Hand written solutions are strictly prohibited. 7. Consider a two-stage competition between two firms.The total market demand curve is givenas P = 36- Q, where Q = Q1 + Q2. (The Qs here stand forquantity, and they are the ys in yourtextbook in the relevant chapters.) Both firms have aconstant marginal cost 18 and zero fixedcost. Firm 1 will pick its output level in stage 1 and Firm 2will pick in stage 2. How many unitsdoes each firm produce in equilibrium? What is the profitlevel?

Stackelberg model is a form of monopolistically competitive market in which there are 2 competitive…

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will pick in stage 2. How many units does each firm produce in equilibrium? What is the profit level?

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Chapter1: Making Economics Decisions

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Question

Hand written solutions are strictly prohibited.

7. Consider a two-stage competition between two firms.
The total market demand curve is given
as P = 36- Q, where Q = Q1 + Q2. (The Qs here stand for
quantity, and they are the ys in your
textbook in the relevant chapters.) Both firms have a
constant marginal cost 18 and zero fixed
cost. Firm 1 will pick its output level in stage 1 and Firm 2
will pick in stage 2. How many units
does each firm produce in equilibrium? What is the profit
level?

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