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2. Suppose there are 2 firms in a market. They face an aggregate demand curve, P=400-.75Q....

2. Suppose there are 2 firms in a market. They face an aggregate demand curve, P=400-.75Q. Each firm has a Cost Function, TC=750+4q (MC=4).

b. Suppose instead that the firms compete in Quantity (Cournot Competition). Calculate each firm's best-response function using the formulae provided in the book. What is the Nash equilibrium level of production for each firm? What is the equilibrium price? What are the profits of each firm? Provide a graph illustrating your answer.

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