Consider the market for vegan soup. Two firms, Garden Kitchen and Veggie Spot are in Stackelberg competition. Veggie Spot observes Garden Kitchen's output level before choosing its desired output level. The market inverse demand curve for vegan soup is P = 18 - Q, where Q measures cups of soup produced by Garden Kitchen and Veggie Spot, qK and qF, and P is the price per cup. Garden Kitchen and Veggie Spot produce soup at a constant marginal cost of $2.
a. Derive Veggie Spot's reaction function.
b. Derive Garden Kitchen's marginal revenue function.
c. How much output does Garden Kitchen produce?
d. How much output does Veggie Spot produce?
e. What is the market price of vegan soup?
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