Question 1 Not yet answered Marked out of 'lDD V Flag question Two rms, Firm 1 and Firm 2, compete by simultaneously choosing prices. Both firms sell an identical product for which each of 100 consumers has a maximum willingness to pay of $40. Each consumer will buy at most 1 unit, and will buy it from whichever firm charges the lowest price. If both firms set the same price, they share the market equally. Costs are given by (15(qi) : 16th:. Because of government regulation, firms can only choose prices which are integer numbers, and they cannot price above $40. Answer the following: a) If Firm 1 chooses p1 : 26, Firm 2's best response is to set what price? I 3) If Firm 2 chooses the price determined in the previous question, Firm 1's best response is to choose what price? U c) If Firm 1 chooses p1 : 8, Firm 2's best response is a range of prices. What is the lowest price in this range? I d) Now suppose both firms are capacityeconstrained: Firm 1 can produce at most 32 units, and Firm 2 can produce at most 32 units. If firms set different prices, consumers will rst buy from the rm charging the lower price. Once that firms supply is exhausted, consumers will buy from the firm charging the higher price until that irm's supply is exhausted. What is Firm 1's equilibrium profit