Two Firms That Are Engaged in Stackelberg Competition Face the Market

question 13

Multiple Choice

Two firms that are engaged in Stackelberg competition face the market inverse demand curve P = 100 - 2Q, where Q is the total market output comprising Firm 1's output, q₁, and Firm 2's output, q₂. Each firm produces the product at a constant marginal cost of $22. If Firm 2's reaction function is q₂ = 22 - 0.5q₁, what is Firm 1's (the first-mover's) inverse demand curve?

• A) P = 88 - 2q₁
• B) P = 56 - q₁
• C) P = 100 - 2(q₂ - 22 + 0.05q₁)
• D) P = 88 - 1.5q₁

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Definitions:

Task-Oriented Behavior

A leadership approach focused primarily on the completion of tasks and the achievement of objectives.

Initiating Structure

The act of defining roles, assigning tasks, and establishing clear patterns of organization and communication within a team or organization.

Maintenance Behavior

Actions or activities aimed at preserving the current state of a system, organization, or relationship, ensuring its continuous operation and effectiveness.

Task-Oriented Behavior

Focuses on assigning tasks, clarifying responsibilities, and ensuring the team achieves its goals efficiently.