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2) As in the above exercise 1), consider two firms with the same constant average and marginal cost AC=MC-5 facing the market demand curve Q1

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2) As in the above exercise 1), consider two firms with the same constant average and marginal cost AC=MC-5 facing the market demand curve Q1 + Q2 = 53 - P. Now, let's consider the Stackelberg model in order to analyze what will happen when one of the firms makes its output decision ahead of the other firm. Suppose that firm 1 is the Stackelberg leader. How much will each firm produce? What is the resulting market price? How much profit will each firm earn? Compare with the Cournot-Nash equilibrium in the above exercise 1)

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