Consider a Stackelberg Duopoly with the Following Inverse Demand Function

question 1

Multiple Choice

Consider a Stackelberg duopoly with the following inverse demand function: P = 100 − 2Q₁ − 2Q₂.The firms' marginal costs are identical and are given by MC_i = 2.Based on this information,the Stackelberg leader's marginal revenue function is:

• A) MR(Q_L) = 50 − 2Q_L + c₁/2.
• B) MR(Q_L) = 50 − 2Q_L + c₂/2.
• C) MR(Q_F) = 100 − 2Q_F + c₁/2.
• D) MR(Q_F) = 100 − Q_F + c₂/2.

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Definitions:

Marginal Product

The increase in output that results from employing one more unit of a factor of production, holding all other factors constant.

Labor Costs

The total expenses incurred by companies for the payment of wages, benefits, and taxes associated with the employment of labor.

Capital Costs

Expenditures for acquiring fixed assets such as buildings, machinery, and equipment, or the costs associated with improving existing assets.

Marginal Product

The rise in production resulting from one more unit of input.