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Consider an industry with two firms, each producing an identical product. Total cost functions for the firms are given by TC 1 = 2q 1

Consider an industry with two firms, each producing an identical product. Total cost functions for the firms are given by TC1= 2q1and TC2= 14q2. Demand for the product is given by P= 50 - (q1+q2).

If firm 1 produces 36 units, how will firm 2 respond? (Will it produce any output at all?) Is this predatory pricing? Why or why not?

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