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1. Suppose there are two firms in the market. Firm 1 and 2's marginal costs are 2 and 4, respectively. The market demand curve is

1. Suppose there are two firms in the market. Firm 1 and 2's marginal costs are 2 and 4, respectively. The market demand curve is P=30-Q.

Suppose the firms compete la Cournot.

(a) Derive firm 1 and 2's reaction curves.

(b) Compute the Cournot equilibrium, and the equilibrium market price.

Now suppose the firms compete la Bertrand.

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