Managers at Firm A and Firm B must make pricing decisions simultaneously. The following demand and long-run cost conditions are common knowledge to the managers:
Qa = 72 – 4Pa + 4 Pb
LACa = LMCa = 2
Qb = 100 – 3Pb + 4 Pa
LACb = LMC b = 6.67
2.1. Derive the best response curve for firm A
2.2. Derive the best response curve for firm B.
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