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

question 39

Multiple Choice

Stackelberg duopolists, Firm 1 and Firm 2, face inverse market demand $P = 50 - Q$ . Both have marginal cost, $M C = \$ 2.0$ . Firm 1 produces output Q₁ = 15 and Firm 2 produces output Q₂ = 7.5. What is the price level in this market and what is the level of industry profits (i.e., the sum of Firm 1 and Firm 2's profits) ?

• A) P = 27.5; industry profits = 168.75
• B) P = 30; industry profits = 172.6
• C) P=32.5; industry profits = 180
• D) P=34; industry profits = 184.2

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