Assume that duopolists in the market share a market demand curve given by the following linear demand function:

P=160-0.5Q1-0.5Q2, where Q1and Q2are the quantities sold by the respective firms and P is the market price.

Each firm's marginal cost and average total cost: MC=ATC=$10.

a. Assuming that the firmsact independently as in the Cournotmodel (quantity competition), compute the equilibrium output level for each firm and market price. Q1=, Q2=, P=$.

b. Assume that the firm 1 makes its quantity decision first (acts asthe Stackelberg leader),compute the equilibrium output level for each firm and market price. Q1=, Q2=, P=$.

c. Compute the first mover's advantage (additional profit) over the Cournot solution for firm 1. $

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