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      Question

      In a Stackelberg Duopoly model where Firm 1 is the

      leader and Firm 2 is the follower with identical marginal costs (C), the leader's equilibrium quantity (Q_1) compared to the Cournot equilibrium quantity (Q_c) is:
      A Q_1 < Q_c Correct Answer Incorrect Answer
      B Q_1 = Q_c Correct Answer Incorrect Answer
      C Q_1 > Q_c Correct Answer Incorrect Answer
      D Q_1 = 2Q_c Correct Answer Incorrect Answer

      Solution

      In the Stackelberg model, the leader chooses its quantity first, anticipating the follower's reaction function. Because the leader has a "first-mover advantage," it commits to a larger quantity to force the follower to scale back its production. Consequently, the leader's output in Stackelberg is always higher than the output in the simultaneous Cournot equilibrium.

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