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

Question 36

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Stackelberg duopolists, Firm 1 and Firm 2, face inverse market demand P=50QP = 50 - Q . Both have marginal cost, MC=$20M C = \$ 20 . Let firm 2, the follower, set its output according to the formula Q2=Q _ { 2 } = 15Q1/215 - Q _ { 1 } / 2 . Which of the following outputs maximizes the leader's profit?


A) Q1=7.5Q _ { 1 } = 7.5
B) Q1=10Q _ { 1 } = 10
C) Q1=15Q _ { 1 } = 15
D) Q1=20Q _ { 1 } = 20

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