Problem
An industry consists of two firms with identical costs C(q) = 2q. The market demand is P=26-2Q.
i. Solve for the collusive output per firm (q*).
ii. Solve for the output if one firm cheats on the collusive agreement optimally (q**).
iii. Solve for the Cournot output per firm (q***).
iv. Set up the normal form representation problem of this game where each firm could make three choices, q*, q**, q***. You will need to calculate profits under the nine possible outcomes.
v. Find the unique Nash Equilibrium.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.