An Industry Has Two Firms, a Leader and a Follower

question 5

Multiple Choice

An industry has two firms, a leader and a follower. The demand curve for the industry's output is given by p = 208 - 4q, where q is total industry output. Each firm has zero marginal cost. The leader chooses his quantity first, knowing that the follower will observe the leader's choice and choose his quantity to maximize profits, given the quantity produced by the leader. The leader will choose an output of

• A) 26.
• B) 17.33.
• C) 13.
• D) 52.
• E) None of the above.

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Definitions:

Financial Statements

Formal records of the financial activities and position of a business, individual, or other entity, including the balance sheet, income statement, and statement of cash flows.

Operating Activities

The portion of a company's business activities that are related to its main operations, such as selling products or offering services.

Cash Flow Statement

A report detailing the impact of variations in balance sheet figures and income on cash and cash equivalents, segmented into operations, investments, and finance-related actions.

Dividend Payments

Dividend payments are the distribution of a portion of a company's earnings, decided by the board of directors, to its shareholders.