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Suppose there are two emergency hospitals in Townville, State ER and University ER. Overall demand (patients) for ER visits in Townville is P = 120-Q
Suppose there are two emergency hospitals in Townville, State ER and University ER. Overall demand (patients) for ER visits in Townville is P = 120-Q per day, where @ =q, +9, . Marginal cost at the State ER is c = 84 per patient. University has access to better equipment so their marginal cost is C = 70. Suppose University ER is the Stackelberg leader and is able to choose their quantity before State ER. State ER then responds to the choice by University. Note 1: Input numerical answers only. Do not input notations such as "$" and "". For fractions such as one-half, write it as 0.50 rather than 1/2. Please keep 2 decimal places in your answers whenever possible. Note 2: There is no design error in the following questions. a) [2 marks] State's optimal strategy is + b) [2 mark] University's optimal strategy is E c) [3 marks] In the equilibrium, the market price is Producers' surplus is Consumers' surplus is
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