats on the collusive agreement while firm 2 produces its agreed quantity.

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