Consider a market consisting of two firms where the inverse demand curve is given by P = 500 − 2(Q₁ + Q₂).If the Stackelberg leader's and follower's marginal costs are zero,the leader's marginal revenue is: A) MR(Q_L, Q_F) = 125 − Q_L + 0.5Q_F. B) MR(Q_L) = 250 − 2Q_L. C) MR(Q_F) = 250 − 2Q_F. D) MR(Q_L, Q_F) = 125 − 0.5Q_L + Q_F.

Question

Quizplus · Accepted Answer

For the Stackelberg leader, the profit maximizing output can be found by solving:
max QS1U1B1L (500 − 2(QS1U1B1L + QS1U1B1F))QS1U1B1L = 250 − 2QS1U1B1L

Differentiating the above equation with respect to QS1U1B1L gives the marginal revenue:
MR(QS1U1B1L) = 250 − 2QS1U1B1L

Consider a Market Consisting of Two Firms Where the Inverse