Imagine that a two-firm duopoly dominates the market for spreadsheet application software for personal computers. Also assume that the firms face a linear market demand curve: P = $1250 - Q where P is price and Q is total output in the market (in thousands). Thus Q = QA + QB. For simplicity, also assume that both firms produce an identical product, have no fixed costs and marginal cost MCA = MCB = $50. In this circumstance, total revenue for Firm A is: TRA = $1,250QA - QA ^2 - QAQB Marginal revenue for Firm A is: MRA = TRA/QA = $1,250 - $2QA - QB Similar total revenue and marginal revenue curves hold for Firm B.

A. Calculate the Stackelberg market equilibrium price-output solutions.

B. Taking the Cournot equilibrium output 800 (000) units) and Cournot equilibrium price of $450 - why do the Stackelberg equilibrium price-output solutions differ from those suggested by the Cournot model?