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There are two rms. i and j competing os-'er quantity. Each fmu produces a homogenous good at the same marginal cost {c}. and fixed costs
There are two rms. i and j competing os-'er quantity. Each fmu produces a homogenous good at the same marginal cost {c}. and fixed costs are F = D. Market demand is p(Q]I = a bQ. where p is price. Q = qr (11 is the total quantityr of output produced and sold by all firms in the market. :11 is the quantity of output for fmu i. qj is the quantity of output for firm j. b 3* C]. and It} i\" c '11 a. Carefully,r derive firm j's best response function. Plot rm j is best-response function from question three above in a two- dimensional graph with (11 on the 1.'ertical axis and [H on the horizontal axis. (i) Illustrate how an increase in marginal cost impacts firm j*s best-response function. (ii) Explain the important economic implication for firm j from an increase in marginal cost
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