An Industry Has Two Firms-A Stackelberg Leader and a Follower

question 45

Multiple Choice

An industry has two firms-a Stackelberg leader and a follower.The price of the industry output is given by P = 84 - Q, where Q is the total output of the two firms.The follower has a marginal cost of $0.The leader has a marginal cost of $21.How much should the leader produce in order to maximize profits?

• A)21
• B)24
• C)42
• D)19
• E)None of the above.

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