1. The firm AXY has to decide whether to enter the market in country X or in country Y. There are two incumbent firms in each of these countries, OXO in country X and OYO in country Y. The product AXY sells is slightly differentiated from the product OXO sells so if AXY decides to sell in country X it will compete with OXO by setting prices under demands DA = 200 – PA + PX and DX = 200 - PX + 0.5PA respectively for AXY and OXO and where PA and PX are the prices set by firms AXY and OXO respectively. On the other hand, the product AXY sells is identical to the product OYO sells in country Y. If AXY enters Y country's market, it will compete with OYO in prices. The market demand in country Y is D = F - p, where F > 1000. AXY has the same marginal cost of producing the good in either country, and it is equal to 40(N+1). OXO’s and OYO’s cost functions are c(QX) = 10(N+1)QX and c(QY) = 30(N+1)QY respectively, where QX represents the quantity produced by OXO and QY represents the quantity produced by OYO. a) Find AXY’s equilibrium profits if it decided to enter the market in country X. b) Find AXY’s equilibrium profits if it decided to enter the market in country Y. c) Which country will AXY enter? How much money would the incumbent firm in that country be willing to pay to keep AXY out?