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Two large test providers dominate the market for Covid tests in Spreadfield: Firm 1 and Firm 2. Their total monthly costs are given by TC1
Two large test providers dominate the market for Covid tests in Spreadfield: Firm 1 and Firm 2. Their total monthly costs are given by TC1 = 15,000+10q1 and TC2 = 18,000+20q2, where q1 is the output of firm 1, and q2 is the output of firm 2.
The demand curve for Covid tests in Spreadfield is as follows:
P = 600 - 2Q
where Q = q1 + q2.
Each firm decides how many test kits to produce, taking as given the output decision of the other firm.
B. Compute the reaction function for each firm. are marginal costs the same?]
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