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Aaron and Barry, living close to the entrance to the Yosemite National Park, sell the same kind of drinking water to tourists. Every day in the morning, Aaron carries some water to the park. Barry, observing how much water Aaron brings to the park, decides on how much water to sell himself. They have been selling water long enough to know that the price the tourists are willing to pay for the drinking water is determined by the quantity in this way: P = 40 – 2(QA + QB), where QA and QB are the quantities of water Aaron and Barry bring to the park, respectively. The drinking water is produced at zero cost. Both Aaron and Barry try to maximize their own profit. (a) Given any QA, how does Barry choose QB to maximize his profit? (b) Knowing the way Barry makes his decision, how does Aaron choose QA to maximize his profit? (c) Calculate the daily profit for Aaron and Barry.

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M91707744

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