(b) Suppose the demand for pizza in a small isolated town is p = 10 - Q. There are only two firms, A and B. Each has a cost function TC = 2 + Q. Determine the equilibrium quantities of each if firm A is the Stackelberg leader. (7%)

(c)Consider a society consisting of just a farmer and a tailor. The farmer has 10 units of food but no clothing. The tailor has 20 units of clothing but no food. Suppose each has the utility function U =F * C. The price of clothing is always $1. If the price of food is $3, does a competitive equilibrium exist? If not, what will happen to the price of food? (7%)

題組內容

(b) Suppose the demand for pizza in a small isolated town is p = 10 - Q. There are only two firms, A and B. Each has a cost function TC = 2 + Q. Determine the equilibrium quantities of each if firm A is the Stackelberg leader. (7%)

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