The inverse demand for fax paper is given by P = 300 - 4Q. There are two firms producing fax paper. Each firm has a unit cost of production equal to 60, and make quantity decisions simultaneously.

a. Show how to derive the Cournot-Nash equilibrium to this game. What are firms' profits in equilibrium?

b. Check the industry prot if each rm produces half of the monopoly output. Are firms better o under this plan and is it a Nash equilibrium?

c. Now suppose rm 1 has a cost advantage. Its unit cost is constant and equal to 40 whereas rm 2 still has a unit cost of 60. What is the Cournot outcome now? What are the prots for each firm?