STATIC OLIGOPOLY 2. MARKET FOR SUVS Two firms compete in the market for Sport Utility Vehicles (SUVs). Costs and prices are measured in thousands of dollars. It costs Firm 1 $20 to produce each SUV. Firm 2 uses a different technology and can produce an SUV at a cost of $18. Firm 1 can switch to using Firm 2's technology, but changing its technology requires investing a fixed amount F. You know that in this industry, market demand is linear: p = a - bq, where q is measured in thousands of units. You also know that the current equilibrium price for SUVs is $30 and that the total number of units traded is 2.2 thousand units (that is: 2,200 units). (1) What is the highest value of F that Firm 1 should be willing to pay? (2) An analyst that reached the CEO of Firm 1 has suggested a shortcut to compute the highest value of F that Firm 1 should be willing to pay. The analyst observes that there is a reduction of costs of $2 (thousand) per unit if the firm were to obtain the new technology. The analyst suggests checking the number of units currently sold and multiplying that number by the $2 (thousand) of savings per unit to determine the maximum the company should be willing to pay. Is the analyst correct/incorrect? Why? (3) A second analyst suggests yet another shortcut to compute the highest value of F that Firm 1 should be willing to pay. The second analyst suggests computing Firm 2's current profits and then calculating the difference between Firm 2's current profits and Firm 1's current profits. This analyst reasons that since with the new technology Firm 1 would be identical to Firm 2, Firm 2's current profits are a good benchmark of what Firm 1 could make if it acquired the new technology. Is this second analyst correct/incorrect? Why