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Two restaurants are located at the end points of a straight road between them. The road is 10 miles long. A total of 1000 consumers are uniformly located on the road. Each has a completely inelastic demand for one unit of a good. To get the good, the consumer has to travel to the restaurant and back. Each mile of travel costs 50 cents. The two restaurants have identical cost functions, produce identical products, and have a constant AC of production of $2. Both firms can choose their own price.

A. Find the best reaction function for either firm.

B. Find the Nash equilibrium prices the two firms will charge.