When completing the industry analysis you should assume that firms are engaged in Cournot Competition. Step 1: Using the

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When completing the industry analysis you should assume that
firms are engaged in
Cournot Competition.
Step 1: Using the information provided in the scenario, derive a
total cost function for
each soft drink producer for the case in which the government
levies a tax of $1.00 per
bottle. Use QBto denote the quantity produced by Bubbles PLC, and
QCto denote the
quantity produced by CarbonCorp. Note that a firm’s marginal cost
will be the sum of its
cost of producing a bottle, and the tax that it must pay to the
government on each bottle
sold. (5 marks)
Step 2: Using the cost functions from step 1, derive a profit
function for each firm. (10
marks)
Step 3: Derive each firm’s best-response function. (15 marks)
Step 4: Solve the best-response functions simultaneously to find
the equilibrium quantities
for each firm. (10 marks)
Step 5: Find the equilibrium price and tax revenue. (10 marks)