In Stackelberg Competition, the Market Inverse Demand Curve Is P

question 34

Multiple Choice

In Stackelberg competition, the market inverse demand curve is P = 20 - 2(q₁ + q₂) , where q₁ and q₂ are Firm 1's and Firm 2's output measured in hundreds of units. Firm 1, the first-mover, has a marginal cost of $4, and Firm 2 has a marginal cost of $2. How much output does each firm produce?

• A) q₁ = 150; q₂ = 120
• B) q₁ = 350; q₂ = 275
• C) q₁ = 80; q₂ = 106
• D) q₁ = 260; q₂ = 245

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