In 2010, global sales of Windows-based desktop computers were 351 million units, whereas average price was $605.1 The leading market shares were as follows: HP, 17.9%; Acer, 13.9%; Dell, 12%; Lenovo, 10.9%; Asus, 5.4%; others, 39.9% equally distributed across 10 firms. Suppose that the Cournot model provides a good approximation of the industry's behavior. Suppose moreover that inverse demand is given by p = a b Q; each firm has constant marginal cost; and that, from previous studies, the price elasticity of market demand is estimated to be -0.5 (at the market equilibrium level)

1. (a)Based on the observable data, estimate each firm's marginal cost and margin.
2. (b)Suppose that Dell's marginal cost decreases by 5%. Based on your answer to the previous question, estimate the impact of this cost decrease on equi- librium price and on Dell's market share.