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Quiz 3 Econ 2350 - A (Fall 2023) Group members (Name & Surname): 1. Chenyang Ye 218621227 2. Co B. MS = 2 TC =

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Quiz 3 Econ 2350 - A (Fall 2023) Group members (Name & Surname): 1. Chenyang Ye 218621227 2. Co B. MS = 2 TC = 29 AMC = 1 TC= q QUESTION: (10 Points) In the town of Fargo there are two bakers, Alma and Bianca. Alma's bread tastes just like Bianca's-nobody can tell the difference. Alma has constant marginal costs of $1 per loaf of bread. Bianca has constant marginal costs of $2 per loaf. Fixed costs are zero for both of them. The inverse demand function for bread in Fargo is p = 6 -0.01q, where q is the total number of loaves sold per day. Suppose that both bakers choose their production levels simultaneously. Use qA to denote Alma's choice of production, and qs to denote Bianca's choice of production. (a) (3.5 Points) Find Alma's reaction function given Bianca's output; that is, find an equation for qA as a function of qB, obtained from Alma's profit maximization condition. (b) (3.5 Points) Symmetrically, find Bianca's reaction function given Alma's output. (c) (3 Points) Solve for the Cournot equilibrium quantities and price. 2 ) P= 6- 0.019A - 0.019/B A = P. 9A - 0.01 9A

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