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...

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?