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Consider a pharmaceutical market served by two firms, firm 1 and firm 2. The two firms produce vaccines and compete to maximise own profits. Suppose that the demand of vaccines is given by ~ p = a -bQ~ where Q = q1 + 92. Suppose that the two firms incur production costs equal to C1(q1) = 191" C2(92) = C292+ a. Suppose that the two firms move simultaneously, c1 = C2 = c and a > c > 0. Derive and describe the Cournot/Nash equilibrium and provide a graphical representation of the best response functions. b. Suppose that the two firms were considering a merger. Would this be beneficial in terms of welfare? Provide economic intuition. c. Suppose that the government decides to partially nationalise firm 1. The presence of the government in the board of firm 1 induces firm 1 to target the joint maximisation of own profits and consumer surplus. Assuming that firm 2 continues to target the maximisation of own profits, derive and describe the equilibrium, and compare it to the equilibrium that you have found in part a