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All information provided is sufficient. Problem 3. Suppose there are two emergency hospitals in Townville, State ER and University ER. Overall demand (patients) for ER

All information provided is sufficient.

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Problem 3. Suppose there are two emergency hospitals in Townville, State ER and University ER. Overall demand (patients) for ER visits in Townville is P = 120 2Q per day, where Q = qs + q\". Marginal cost at the State ER is cs = 84 per patient. University has access to better equipment so their marginal cost is on = 60. The two hospitals compete under Cournot competition. 1. Write down each rm's prot function: ws(qs, q\") and MUM: qs). 2. Find the best response function for each rm: q2(qu) and gags). 3. Solve for the equilibrium quantities, price and prot for each rm. 4. Briey explain the intuition for why one rm may be making more prot than another. Problem 4. Suppose the two ERs from the previous problem propose to merge and form one ER system. The new ER system would be able to access the equipment from University ER, meaning the marginal cost of the new rm would be cu = 60. 1. What quantity does the merged ER choose to supply? 2. What is the price after the merger? 3. What are prots after the merger? 4. Are consumers better off or worse off following the merger? Why

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