A7.1 Suppose that you are the manager of Matts Prime Steakhouse, one of only two premium steakhouses

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A7.1 Suppose that you are the manager of Matt’s Prime Steakhouse, one of only two premium steakhouses in Gainesville, Georgia. The nightly demand for steak dinners in town is given by Qd = 80 - 2P where Qd is the market quantity of steak dinners demanded and P is the price of a steak dinner.

Matt’s Prime Steakhouse produces qM dinners, and Matt’s only competitor in the premium steak market, Emberwood Grill, produces qE dinners. Each firm’s total cost of producing and selling q dinners is TC1q2 = 400 + 10q

a. What is Matt’s best-response function to the quantity produced by Emberwood?

b. How many steak dinners does each firm produce?

c. What is the price of a dinner when each restaurant sells its equilibrium quantity of steaks?

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