Firm 1 is the leader and Firm 2 the follower in the model of price leadership. Thus, Firms 1 and 2 are the only two producers of a certain good; Firm 1 chooses the price p it will commit to maintain in the market; after having observed Firm 1's decision p, Firm 2 chooses the quantity y2 it will produce. Here, the firms cost functions are as follows: c(y;)=3y,+y,/2 and c2(y2) = y22/4. The inverse demand curve is p(Y)=70-Y. What is true about the quantity Firm 2 will produce at the equilibrium of this model? a. It is between 40 and 42. O b. None of the other answers. O c. It is between 44 and 45. O d. It is between 38 and 39. e. It is between 43 and 43.5.

Firm 1 is the leader and Firm 2 the follower in the model of price leadership. Thus, Firms 1 and 2 are the only two producers of a certain good; Firm 1 chooses the price p it will commit to maintain in the market; after having observed Firm 1's decision p, Firm 2 chooses the quantity y2 it will produce. Here, the firms cost functions are as follows: c(y;)=3y,+y,/2 and c2(y2) = y22/4. The inverse demand curve is p(Y)=70-Y. What is true about the quantity Firm 2 will produce at the equilibrium of this model? a. It is between 40 and 42. O b. None of the other answers. O c. It is between 44 and 45. O d. It is between 38 and 39. e. It is between 43 and 43.5.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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