Two Firms Compete as a Stackelberg Duopoly

question 73

Multiple Choice

Two firms compete as a Stackelberg duopoly.The inverse market demand they face is P = 62 − 4.5Q.The cost function for each firm is C(Q) = 8Q.The outputs of the two firms are:

• A) Q_L = 48; Q_F = 24.
• B) Q_L = 35; Q_F = 6.
• C) Q_L = 6; Q_F = 3.
• D) None of the preceding answers is correct.

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Definitions:

Consolidated Balance Sheet

A financial statement that presents the total assets, liabilities, and shareholders' equity of a parent company and its subsidiaries as one single entity.

Acquisition Differential

The variance between the purchase price of an acquisition and the fair value of the net assets that are distinctly recognized.

Purchase Price

The amount paid or to be paid by a buyer to acquire an asset or service from a seller, not including incidental costs.

Goodwill

The intangible asset that arises when a business is acquired for more than the fair value of its net assets.