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| Consider a market in which the market demand curve is given by P = 18 – X – Y, where X is Firm 1’s output, and Y is Firm 2’s output. Firm 1 has a marginal cost of 3, while Firm 2 has a marginal cost of 6. a) Find the Cournot equilibrium outputs in this market. How much profit does each firm make? b) Find the Stackelberg equilibrium in which Firm 1 acts as the leader. How much profit does each firm make? |
