Suppose the Outboard Motor Market Is Characterized by Stackelberg Competition

question 48

Multiple Choice

Suppose the outboard motor market is characterized by Stackelberg competition. The market inverse demand curve for outboard motors is P = 10,000 - 50Q, where Q is the total market output produced by Mercury Marine and Yamaha, q_M + q_Y. Suppose that the marginal cost for both firms is constant at $1,000. If Yamaha is the first-mover, what is the equilibrium price?

• A) $1,800
• B) $2,600
• C) $3,250
• D) $4,000

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