Suppose the daily demand for Coke and Pepsi in a small city are given by Q_C = 90 - 100P_C + 400(P_P - P_C)and Q_P = 90 - 100P_P + 400(P_C - P_P),where Q_C and Q_P are the number of cans Coke and Pepsi sell,respectively,in thousands per day.P_C and P_P are the prices of a can of Coke and Pepsi,respectively,measured in dollars.The marginal cost is $0.45 per can for both Coke and Pepsi.What is Pepsi's best response function? A) Q_P = 200P_C - 67.5 B) Q_P = (90 + 400P_C) - 500P_P C) P_P = 0.315 + 0.4P_C D) P_P = (0.18 + 0.8P_C) - 0.002Q_P

Question

Quizplus · Accepted Answer

To find Pepsi's best response function, we need to determine the quantity of Pepsi that maximizes its profits for every possible price of Coke. This means we need to solve for Q_P as a function of P_C. Taking the derivative of Pepsi's profit function with respect to Q_P, we get: ∂(πPS)/∂Q_P = 90 - 200P_P + 400P_C - 0.45 = 0 Simplifying this equation, we get: Q_P = 0.315 + 0.4P_C This is Pepsi's best response function. Therefore, the answer is C.

Suppose the Daily Demand for Coke and Pepsi in a Small