= 1. There are two firms (firm 1 and firm 2) operating in a market where both firms produce a single homogenous good. The two firms sell the good in a market where the demand function is given by: Q = 11 - 0.25P, if Q < 11 Q = 0, if Q 11 where Q: q1+ q2 is the total market output and qi is firm i's output, i = 1,2. Firm i's cost function is: Ci (qi)=4qi. a. Explain the Bertrand equilibrium prices and quantities of the two firms. Use best response function diagrams to aid your explanation. [40 marks] b. Assume the two firms are now able to collude and behave as a single monopolist. Derive the equilibrium quantities each firm sells, the profits each firm earns, and the equilibrium market price. How much has deadweight loss increased by due to the two firms colluding? [30 marks]