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.1_ There are two auto produoers in Karmania, F1 and F2. The cars they produce are essentially identical. The market inverse demand curve is given
.1_ There are two auto produoers in Karmania, F1 and F2. The cars they produce are essentially identical. The market inverse demand curve is given by p = a of\"), where p is price {in thousands of dollars]; [3 market output [in thousands of imits]; and o and b are parameters. It is estimated that a. = 25 and h = .1. Both F1 and F2 have a marginal mst of Ill thousand dollars per car. Competition in the Karmania auto market works as follows. At the beginning of each year, both rms simultaneously and independently decide how many cars to produce. Then the market price adjusts so that supply equals demand. (a) Determine Fl's best response mapping. [b] Determine the equilibrium of the game played between F1 and F2. (c) Suppose that an increase in incomes shifts demand to p = 28 - [1.1 Q. 1What do you expect will happen to price and the number of cars sold
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