Determine the resulting prots for the two rms. Identify the point which corresponds to the equilibrium outcome of this game on the best response function diagram from part (a). Explain Whether there is a rst- or a second-mover advantage. (d) Suppose that the two firms choose output sequentially, rather than simultaneously. Finn 2 moves rst by choosing its output level. After Firm 2 has chosen its output level, Firm 1 observes q 2 and chooses its output level. Find the subgame-perfect equilibrium quanties of the CoumotStackelberg game. Determine the resulting prots for the two rms. Identify the point which corresponds to the equilibrium outcome of this game on the best- response function diagram from part (a) Explain whether there is a rst- or a second-mover advantage. Explain Why your results differ from those obtained in part (c). Q4 Capacity Competition Game Suppose that two rms compete in capacities. The prot functions of two firms are: 1 1 1:1(K1,K2) =K1(24K1 K2) and 1120919) = K2 (24 K1 K2) where K represents rm I's production capacity. Assume that the rm produces at 100% capacity, q1 = Kr Note that this is a strong assumption that may not be true in every situation. CALCULATE NUMBERS TO THE NEAREST 3 DECIMAL PLACES. (a) Do the rm prots satisfy the interchange condition? Explain (13) Suppose that the rm merge and for a single rm. Assume that the monopolist maintains the two branches or subsidiaries open. What capacity should the monopolist install in each subsidiary? What are monopoly prots and the prots made by each subsidiary? Locate monopoly point in the Coui'not graph that you will draw in part (b) (6) Suppose that the two rms compete in capacities in a simultaneous-move games Draw the rms' best-response function diagram and show that the Nash equilibrium of the