Eco 353: Homework 2 1. Suppose that firms 1 and 2 compete in the \"pure\" Bertrand model described on pp1518 of the notes on Canvas. Suppose that the two firms have equal marginal costs initially, but then firm 1 lowers its marginal cost by 10 percent. What effect does this have on the two firms' market shares? 2. Based on the Connor essay, describe the \"before and after\" method of calculating damages in a price-fixing case. What cautions should one observe in using this method? Use no more than 150 words. 3. In the Coke-Pepsi example on pp22,23 of the notes, what happens to prices and market shares if Coke reduces its marginal cost by 20%? This involves the product differentiation version of the Bertrand model