Suppose Duopolists Face the Market Inverse Demand Curve P =

question 24

Multiple Choice

Suppose duopolists face the market inverse demand curve P = 100 - Q,Q = q₁ + q₂,and both firms have a constant marginal cost of 10.If firm 1 is a Stackelberg leader and firm 2's best response function is q₂ = (100 - q₁) /2,at the Nash-Stackelberg equilibrium the prices the two firms charge are

• A) P₁ = 40, P₂ = 40.
• B) P₁ = 30, P₂ = 30.
• C) P₁ = 30, P₂ = 40.
• D) P₁ = 40, P₂ = 30.

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