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Managerial Economics · End Term · 13 Sept 2026 · May 2026 term · Set 1

Question 9: Now suppose that the two firms are competing in the Stack…

Question 9

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Suppose two firms operate in a market and can produce at a constant average (and marginal) cost of AC = MC = $8. Let Q1 be the output of the first firm and Q2 be the output of the second. Market demand is given by Q1+ Q2 = 80 - P. Assuming that the firms are competing as per the Cournot competition, find out the equilibrium quantity for each firm, equilibrium price and profit (π1, π2) of each firm. Based on the above data, answer the given subquestions.

Now suppose that the two firms are competing in the Stackelberg manner where one of the firms makes its output decision before the other. Suppose Firm 1 is the Stackelberg leader (i.e., makes its output decisions before Firm 2). Calculate the equilibrium quantity for the firms, equilibrium market price and profits (π1, π2) of both the firms in equilibrium. π1…………

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Correct answer: 648

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Question 9 of 37 in the IIT Madras BS Managerial Economics (Managerial Economics) End Term paper sat on 13 Sept 2026, in the May 2026 term (Managerial Economics 13 Sep 26 (Session 2)). It carries 1 mark.

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