The benefits and costs of the two firms are B1, C1 and B2, C2 respectively, where B1 – C1 > B2 – C2. What price should firm 1 set so that it can capture the entire market and maximize profits.

Suppose that two firms compete in a market where consumers have identical preferences. The benefits and costs of the two firms are B1, C1 and B2, C2 respectively, where B1 – C1 > B2 – C2. What price should firm 1 set so that it can capture the entire market and maximize profits.

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