Consider a Stackelberg Duopoly with the Following Inverse Demand Function

question 106

Multiple Choice

Consider a Stackelberg duopoly with the following inverse demand function: P = 100 − 2Q₁ − 2Q₂.The firms' marginal costs are identical and are given by MC_i(Q_i) = 2.Based on this information,the leader's reaction function is:

• A) r₁(Q₂) = 24.5 − 0.5Q₁ and r₂(Q₁) = 24.5 − 0.5Q₂.
• B) r₁(Q₂) = 24.5 − 0.5Q₂ and r₁(Q₂) = 24.5 − 0.5Q₁.
• C) Q₁ = 49 − 0.5Q₂ and Q₂ = 49 − 0.5Q₁.
• D) The Stackelberg leader does not react to the output decision of its rival.

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