Problem 1: Bertrand Game with Product Differentiation. Firm 1 produces vanilla ice cream. Firm 2 produces chocolate ice cream. Marginal cost of each rm is M C' : 40. Price and quantity of vanilla ice cream is p1 and q1. Price and quantity of chocolate ice cream is 192 and q2. Demand for vanilla ice cream is q1 = 100 p1 +302. Similarly the demand for chocolate ice cream is (12 = 100 |p2 +101. Firm 1 and rm 2 play a Bertrand game, that is, they simultaneously choose prices p1 and p2. (a) What is the best response for rm 1 if 132 = 40? (b) What is the best response formula for rm 1 for any value of p2? (c) Draw the best response curves on a graph. What is the Nash equilibrium of the game