Question: The question is in the image. 4. (7 marks) Consider the following two-rm Stackelberg oligopoly problem. The output of rm 1 is (11 Z 0

The question is in the image.

4. (7 marks) Consider the following two-rm Stackelberg oligopoly problem. The output of rm 1 is (11 Z 0 and the output of rm 2 is q2 Z 0. Total output is q = (11 + 9'2. Firm 1 chooses its output rst. Firm 2 observes rm 1's choice and then chooses its output. The price is given by 1 if l Firm 1 has the linear cost function: C1011) = Q1. Firm 2 has the quadratic cost function: 02012) = (q2)2- (a) What is rm 2's optimal strategy? (b) What is rm 1's optimal strategy? (c) What outputs will be chosen when these strategies are adopted

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