1.Consider a product for which the market/industry demand is given by: P(Q) = 300 - 3Q, where Q is the market/industry output and P is the market/industry price in Rs. per unit. The industry consists of two firms (duopoly). Each firm's total cost function is given as: TC(q) = 30q + 1.5q2. Each firm chooses its output, taking the output of the other firm as given. (30 marks)

(a)Determine the equation of the residual demand curve and residual marginal revenue curve of firm 1 and firm 2 respectively. Graphically depict the above curves for firm 1.

(b)Determine the reaction/best response function of each firm and graph their reaction curves in the same graph.

(c)What will be the market/industry price and output in the Cournot-Nash Equilibrium/Cournot Equilibrium (CNE/CE)? What would be the economic profit of each firm in equilibrium?

(d)What would be the market/industry equilibrium price, output and economic profit for a monopolist?

(e)Compare the results obtained in parts (c) and (d) above.