Assume a two-firm industry where firms select price (i.e., Bertrand setting), and products are differentiated.Firm A produces Product A, and the demand for Product A is:

Q_A = 10 - P_A + 2P_B.Firm B produces Product B, and the demand for Product B is:

Q_B = 20 - P_B + P_A.Marginal cost is constant and equal to $6/unit for Firm A and $4/unit for Firm B.

a)Briefly define "reaction function" and solve for the reaction function for each firm.

b)Graph the two reactions functions in a single graph.

c)Determine the equilibrium level of prices, quantities, and profits.