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1. There are two rms (1 and 2) that sell bottled water in Oligopolis. Each firm can produce the water at zero cost. The demand

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1. There are two rms (1 and 2) that sell bottled water in Oligopolis. Each firm can produce the water at zero cost. The demand curve for bottled water is Q\"I = 300 - p. where p is its price. (a) Suppose the rms are Cournot competitors. What will be each rm's output level, the price in the market, and each rm's prots, in the Cournot equilibrium? (b) Suppose instead that film 1 is a Stackelberg leader, while rm 2 plays Cournot. Find each rm's output, the market price, and each rm's prots under this assumption. (c) Finally, suppose rm 2 has not yet actually entered the bottled water market but could do so at a cost of 900. The game being played by the two rms is a twostage game in which firm 1 chooses its output first and then rm 2 can decide whether or not to enter the market. If rm 2 enters, it will play its Cournot best-response strategy. What is rm 1's prot-maximizing output choice now? How much profit will each rm make in this scenario

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