Question: 4.5 The market demand function is Q = 1,000 - 1,000p. Each firm has a marginal cost of m = 0.28 (28 per unit). Firm

4.5 The market demand function is Q = 1,000 -

1,000p. Each firm has a marginal cost of m =

0.28 (28¢ per unit). Firm 1, the leader, acts before Firm 2, the follower. Solve for the Nash-Stackelberg equilibrium quantities, prices, and profits. (Hint:

See Appendix 13B and Solved Problem 13.3.)

Compare your solution to the Nash-Cournot equilibrium

(Question 3.2). C

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