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Ef4 4. [imperfect Competition - Coffee] Dunkin' Donuts and Starbucks are competing for young minds during Finals Week. They face a market demand of P

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Ef4

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4. [imperfect Competition - Coffee] Dunkin' Donuts and Starbucks are competing for young minds during Finals Week. They face a market demand of P = 50 - Q/6, where Q = qad + 4xb. The marginal cost of coffee is $1.50. a. [12 points] [Cournot Competition] Suppose Dunkin' and Starbucks compete in quantities. I. First calculate each firm's Reaction Curves. li. Graph them. ill. Calculate the equilibrium quantity for each firm, and the market price. b. [Monopolistic Competition] Seeing the profits of Dunkin' Donuts and Starbucks, more firms enter the market, each paying $100 in fixed costs to deliver their own "unique" flavor. The coffee market becomes saturated. Answer the following: i. What happens to the firms' profits in the long run? ii. Is the price higher or equal to marginal cost? c. If there were many other viable competitors in the industry, leading to a perfectly competitive environment, what would be the market price and quantity

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