With linear demand and constant marginal cost, a Stackelberg leader's profits are ___________ the follower.
A)less than.
B)equal to.
C)greater than.
D)either less than or greater to.

Question

Quizplus · Accepted Answer

With linear demand and constant marginal cost, the Stackelberg leader has the first mover advantage and can set the quantity to maximize profits. The follower then chooses its quantity based on the leader's quantity. As a result, the leader's profits are greater than the follower's because they have more control over the market.

With Linear Demand and Constant Marginal Cost, a Stackelberg Leader's