2) Suppose market demand is given by Q = 800 - P and there are two firms in the market, each with cost structure C(q)=200q+10,000 where q, is the output firm i, and i=1 or 2. a) Assume the market is characterized by Cournot b behavior. If firm I thinks firm 2 will produce q units, then firm 1's reaction function (best response function) is...q (q) = and firm 2's reaction function is the mirror image... 9: (91)= b) What is the equilibrium market quantity and price? Graph their reaction functions in quantity space (like we did in class), putting q, on the horizontal axis. What is the equilibrium market quantity and price? What would be the equilibrium market quantity and price if there were 4 identical firms in the market? c) If the two firms collude, what is the price and quantity going to be? Fill in the profits (pp) in the table below. Assume that when a firm is competing, it is producing the Cournot output, when it is colluding it is producing the collusive (cartel) output. Find the Nash-Cournot equilibrium, of a one period static game. Firm 2 Compete Collude Firm Compete (pp.) (pp.) Collude (PP) (P..p.)