The market demand curve faced by Stackelerg duopolies is: Qd = 12,000 - 5P where Qd is the market quantity demanded and P is the commodity's price in dollars. Firm A's marginal cost is: MCa = 0.08qa where MCa is Firm A's marginal cost in dollars and qa is the quantity of output produced by Firm A. Firm B's marginal cost equation is: MCb = 0.1qb where MCb is Firm B's marginal cost in dollars and qb is the quantity of output produced by Firm B. Because of Firm A's lower marginal cost, Firm B has conceded the power to move first to Firm A. a. Given Firm B will move second, what is the equation for Firm B's reaction function with qb expressed as a function of qa? b. Given Firm A can move first, what quantity of output will Firm A produce? c. What quantity of output will firm B produce? What price will be established for the commodity?
The market
Qd = 12,000 - 5P
where Qd is the market quantity demanded and P is the commodity's price in dollars. Firm A's marginal cost is:
MCa = 0.08qa
where MCa is Firm A's marginal cost in dollars and qa is the quantity of output produced by Firm A. Firm B's marginal cost equation is:
MCb = 0.1qb
where MCb is Firm B's marginal cost in dollars and qb is the quantity of output produced by Firm B. Because of Firm A's lower marginal cost, Firm B has conceded the power to move first to Firm A.
a. Given Firm B will move second, what is the equation for Firm B's reaction function with qb expressed as a function of qa?
b. Given Firm A can move first, what quantity of output will Firm A produce?
c. What quantity of output will firm B produce? What price will be established for the commodity?
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