1. If firm 1 chooses to sell for $2 and firm 2 chooses to sell for $2.50A. How many goods can firm 1 sellB. What are firm 1 today revenueC. What are firm 1 total costD. What are firm 1 profitsE. How many goods can firm 2 sell F. What is firm 2 total revenueG what are firm 2 total cost H . What are firm 2 profit For this question refer to the following figure:Firm 1Sell for $2.50 Sell for $2Sell for $2Firm 2's profit:Firm 1's profit:Firm 2's profit:upuo srb toloolFirm 1's profit:Firm 2(adulSell for $2.50Firm 2's profit:OrsFirm 1's profit:Firm 2's profit:mrt svillsammaFirm 1's profit:There are two dominant firms in a market (a duopoly). Consumers only care about whichfirm offers a lower price. If one firm's price is lower than the other firm's price, allconsumers will buy from the low-price firm. If they have the same price, they willsplit the market (i.e. half of the consumers will buy from one firm and half from theother).There are 100 consumers in the market. Each firm has $25 in fixed costs, and $1/unitvariable costs. They are able to observe how many customers they have before theyproduce the goods, so they only produce as many goods as they have customers.

Given: Duopoly Customers will only buy from the lowest price producer.If one firm has comparatively higher price, then all the demand will be form the lower price firm. If both charges same price, then the demand will be split in half. Number of goods produced=Number of consumer=100 Fixed Cost=$25 Variable Cost=$1/unit 1. Action of Firm 1 : $2 Action of Firm 2 : $2.50 Since, the price of firm 2 is lower than firm1, firm2 will get all the market demand (100 units) and firm 2 will lose all the market demand (0 units). Firm 1 will sell number of goods=Number of customers=100 Firm 1's total revenue =Price*Units produced TR=$2*100=$200 Firm1's total cost=Fixed Cost+Variable Cost TC=$25+$1*100 TC=$125 Firm1's profits=Firm1's Total revenue - Total cost Profit=$200-$125 Profit=$75 Firm 2 will sell number of goods=Number of customers-Customers lost=0 (They lost all the customers as they charged higher price than Firm 1) Firm 1's total revenue =Price*Units produced TR=$2.5*0=$0 Firm1's total cost=Fixed Cost+Variable Cost TC=$25+$1*0 TC=$25 Firm1's profits=Firm1's Total revenue - Total cost Profit=$0-$25 Profit=-$25