Suppose a market is served by two firms (a duopoly) The market demand function given by P = 1200 - O_{1} - O_{2} where is the output produced by firm 1 and is the output produced by firm 2 Q_{1}*Q_{2} Firm I's cost of production is given by the function C(Q_{1}) = 120Q_{1} and firm 2's cost of production is given by the function C(Q_{2}) = 120Q_{2} The average cost of firm is given by A*C_{1} = 120 and the average cost of firm 2 is given by A*C_{2} = 120 Marginal profit function for firm 1 (d*pi_{1})/(Delta*Q_{1}) = 1080 - 2Q_{1} - Q_{2} Marginal profit function for firm 2 (Delta*pi_{2})/(Delta*Q_{2}) = 1080 - Q_{1} - 2Q_{2} What will be the equilibrium profit levels earned by the stackelberg leader firm and the stackelberg follower firm?
Suppose a market is served by two firms (a duopoly) The market demand function given by P = 1200 - O_{1} - O_{2} where is the output produced by firm 1 and is the output produced by firm 2 Q_{1}*Q_{2} Firm I's cost of production is given by the function C(Q_{1}) = 120Q_{1} and firm 2's cost of production is given by the function C(Q_{2}) = 120Q_{2} The average cost of firm is given by A*C_{1} = 120 and the average cost of firm 2 is given by A*C_{2} = 120 Marginal profit function for firm 1 (d*pi_{1})/(Delta*Q_{1}) = 1080 - 2Q_{1} - Q_{2} Marginal profit function for firm 2 (Delta*pi_{2})/(Delta*Q_{2}) = 1080 - Q_{1} - 2Q_{2} What will be the equilibrium profit levels earned by the stackelberg leader firm and the stackelberg follower firm?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Suppose a market is served by two firms (a duopoly) The market demand function given by P = 1200 - O_{1} - O_{2} where is the output produced by firm 1 and is the output produced by firm 2 Q_{1}*Q_{2} Firm I's cost of production is given by the function C(Q_{1}) = 120Q_{1} and firm 2's cost of production is given by the function C(Q_{2}) = 120Q_{2} The average cost of firm is given by A*C_{1} = 120 and the average cost of firm 2 is given by A*C_{2} = 120 Marginal profit function for firm 1 (d*pi_{1})/(Delta*Q_{1}) = 1080 - 2Q_{1} - Q_{2} Marginal profit function for firm 2 (Delta*pi_{2})/(Delta*Q_{2}) = 1080 - Q_{1} - 2Q_{2} What will be the equilibrium profit levels earned by the stackelberg leader firm and the stackelberg follower firm?
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