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

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter12: Price And Output Determination: Oligopoly

Section: Chapter Questions

Problem 2E

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	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