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Two Cournot firms produce slightly different products. Product prices depend on both firms' outputs and are...

Two Cournot firms produce slightly different products. Product prices depend on both firms' outputs and are determined by the following equations P1 = 70 - 2Q1 - Q2, P2 = 100 - Q1- 2Q2. Both Firm 1 and Firm 2 have constant marginal cost of $10 and zero fixed cost. Firm 1 chooses Q1 and Firm 2 chooses Q2.

  1. (3pts) Find Firm 1's best response as a function of Firm 2's output Q2.  
  2. (3pts) Find Firm 2's best response as a function of Firm 1's output Q1.
  3. (6pts) Use the two best response functions to find the Nash equilibrium. In equilibrium, how much profit will each firm earn?
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