4. Consider the following Stackelberg game. Firm 1, the leader, selects an output,q1, after which firm 2, the follower, observes the choice of q1, and selects its own output, q2. The resulting price is one satisfying the industry demand curve P=200-q1-q2 . Both firms have a constant marginal cost of 60. a. Derive the equation for the follower firm’s best response function. b. Determine the equilibrium output and price of the Stackelberg game. What are the profits for the leader and follower firm in the equilibrium?

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