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I'd like a step by step solving and explanation to understand please and thanks Problem 3. Two firms, AbleCow and Betsy's Pride, are competing in

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I'd like a step by step solving and explanation to understand please and thanks

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Problem 3. Two firms, AbleCow and Betsy's Pride, are competing in the market for milk in Lean City. . AbleCow firm sells only 2 percent milk, while Betsy's Pride sells only skim milk, which is 0 percent milk-fat. . 100 consumers in Lean City have varied taste for milk. Specifically, consumers ideal percentage of milk-fat is uniformly distributed between 0 and 2. . Consumers value their ideal percentage milk-fat milk at $6 per gallon. For other milk. they are willing to pay $1 less for each percentage point that milk differs from their ideal. Econ 3P06: Problem Set #2 . The two firms set prices simultaneously. The cost of milk for both firms is $3 per gallon! . Only one gallon cartons of milk are available, consumers buy at most 1 gallon of milk. 1. For a consumer with ideal milk-fat percentage r (between 0 and 2), what is the utility of purchasing milk from AbleCow at price pa? 2. For a consumer with ideal milk-fat percentage I (between 0 and 2), what is the utility of purchasing milk from Betsy's Pride at price po? 3. Write an expression that gives the ideal milk-fat percentage of the consumer who is indifferent between buying AbleCow and Betsy's Pride given prices p. & p. 4. Write down demand for each firm. 5. What are the best response functions of each firm? 6. What are equilibrium prices for each firm? 7. Suppose that consumers don't care about milk-fat percentage. That is, they treat the two goods as homogeneous. What are equilibrium prices for each firm

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