1) Bertrand (price) competition with limited capacity There are two firms that produce differentiated products: Firm 1 and Firm 2. Demand for their products is given by the symmetric system of equations: DEMAND for Firm 1: q,(p,, p.) = 32 - 2p, + P, DEMAND for Firm 2: q,(p,, p.) = 32 - 2p, + P, The firms have identical cost functions: c(q) = 2q, and they compete in the style of Bertrand by choosing prices independently and simultaneously. Firm 2 has a capacity constraint of K = 13 units. Firm 1 has unlimited capacity. A. If Firm 2 expects Firm 1 to set p, = 12, what price should Firm 2 set? B. Compute the Nash equilibrium prices