Cournot Oligopoly and Process Innovation a) (1 0 marks) . Two firms are competing in a Cournot market structure. Firm 1 is considering an investment in new production technology, which will result in lower variable ( marginal ) costs forthe company. Firm '| 's competitor, Firm 2 , does not have access to the resources necessary for a similar investment. Firm 1 ' 5 financial planners have reported that at current output levels the present value ofthe cost saving from the investment is slightly less than the cost of the project. However, as a strategy consultant, you point out that a proper analysis of the project would take the investments effect on output decisions ( of both firms ) into account. What do you expect such analysis will show? Explain. b) (1 0 marks) . (i) Illustrate your answer in part a ) by solving for the pre - investment and postinvestment Cournot equilibrium levels of output, price and profits for the demand and cost functions indicated below. (ii ) Show that the investment increases market concentration ( H ) and marketpower(PCM) . P =120-q1-q2.Pre - investment MC 1 = MC 2 6 0 Post - investment MC 1=30,MC2=6O