B I UV Y UV Av 00 20 B C D E F G H K L M Problem 6-1 Use a cell reference or a single formula where appropriate in order to receive full credit. Do not copy and paste values or type values, as you will not receive full credit for your answers. The inverse market demand curve for a duopoly market is p = 14 - Q = 14 - q 1 - 92, where @ is the market output, and q , and q 2 are the outputs of Firms 1 and 2 respectively. Each firm has a constant marginal cost of 2 and a fixed cost of 4. Consequently, the Nash- Cournot best-response curve for Firm 1 is 9 1 = 6 - q 2/2. P 14 14 91 92 91 92/ 2 Na MC FC a) Calculate the profit-maximizing output for Firm 1 (best response, BR,), the profit for Firm 1, the market output, and the price for q 2 = 0, 2, ..., 12. 92 BR Q P Profit, 0 2 4 6 8 10 12 Use the scatterplot option in Excel to draw the best-response curve for Firm 1. b) What is the monopoly output and profit for Firm 1? (That is, how much does Firm 1 produce if Firm 2 does not produce?) If Firm 1 expects Firm 2 to produce 10 units of output, would it operate in the long run (given that it can avoid incurring its fixed costs by shutting down)? Will it operate in the short run (when its fixed cost cannot be avoided)? The monopoly output for Firm 1 is If Firm 2 produces 10 units of output, Firm I will unit(s) and the monopoly profit is in the short run and will in the long run. Problem Instructions + Ready 1x Accessibility: Investigate