Use the following figure to answer the question : Figure 13-1 : shows the Stackelberg model of a duopoly.Both firms face constant marginal costs equal to OJ and the market demand curve is AD.The Stackelberg firm produces an output of OF and OF is equal to FL.
-Refer to Figure 13-1.In the Stackelberg equilibrium,the total industry output is _____.
A)OF
B)OK
C)OE
D)OL

Question

Use the following figure to answer the question : Figure 13-1 :  shows the Stackelberg model of a duopoly.Both firms face constant marginal costs equal to OJ and the market demand curve is AD.The Stackelberg firm produces an output of OF and OF is equal to FL. 
-Refer to Figure 13-1.In the Stackelberg equilibrium,the total industry output is _____.
A)OF 
B)OK 
C)OE 
D)OL

Quizplus · Accepted Answer

In the Stackelberg model of duopoly, one firm (the leader) chooses its output level first, and then the other firm (the follower) chooses its output level after observing the leader's choice. The total industry output in the Stackelberg equilibrium is the sum of the output levels chosen by the leader and the follower. The correct answer is the output level that corresponds to the Stackelberg equilibrium on the diagram referred to in the question, which is typically represented by the point where the leader's reaction function intersects the follower's reaction curve or the market demand curve, depending on the specific details of the figure. Without seeing Figure 13-1, the general explanation is that the Stackelberg equilibrium involves a higher total output than the Cournot equilibrium (where firms choose outputs simultaneously) because the leader commits to an output level first, effectively capturing a larger share of the market, and the follower adjusts its output accordingly.

Use the Following Figure to Answer the Question : Figure