1. There are two firms (1 and 2) that sell bottled water in Oligopolis. Each firm can produce the water at zero cost. The demand curve for bottled water is =300, wherepis its price.

(a)Suppose the firms are Cournot competitors. What will be each firm's output level, the

price in the market, and each firm's profits, in the Cournot equilibrium?

(b)Suppose instead that firm 1 is a Stackelberg leader, while firm 2 plays Cournot. Find each firm's output, the market price, and each firm's profits under this assumption.

(c)Finally, suppose firm 2 has not yet actually entered the bottled water market but could do so at a cost of 900. The game being played by the two firms is a two-stage game in which firm 1 chooses its output first and then firm 2 can decide whether or not to enter the market. If firm 2 enters, it will play its Cournot best-response strategy. Whatis firm 1's profit-maximizing output choice now? How much profit will each firm make in this scenario?