HANDWRITING ANSWER PLEASE!

buppose there are two firms, indexed by i = 1,2, in a market where demand is P = 120 (Q1 + qz}. Each firm has the same xed costs: F1 = F2 = 200. Both of them buyr capital in the same market where its price is r = 30. Suppose Firm 1's workers are unionized so that the wage rate it faces is W1 = 30. Firm 2's workers are not unionized so that it faces a wage rate of W; = 25. The cost function of firm 1' is HIGH) = F; + (w; + g! 1. Stackelberg Competition with Entry Deterrence. Firm 1 chooses an output level ql (that it is then committed to by assumption] rst. a. Su ose Firm 2 has alread entered the market meanin the fixed cost is alread incurred . Given that it is in the market, Firm 2 decides to produces R2031): its best response to ql. i. Compute Firm 2's reaction function Rzh). Show your work. ii. Given R2 (Ch), what ql maximizes Firm 1's profits? iii. What are each rm's profits here (from Stackelberg Competition)? Show your work. iv. Compute the limit quantity qi', which if committed to by Firm 1, will lead to 0 prots for Firm 2. b. Suppose Firm 2 has not yet entered the marketI and is considering whether to do so. i. Draw Firm 2's reaction function from Q. 1 (b} and show the breakeven point B (where its profits are zero), and also the Stackelberg point (from Q. 1), on it. ii. What are Firm 1's profits at the entry deterrence outcome, when it commits to q1 = (if + E, and Firm 2 decides to stay out of the market?' 2. Suppose, as in the \"Capacity Expansion as a Credible EntryDeterring Commitment\" model, Firm 1 has the option of buying some capacity prior to Firm 2's entry decision. Firm 2 observes Firm 1's capacity purchase and decides to enter or not. If entry occurs, the two firms compete in Cournot fashion by setting quantities simultaneously. a. Draw the reaction functions of the two rms on the same graph and compute the coordinates ofthe Best Nash Equilibrium and the Worst Nash Equilibrium (for the entrant). Hint: it should be analogous to Figure 12.5. b. How much capacity will Firm 1 buy? Will Firm 2 enter the market? If yes, how much output will it produce? Explain