a) Two firms faces production externalities problem. Explain how they can solve this problem to maximize their profits. [6 marks] - b) The market demand curve is given by P = 100 Q-Q2, where Q1 is the amount company X produces and Q2 is company Y level of output. The marginal cost of each firm is Ksh.10. i) Given the market demand curve, what is company X profit maximising quantity when company Y produces 50 units? [3 Marks] ii) What is company X profit-maximizing output when company Y produces an arbitrary output Q? [3 Marks] iii) Compute the Cournot equilibrium quantities and price in this market. [3 Marks]