In Stackelberg competition, the market inverse demand curve is P = 20 - 2(q1 + q2) , where q1 and q2 are Firm 1 and Firm 2's output measured in hundreds of units. Firm 1, the first-mover, has a marginal cost of $4, and Firm 2 has a marginal cost of $2. How much output does each firm produce?
A) q1 = 150; q2 = 120
B) q1 = 350; q2 = 275
C) q1 = 80; q2 = 106
D) q1 = 260; q2 = 245
Correct Answer:
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