What is the follower’s total revenue function? Determine the equilibrium output level for both the leader and the follower. Determine the equilibrium market price.
What is the follower’s total revenue function? Determine the equilibrium output level for both the leader and the follower. Determine the equilibrium market price.
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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Question
Suppose two firms face market demand of P=150-Q, where . Both firms have the same unit cost of C, cost C=27. Assume the firms compete a la Stackelberg. Firm 1 is the leader and Firm 2 is the follower in this market.
- What is the follower’s total revenue function?
- Determine the equilibrium output level for both the leader and the follower.
- Determine the
equilibrium market price. - Determine the profits of the leader and the follower.
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