Scenario 12.2:
Suppose a stream is discovered whose water has remarkable healing powers. You decide to bottle the liquid and sell it. The market demand curve is linear and is given as follows:
P = 30 - Q
The marginal cost to produce this new drink is $3.
-Refer to Scenario 12.2. What will be the price of this new drink in the long run if the industry is a Stackelberg duopoly?
A) $3
B) $9
C) $12
D) $13.50
E) none of the above

Question

Quizplus · Accepted Answer

In a Stackelberg duopoly, the leader firm decides its quantity first, and then the follower firm decides its quantity knowing the leader's quantity. The market price is determined by the total quantity supplied by both firms. The given information does not provide enough details to calculate the exact price in a Stackelberg duopoly scenario, such as the quantities decided by the leader and the follower. Therefore, without additional information about the firms' strategies or quantities, the exact price cannot be determined from the given options.

Scenario 12.2: Suppose a Stream Is Discovered Whose Water Has Remarkable Healing