Two Firms Compete as a Stackelberg Duopoly

question 14

Multiple Choice

Two firms compete as a Stackelberg duopoly. The demand they face is P = 100 - 3Q. The cost function for each firm is C(Q) = 4Q. The profits of the two firms are:

• A) π_L = $384; π_F = $192.
• B) π_L = $192; π_F = $91.
• C) π_L = $56; π_F = -$28.
• D) π_L = $56; π_F = $28.

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Definitions:

Rate of Unemployment

The segment of the labor force that is without a job and actively on the look out for employment opportunities.

Passive Approach

A strategy, particularly in investing or management, where minimal intervention or action is taken, often to maintain the current state or to avoid risk.

Recessionary Gap

The difference between the actual output of an economy and its potential output at full employment, indicating underutilization of resources.

Inflationary Expectations

The anticipation of future inflation rates, influencing economic decisions and behavior.