Suppose the airline industry consisted of only two firms: AC and WJA. The two firms have identical cost functions, C(q) = 40q.Assume the demand curve for the industry is given by P = 100 - Q and that each firm expects the other to behave as a Cournot competitor. The firms face a constant marginal cost of 40.

(a)Calculate the reaction function (best response function) for each firm.

(b)Calculate the Cournot-Nash equilibrium for each firm assuming that each chooses the output level that maximizes its profits when taking its rival's output as given. What is the price quantity and profits for each firm?