Exercise 1: Stackelberg in quantities Suppose we have two firms, a leader and a follower. The leader's cost function is given by CL(qL) = 10+ qL and the follower's cost function is Cy(q ) = 5q + 5. Market demand is given by P(Q) = 250 -5Q, where Q = qf + qL. a) (5 points) Find equilibrium price and quantities b) (5 points) Find profits, Consumer surplus and Total surplus