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Statistics Help

**Question: **In the Stackelberg model, suppose the first-mover has MR = 15 - Q1, the second firm has reaction function Q2 = 15 - Q1/2, and production occurs at zero marginal cost. Why doesn't the first-mover announce that its production is Q1 = 30 in order to exclude the second firm from the market (i.e., Q2 = 0 in this case)?

A) In this case, MR is negative and is less than MC, so the first-mover would be producing less than the optimal quantity.

B) In this case, MR is negative and is less than MC, so the first-mover would be producing too much output.

C) This is a possible outcome from the Stackelberg duopoly under these conditions.

D) We do not have enough information to determine if this is an optimal outcome for this case. Edit

**Answer: **A) In this case, MR is negative and is less than MC, so the first-mover would be producing less than the optimal quantity. Edit

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