Firm 1 must decide whether to enter an industry in which firm 2 is an incumbent. To enter this industry, firm 1 must choose to build either a plant with a small output capacity (S), or large output capacity (L). A plant with small capacity costs $50 to set up; one with large capacity cost $175. In either case, the marginal cost of production is zero. But firm 1 can also opt to stay out (O). in which case it does not incur any type of cost. Firm 2 is able to observe firm 1's decision before deciding whether to expand or not its initial small output capacity operation. Expanding (E) costs firm 2 $72, whereas not expanding (N) incurs no cost for the firm. In either case, the marginal cost of production is also zero. The revenues under the different scenarios are given below. -If only one small firm exists, its revenue is $80, the other earns zero. - If two small firms exist each earns revenue of $70. - If only one large firm exists, its revenue is $200, the other earns zero. - If two large firms exist each earns revenue of $90. - If one small and one large firm exist the small firm earns $40, while the large one earns $160. Answer the following: ) How many pure strategies are available for firm 1? 3 One possible correct answer is: 3 b) How many pure strategies are available for firm 2? 6 One possible correct answer is: 8 () What is the sum of the firms' profits in the subgame perfect equilibrium