Duopoly

Two large tests provider dominate the market for Covid rapid test in India. Firm one and Firm 2. There total monthly cost are given by

TC1=10000+30q1

TC2= 15000+20q2

Where Q1 is the output of firm one and Q2 is the output for firm 2

The demand curve for covid test in India is as follows: P=820-4Q

Where Q=q1+q2

Each firm decide how many rapid tests kits to produce taking as given the output decision of the other firm.

1. Which type of competition do the two firm engage in
2. compute the reaction function for each firm (Hint careful - are marginal cost the same?)
3. find the equilibrium quantities and the price of covid test in India
4. the owner of firm one reads in a WSJ that firm can compete on prices and decide to pursue this strategy. Assume that the firm two also responds by changing its price. what do we call this type of competition and what is the most likely short run outcome (market price and total quantity produced)? (assume there is no collusion)