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The inverse demand for a homogeneous-product Stackelberg duopoly is P = 18,000 -5Q. The cost structures for the leader and the follower, respectively, are CL(QL) = 2,000QL and CF (QF) = 4,000QF..
a. What is the follower’s reaction function?
QF = 1400 - .5 QL
b. Determine the equilibrium output level for both the leader and the follower.
Leader output:
Follower output:
c. Determine the equilibrium market price. $
d. Determine the profits of the leader and the follower.
Leader profits: $
Follower profits: $
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