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Two firms compete Cournot. The market demand curve is Q = 1 - p and a cost function for each firm of C(qi)=qi/2. a. Find

Two firms compete Cournot. The market demand curve is Q = 1 - p and a cost function for each firm of C(qi)=qi/2.

a. Find the equilibrium firm quantities, industry quantity, price and firm profits.

b. Sketch the best response functions for each firm in a single diagram.

c. Verify that the Lerner Condition (for Cournot competition) holds.

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