Stackelberg

Suppose there are two departments selling economics degrees in one market competing following the rules of the Stackelberg Oligopoly Modelecon and man. econ. Suppose man. econ is the leader and econ is the follower. Suppose market demand for an economics degree is Q = 7200 2p. Suppose both departments marginal cost is $3000 per degree.

a. What is the econ department's best response function?

b. What is the man. econ department's residual demand curve?

c. What is the Nash-Stackelberg equilibrium in this market?

d. What is the price at this equilibrium?

e. What are profits for the two departments at this equilibrium?

f. Graph the marginal cost, demand, residual demand, and marginal revenue curve for the man. econ department. Show the equilibrium price and quantity for the man. econ department.