question archive Assume the same market demand and cost functions as Problem 1, the two firms are duopoly but Firm 1 enters the market first and sets its output first, firm 2 determines its output decisions after Firm 1
Assume the same market demand and cost functions as Problem 1, the two firms are duopoly but Firm 1 enters the market first and sets its output first, firm 2 determines its output decisions after Firm 1
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Assume the same market demand and cost functions as Problem 1, the two firms are duopoly but Firm 1 enters the market first and sets its output first, firm 2 determines its output decisions after Firm 1. In this case, Firm 1 is the Stackelberg leader and the two firms make their output decisions independently.
The market demand function is P=50−QP=50−Q;
Firm's total costs areTC1=10q1TC2=10q2TC1=10q1TC2=10q2
where Q=q1+q2Q=q1+q2
1. Solve for Firm 1's profit maximizing output decision?
2. Solve for Firm 2's profit maximizing output decision?
3. What is Firm 1's profit? Firm 2's profit? Total profit?
Option 1
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