Research into the soft drink market indicates that the two firms compete by selecting quantities (Cournot competition). Soft drinks are regarded as a homogeneous good by consumers, and inverse demand in the market is estimated to be,

Q P=6 (Q/100,000)

where P represents the price of a bottle of soft drink, and Q is the total number of bottles sold per year.

At present soft drinks sell for $3.80 a bottle. Bubbles PLC produces 140,000 bottles per year, paying $56,000 in bottle tax. CarbonCorp produces 80,000 bottles and pays $32,000. It is estimated that it costs Bubbles PLC $2.00 per bottle of soft drink produced, while producing a bottle of soft drink cost CarbonCorp $2.60. The fixed costs of production can be neglected in this analysis.

• Derive each firm's best-response function
• Solve the best-response functions simultaneously to find the equilibrium quantities

for each firm