Consider an industry with two identical firms (denoted firm 1 and 2) producing a homogenous good. Firms compete in quantities and have a constant marginal cost of 30.

Demand in the industry is given by

D(p) = 195 - p/2.

Let q₁and q₂denote the quantities of firm 1 and 2, respectively.

Derive the best resonse functions and the Nash equilibrium in quantities.

Which TWO of the following statements are correct?

The Nash equilibrium quantity for each firm is 40.

The Nash equilibrium quantity for each firm is 60.

The reaction function of firm 1 is given by q₁= 90 - (q₂)/2.

The reaction function of firm 1 is given by q₁= 45 - (q₂)/2.

The reaction function of firm 1 is given by q₁= 60 - (q₂)/2.

The Nash equilibrium quantity for each firm is 30.