1. Before there was the lockdown, there were (they are still there, just not serving any coffee) two busy coffee shops in SFU West Mall, Starbucks & its rival Tim Horton's. Think about the West Mall coffee sellers' rivalry using a simple Hotelling model: Starbucks coffee is valued by each customer at VS = $10/cup and each customer would buy exactly 1 cup a day if the full price is less than the value & the consumer surplus of buying from Starbucks is lower than the consumer surplus of buying from Tim Horton's. Tim Horton's coffee is valued by each customer at VT = $8/cup and each customer would buy exactly 1 cup a day if the full price is less than the value & the consumer surplus of buying from Tim Horton's is lower than the consumer surplus of buying from Starbucks. There are 2,000 customers evenly spread along the WMX hall. For each the cost of travel is $2 per length of the hall. Starbucks is located at the East end of the hall, Tim Horton's is located at the West end of the hall. It costs Starbucks $2 to make each cup of coffee, and it costs Tim Horton's $1 to make each cup of coffee. The two shops choose their prices in a simultaneous-move Bertrand duopoly. Find the equilibrium prices the two coffee shops charge, the equilibrium quantities of coffee each one of them sells, and their profits (assuming no fixed costs). (6)

2. (This question should be treated as unrelated to question 1 above) Before there was the lockdown, there were (they are still there, just not serving any coffee) two busy coffee shops in SFU West Mall, Starbucks & its rival Tim Horton's. Think about the West Mall coffee sellers' rivalry using a simple Hotelling model: Starbucks coffee is valued by each customer at VS = $3/cup and each customer would buy exactly 1 cup a day if the full price is less than the value & the consumer surplus of buying from Starbucks is lower than the consumer surplus of buying from Tim Horton's. Tim Horton's coffee is valued by each customer at VT = $3/cup and each customer would buy exactly 1 cup a day if the full price is less than the value & the consumer surplus of buying from Tim Horton's is lower than the consumer surplus of buying from Starbucks. There are 2,000 customers evenly spread along the WMX hall. For each the cost of travel is $2 per length of the hall. Starbucks is located at the East end of the hall, Tim Horton's is located at the West end of the hall. It costs Starbucks $2 to make each cup of coffee, and it costs Tim Horton's $2 to make each cup of coffee. The two shops choose their prices simultaneously. Find the equilibrium prices the two coffee shops charge, the equilibrium quantities of coffee each one of them sells, and their profits (assuming no fixed costs). (6)