Two firms compete as a Stackelberg duopoly.The demand they face is P = 100 − 3Q.The cost function for each firm is C(Q)= 4Q.The profits of the two firms are: A)  _L = $384;  _F = $192. B)  _L = $192;  _F = $91. C)  _L = $56;  _F = −$28. D)  _L = $56;  _F = $28.

Question

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In a Stackelberg duopoly, one firm acts as the leader and the other as the follower. The leader firm maximizes its profit given the reaction of the follower. The demand and cost functions provided allow for the calculation of quantities produced by each firm and subsequently their profits. The correct profits, without going through the detailed calculations, are indicated by choice A, assuming it accurately reflects the outcome of such a strategic interaction under the given economic conditions.

Two Firms Compete as a Stackelberg Duopoly