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Suppose there is a market which the incumbent firm is already in. The market demand is given by P = 32 - Q. The incumbent

Suppose there is a market which the incumbent firm is already in. The market demand is given by P = 32 - Q. The incumbent (I) firm's cost function is given by CI (qI) = 8qI. There is a potential entrant (E). The entrant has a cost function is CE (qE) = 8qE + 16.

Suppose the entrant stays out of the market. What would be the optimal quantity that the incumbent wants to produce? What would be the profit?

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