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Intel and AMD produce microprocessors. The inverse demand for microprocessors is P=100-Q. Suppose that Intel's marginal cost is 5 and AMD's marginal cost is 10.

Intel and AMD produce microprocessors. The inverse demand for microprocessors is P=100-Q. Suppose that Intel's marginal cost is 5 and AMD's marginal cost is 10. Assume that firms set quantities simultaneously a la Cournot.

AMD considers to invest in R&D which brings its own marginal cost down to 5. How much would AMD be willing to spend at most in this marginal cost-reducing innovation?

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