Open Word and answer the following questions. Save the document and print it when you are done.
1. If Conjectured Q2 is 15,000, why does Firm 1 decide to produce nothing? Use the Residual Demand sheet (with B11 = 5) to support your explanation.
2. Firm 1 produces 4500 and Firm 2 produces 6000. Does Firm 1 have any regrets? Does Firm 2 have any regrets? Enter these two values in the Duopoly sheet (with B11 = 5) and click the Choose q buttons. Which firm changed its mind? Why?
3. Click the Reset All button in the Duopoly sheet. Explore the effect of changing Firm 1's cost function so that c_2 (cell B10) is 0.001 (with B11 = 5). How does this affect the Nash equilibrium?