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Suppose Two Duopolists Operate at Zero Marginal Cost

Question 34

Multiple Choice

Suppose two duopolists operate at zero marginal cost.The market demand is p = a - bQ.If firm 1 is the Stackelberg leader,what level of output will it choose?


A) q1 = (a - bq2) /2b
B) q1 = (a - 2bq2) /2b
C) q1 = a/b
D) q1 = a/2b

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