Understanding Business
Understanding Business
12th Edition
ISBN: 9781259929434
Author: William Nickels
Publisher: McGraw-Hill Education
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The inverse demand for a homogeneous-product Stackelberg duopoly is P= 10,000 -4Q. The cost structures for the leader and the
follower, respectively, are CL(QL) = 3,000QL and CF (QF) = 4,000 QF
a. What is the follower's reaction function?
QF= 750
0.1
QL
b. Determine the equilibrium output level for both the leader and the follower.
Leader output:
875
Follower output:
641
c. Determine the equilibrium market price.
$ 4,999
d. Determine the profits of the leader and the follower.
Leader profits: $1,619,531
Follower profits: $ 999,506 ✪
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Transcribed Image Text:The inverse demand for a homogeneous-product Stackelberg duopoly is P= 10,000 -4Q. The cost structures for the leader and the follower, respectively, are CL(QL) = 3,000QL and CF (QF) = 4,000 QF a. What is the follower's reaction function? QF= 750 0.1 QL b. Determine the equilibrium output level for both the leader and the follower. Leader output: 875 Follower output: 641 c. Determine the equilibrium market price. $ 4,999 d. Determine the profits of the leader and the follower. Leader profits: $1,619,531 Follower profits: $ 999,506 ✪
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