EXERCISE Consider an oligopoly market with two producers. The reaction function (RF1) for firm 1 is described by q₁=30-0.033q₂.

And the RF2 for firm 2 is q₂=20-0.02q₁. Demand in the market is described by P=1000-5Q.

A. Find the optimal quantities offered into the market for firm 1 and firm 2.

B. Find the equilibrium price for the market.

C. Find the profits for each firm.

D. Explain what would happen to the quantity and price in the market, as well as the profits for each firm if the low cost firm doubled

E. Qualitatively, what would happen to the equilibrium price and quantities offered into the market if a third producer entered the market?