Nutella and peanut butter are identical, and firms' products are perfect substitutes, i.e., consumers prefer to buy the masks with the lower price. The firms are engaged in Bertrand competition, they set their prices simultaneously. Each firm has a capacity constraint of producing 100,000 jars a month. If the firms have the same price, then they share the market equally. Both producers have a marginal cost of $1 per mask. (a) Suppose that the nutella was Q = 90, 000 10, 000P per month. How much does each firm sell in the Bertrand equilibrium? What is market price and what are each firms' profits?

(b) Due to the demand for Nutella by college students, the demand increased to

Q = 300, 000 10, 000P . How much does each firm sell in the Bertrand equilibrium under the new demand? What is market price and what are each firms' profits?