Homework Answers
As given good is homogeneous ,so both firm's good will same and whichever firm charge lower price it will capture entire market.
Given MC1=10
MC2=5
So if firm2 best move is to charge price 10$ or less ,so thay firm 1 don't prpduce anything and it will capture entire Market.
On other hand firm 1 best move is to charge lowest possible price Equal to 10 and at this price it will be indifferent between producing and don't produce as in both case he will earn zero Profit.
So firm 2 charges P=10 and firm 1 doesn't operate ,so entire Market caotured by firm 2.
Q1=0
Q2=Q=110-10=100
Profit of firm 1=0
Profit of firm 2=(p-MC)*Q1=(10-5)*100=500
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