Duopoly: Assume that two firms made an agreement to restrict their output - splitting equally the monopolist's quantity. Firm 1 holds

to the agreement but Firm 2 'defects' and chooses its own profit maximizing output. What

are the two firms' outputs, and profits. What is the consumer surplus?

Note: the reaction function determining firm 2's optimal response to firm 1's choice is given

by: 2(1) =90101 / 30

Extra credit: (5 points) derive the reaction function