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:

Sample Mean

The average value of a sample set of numbers, calculated by adding all the values together and dividing by the number of values.

Confidence Interval

An interval estimate used to infer the reliability of a parameter estimate, such as a mean or proportion, within a population.

Population Mean

The average value of a population attribute.

Population Mean

The average of all the members of a population.