Homogeneous-product stackelberg duopoly

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The inverse demand for a homogeneous-product Stackelberg duopoly is P = 20,000 -4Q. 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 =___?____ - ____?____ QL (Fill in the blank & show equation)

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: $ ?

Reference no: EM131169393

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