Suppose that two identical firms produce widgets and that they are the only firms in the market. The average and marginal cost is €60 for each firm. Price is determined by the following demand curve: P = 300 – Q where Q = Q1 + Q2. Suppose firm 1 is the leader and firm 2 is the follower. The output produced by each firm in a Stackelberg equilibrium is A. Firm 1 will produce 60 and Firm 2 will produce 120 B. Firm 1 will produce 80 and Firm 2 will produce 40 C. Firm 1 will produce 120 and Firm 2 will produce 40 D. Firm 1 will produce 120 and Firm 2 will produce 60
Suppose that two identical firms produce widgets and that they are the only firms in the market. The average and marginal cost is €60 for each firm. Price is determined by the following demand curve: P = 300 – Q where Q = Q1 + Q2. Suppose firm 1 is the leader and firm 2 is the follower. The output produced by each firm in a Stackelberg equilibrium is A. Firm 1 will produce 60 and Firm 2 will produce 120 B. Firm 1 will produce 80 and Firm 2 will produce 40 C. Firm 1 will produce 120 and Firm 2 will produce 40 D. Firm 1 will produce 120 and Firm 2 will produce 60
Chapter15: Imperfect Competition
Section: Chapter Questions
Problem 15.3P
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Suppose that two identical firms produce widgets and that they are the only firms in the market. The average and marginal cost is €60 for each firm.
Price is determined by the following demand curve: P = 300 – Q where Q = Q1 + Q2.
Suppose firm 1 is the leader and firm 2 is the follower. The output produced by each firm in a Stackelberg equilibrium is
A. Firm 1 will produce 60 and Firm 2 will produce 120
B. Firm 1 will produce 80 and Firm 2 will produce 40
C. Firm 1 will produce 120 and Firm 2 will produce 40
D. - Firm 1 will produce 120 and Firm 2 will produce 60
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