2 Stackelberg Suppose econ and man. econ are competing following the rules of the Stackelberg Oligopoly Model. Suppose man. econ is the leader and econ is the follower. Market demand for an economics degree now is @ = 10000 2p. Both departments' marginal cost is now $4400 per degree. 2.1 What is the econ department's best response function? 2.2 What is the man. econ department's residual demand curve? 2.3 What is the Nash-Stackelberg equilibrium in this market? 2.4 What is the price at this equilibrium? 2.5 What are profits for the two departments at this equilibrium? 2.6 Graph the marginal cost, demand, residual demand, and marginal revenue curve for the man. econ department. Show the equi- librium price and quantity for the man. econ department. 3 Bertrand Now suppose that instead of competing on quantities, the two departments are competing by setting prices following the Bertrand Oligopoly Model. Marginal cost remains the same ($4400 per degree) and total market demand for economics degrees is 720. 3.1 What is the Nash-Bertrand equilibrium for this market? Now suppose that the two departments enter the market for online degrees with differentiated products. The marginal cost of each degree drops to $200 for each department. Suppose econ faces a demand function of g. = 20000 200p, + 100p,,.. Suppose man. econ faces a demand function of , = 20000 200p,,. + 100p.. 3.2 What is the Nash-Bertrand equilibrium now