(d) Suppose now that a second firm enters the market and the market structure changes from monopoly to Cournot duopoly. Assume that no tax is imposed in this market. Firm 1 is the incumbent firm (the former monopolist) with cost function: TC_1 = 20q_1 + 100 Firm 2 is a new entrant with a different cost structure: TC_2 = 30q_2 + 50 The market demand remains: Q = 120 - 2P, Q = q_1 + q_2 where q_1 and q_2 denote the output of firm 1 and firm 2 respectively. Answer the following questions: (d.1) Derive the profit function for each firm and obtain the reaction function of each firm. (5%)

3. Consider a closed economy described by the Solow growth framework in continuous time. Output is produced using a Cobb-Douglas technology: $$Y = K^{\alpha} N^{1-\alpha}, \quad 0 < \alpha < 1$$ where $Y$ represents total output, $K$ denotes the capital stock, and $N$ is the labor force (number of workers). The parameter $\alpha$ measures capital's share in output. The population grows at a constant rate $n > 0$, i.e., $\dot{N}/N = n$. Capital accumulates according to: $$\dot{K} = I - \delta K$$ where $I$ is total investment and $\delta \in (0,1)$ is the constant rate of capital depreciation. National saving is defined as a constant fraction of output: $$S = sY$$ where $s \in (0,1)$ is the savings rate. We assume the goods market clears such that $S = I$. Please answer the following questions: (a) Derive the steady-state level of capital per worker $ k $ and the steady-state output per worker $ y $, where $ k = K / N $ and $ y = Y / N $. (15%)

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