Two firms compete in a homogeneous product market where the inverse demand function is P= 10 -2Q (quantity is measured in millions). Firm 1 has been in business for one year, while Firm 2 just recently entered the market. Each firm has a legal obligation to pay one year's rent of $0.3 million regardless of its production decision. Firm 1's marginal cost is $2, and Firm 2's marginal cost is $6. The current market price is $8 and was set optimally last year when Firm 1 was the only firm in the market. At present, each firm has a 50 percent share of the market. a. Based on the information above, what is the likely reason that Firm 1's marginal cost is lower than Firm 2's marginal cost? O Direct network externality O Limit pricing Learning curve effects O Second-mover advantage b. Determine the current profits of the two firms. Instructions: Enter all responses rounded to two decimal places. Firm 1's profits: $ million Firm 2's profits: $ million c. What would each firm's current profits be if Firm 1 reduced its price to $6 while Firm 2 continued to charge $8? Instructions: Enter all responses to two decimal places. Firm 1's profits: $ million Firm 2's profits: $ million