Two sellers producing similar but distinguishable products have the following demand curves in their respective markets:Firm 1s demand curve:P1 = 550 - 2 q1 - q2Firm 2s demand curve:P2 = 600 - 2 q1 - 5 q2Firm 1s cost function is given by: C1(q1) = 150 q1 + 30Firm 2s cost function is given by:C2(q2) = .5 q22 + 10 q2 Ifthe current prices and outputs of the two firms are given as:P1 = $290 , q1 = 100 units, and P2 = $100 , q2 = 60 units.

(a) Determine the demand curve for Firm I on the basis of the KINKED DEMAND CURVE THEORY: [14 pts] SOLUTION: The demand curve for Firm I is given by: (the following two-part function of q1):

b) Is this a stable equilibrium for Firm I, or will Firm I want to shift its production and price, and, if so, what will the new price and quantity be? EXPLAIN BRIEFLY: [14 pts] SOLUTION: (New) Price is P1 = $_____________ (Write current price and quantity if a stable equilibrium) (New) Quantity isq1 = ____________ units Explanation: The current market price and quantity of Firm I _ IS / IS NOT a stable equilibrium BECAUSE:(circle one)