Problem 12-27 (algorithmic) andalus furniture company has two manufacturing plants, one at aynor and another at spartanburg. the cost in dollars of producing a kitchen chair at each of the two plants is given here. aynor: cost = 80q1 + 5q12 + 106 spartanburg: cost = 28q2 + 3q22 + 158 where q1 = number of chairs produced at aynor q2= number of chairs produced at spartanburg andalus needs to manufacture a total of 30 kitchen chairs to meet an order just received. how many chairs should be made at aynor and how many should be made at spartanburg in order to minimize total production cost? when required, round your answers to the nearest dollar. the optimal solution is to produce chairs at aynor for a cost of $ and chairs at spartanburg for a cost of $ . the total cost is $ .

1. consider a two-firm industry. firm 1 (the incumbent) chooses a level of output qı. firm 2 (the potential entrant) observes qı and then chooses its level of output q2. the demand for the product is p 100 q, where q is the total output sold by the two firms which equals qi +q2. assume that the marginal cost of each firm is zero. a) find the subgame perfect equilibrium levels of qi and q2 keeping in mind that firm 1 chooses qi first and firm 2 observes qi and chooses its q2. find the profits of the two firms-n1 and t2- in the subgame perfect equilibrium. how do these numbers differ from the cournot equilibrium? b) for what level of qi would firm 2 be deterred from entering? would a rational firm 1 have an incentive to choose this level of qi? which entry condition does this market have: blockaded, deterred, or accommodated? now suppose that firm 2 has to incur a fixed cost of entry, f> 0. c) for what values of f will entry be blockaded? d) find out the entry deterring level of q, denoted by q1', a expression for firm l's profit, when entry is deterred, as a function of f. for what values of f would firm 1 use an entry deterring strategy?