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3. Oligopoly Consider a small town that has only two Sushi restaurants, A and B. Suppose that it costs $2 to make each sushi (for
3. Oligopoly Consider a small town that has only two Sushi restaurants, A and B. Suppose that it costs $2 to make each sushi (for each store) and that the relation between sales in each month (q, measured in thousands) and price (p, measured in dollars) for each firm is qi = 24 - pi+ Pi. (a) What is each store's monthly profit as a function of PA and PB? (b) What are the Nash equilibrium prices, quantities, and profits for A and B? (c) Suppose that the two firms work together and collusively choose a joint best price pc. What single price do they choose to maximize their joint profits? Now consider the two restaurants, C and D, engaging in Cournot competition in a different town. Their inverse demands are given as p(Q) = 40 -5Q where Q = q1 + q2. Costs are ci(91) = 10q1 and C2(92) = 292 + 295 (d) Find the Nash Equilibrium quantities for each firm. (e) Calculate profit for each firm
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