In a strategy meeting, the Chief Operating Ofcer (COO) discusses production planning for the next year. She observes that, in recent years, the price we could charge depended not only on our own, but also on the main competitor's, decisions. When they supplied a lot of product, the price would drop. In fact, the behavior of the price has been estimated as follows: P = 630 - 15q1 - 15q2, where P is the market price, q1 is the quantity sold by your company, and q2 is the quantity sold by your competitor. Since the price impacts the protability of our choices, the COO says we need to plan exibly until we get some sense of how the competitor is planning. You are being tasked with designing a strategy that responds to each possible output level q2 of the competitor with our best response m. In order to solve this problem, you decide to model the industry as a Cournot duopoly and nd your company's reaction function. You shoot a quick e-mail to the COO to nd out about costs of production. It turns out that the cost increases with every additional unit that is produced and can therefore be expressed as MC1 = 5q1. The competitor uses the same technology and therefore has the same cost structure (i.e. M02 = 5q2). Based on these data, you derive the reaction function for your rm as: O q1=18- 0.5q2 O q1 = 23 - 0.8q2 O q1 = 280 - 5q2 O q1=315-15q2