Question: please help and show all work will rate 2. Stackelberg model: redo the entire Example 12.1 assuming that the marginal cost is $5.00 for Microsoft
2. Stackelberg model: redo the entire Example 12.1 assuming that the marginal cost is $5.00 for Microsoft and $4.50 for Apple. So, you must do all the following to earn the points: (a) Starting with Microsoft's decision in stage 2, write down Microsoft's profit ( M) as a function of its own quantity (qM) and Apple's quantity (qA). (2p) (b) find Microsoft's best response (BR) to Apple's decision by taking the derivative of M with respect to qM, setting it equal to 0 , and calculating qM as a function of qA. (2p) (c) Moving to Apple's decision in stage 1, write down Apple's profit (A) as a function of qM and qA. (1) (d) Since Apple knows Microsoft's BR, go ahead and plug in for qM the function that you found in part (b). (1p) (e) take the derivative of A with respect to qA, set it equal to 0 , and solve for qA. (2p) (f) Solve for qM, and then solve for M and A. (3p)
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