A Stackelberg Leader and Follower Choose Their Outputs to Maximize

question 8

Multiple Choice

A Stackelberg leader and follower choose their outputs to maximize their own profits.Local property taxes which constitute a lump sum tax for each of them are reduced by $500 per year for the leader and by $200 a year for the follower.In consequence, the firms

• A)both increase their output, with the leader increasing its output by more.
• B)both increase their output, with the follower increasing its output by more.
• C)increase their output by equal amounts for each firm.
• D)leave their outputs unchanged.
• E)There is not enough information in the question to determine what the firms will do.

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Definitions:

Interdependence

The mutual reliance between two or more groups, organisms, or systems for benefits or survival.

Direct Competition

Refers to the rivalry between businesses that offer the same or similar products or services to the same customer base.

Systematic Processes

Methodical and organized procedures or methods followed to achieve specific goals.

Organized Approaches

Systematic methods or strategies applied to achieve goals in an orderly and efficient manner.