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Question A.3 (Word Limit: 300 words) For this exercise s=2+the 3rd digit of your student number. In an industry there are two rms, f1 and f2, producing a homogeneous product in quantities ql, (12 with constant marginal costs 01 = 90 and 02 = 30 respectively. The inverse demand curve for the industry is p : 130 262, where Q : q1 + (12. The two rms are in Stackelberg competition where Firm 1 moves rst. (i) Compute the equilibrium quantities and price in this market. (ii) Suppose that this market takes place every period t = 1,2. . . and the marginal cost of rm 1 evolves over discrete time according to the difference equation: 1 01,: = 90 _Cl,t71a C1,0 = 90 (1) 8 By studying the above dynamic system, compute the long run equilibrium quantities and price in this market. (iii) From your solution in (ii), nd for how many periods this market will remain monopo listic