1. Suppose that the demand for a product is given by P=200-2Q where Q is total industry output. The market is occupied by two firms, each with constant marginal costs equal to $8.
A) Calculate the equilibrium price and quantity assuming the two firms compete in quantities.
B) Calculate the equilibrium price and quantity assuming the two firms compete in prices.
C) How would your answer to B change if one of the rm's costs rose to $10?