Stackelberg Duopolists, Firm 1 and Firm 2, Face Inverse Market $P = 50 - Q$

question 36

Multiple Choice

Stackelberg duopolists, Firm 1 and Firm 2, face inverse market demand $P = 50 - Q$ . Both have marginal cost, $M C = \$ 20$ . Let firm 2, the follower, set its output according to the formula $Q _ { 2 } =$ $15 - Q _ { 1 } / 2$ . Which of the following outputs maximizes the leader's profit?

• A) \(Q _ { 1 } = 7.5\)
• B) \(Q _ { 1 } = 10\)
• C) \(Q _ { 1 } = 15\)
• D) \(Q _ { 1 } = 20\)

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