Suppose a store requires a membership to purchase products at the store. The demand is given by: = 10 The marginal cost of production (bringing each unit to the store) is $1. The store sets a membership fee of $40.5 and a price per unit of $1. An individual who has not taken ECN 121A recommends to the store owner that she should decrease the price to 0 so that she can charge a higher membership fee. a. By how much can the membership fee be increased if price is dropped to 0? b. By how much would profits decrease if price is dropped to 0?

Suppose there are two identical firms in a market. The demand of the market is given by: = 50 0.5 Suppose the marginal cost of each firm is $10 per unit and the firms are competing in a Cournot-type setting. a. Graph the reaction functions of both firms on the same graph. At what point do they cross? b. What price is the product going to be sold for? What is the equilibrium output and profits for each firm?