ACME Manufacturing monopolizes the market for lava lamps. Demand for lava lamps is described by the inverse demand curve, P = 148 ? 2Q. ACME's total costs are given by C(Q) = 10 + 4Q.

1. Find the optimal quantity of lava lamps for ACME to produce.

2. If ACME produces lamps at its profit maximizing quantity, what is the price of a lava lamp?

3. If ACME is maximizing profits, what profit does it receive?

Now suppose ACME is joined in this industry by Betamax Corp. Demand is unchanged from problem 2, (P = 148 2@Q)). Betamax has access to the same technology as ACME. That is, both firms total costs are C(g;) = 10 + 4q; where ; is the quantity produced by firm i. Let Q = , + g5 be the total number of lava lamps produced (i.e., the sum of those produced by ACME and Betamax respectively). Assume that the assumptions of Cournot duopoly competition apply. 4. Write both firms' profits as a function of their quantities. That is, what are 7,(qa, qs) and 74(qa, gs)? 5. What is the best response function of ACME? 6. What is the best response function of Betamax