Question 8 (Oligopoly). Suppose the Smartphone market has two firms, Samsung and Apple. Apple is the quantity (Stackelberg) leader in this market. The inverse market demand for Smartphones is p(q) = 820 - 2q. Firm costs are

Samsung: c(q)=20q

Apple: c(q)=20q

a) What is the total quantity of phones produced in the market? How is this total quantity split between Samsung and Apple?

b) Suppose Apple decides it wants to produce more and increases output by 1. What are its new profits? (Hint: when firm 1 increases its output, then firm 2 will also change its output according to its reaction function)