two firms produce .......

2. (15pts) (Duopoly) Two firms produce identical products and choose quantities of output to compete against each other. Both firms have the same constant marginal cost c = 20 and zero fixed cost. Market price is determined by P = 260 - 2(Q1 + Q2). (a) (7 pts) First, suppose the two firms choose outputs simultaneously. Find the Cournot equilibrium outputs as well as the profits that each firm earns in equilibrium. (b) (8 pts) Next, suppose Firm 1 moves first and Firm 2 chooses its output after observing Firm 1's output. Find the Stackelberg equilbrium outputs. Is the total output of the two firms in the Stackelberg equilibrium higher than that in the Cournot equilibrium? What about total profits