1.-There are only two firms in the market, Firms A and B, producing differentiated products. Specifically, the demands for the two firms' products are given by qA = 30 − 2pA + pB and qB = 15 − 2pB + pA, where pi denotes the price charged by Firm i and qi denotes the resulting number of units that will be purchased from Firm i. Each firm can produce as much as it chooses, at zero marginal cost. The firms compete with one another in prices. (a) Draw the two firms' reaction functions in a diagram with p1 and p2 on the axes. (b) Determine the equilibrium prices and quantities.

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1.-There are only two firms in the market, Firms A and B, producing differentiated products. Specifically, the demands for the two firms' products are given by qA = 30 − 2pA + pB and qB = 15 − 2pB + pA, where pi denotes the price charged by Firm i and qi denotes the resulting number of units that will be purchased from Firm i. Each firm can produce as much as it chooses, at zero marginal cost. The firms compete with one another in prices.

(a) Draw the two firms' reaction functions in a diagram with p1 and p2 on the axes.

(b) Determine the equilibrium prices and quantities.

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