# Quiz 11: Imperfect Competition

Business

Q 1Q 1

In monopolistic competition, the long-run equilibrium price _____ marginal cost because _____.
A) equals; firms earn zero economic profit
B) exceeds; firms face downward-sloping demand curves
C) exceeds; there are significant barriers to entry
D) is less than; firms set their production plans simultaneously

Free

Multiple Choice

B

Q 2Q 2

In a Cournot market structure with two firms, firm A's reaction function gives:
A) optimal quantity for A as a function of quantity for B.
B) optimal price for A as a function of price for B.
C) optimal quantity for A as a function of price for A and price for B.
D) optimal quantity for A as a function of price for B.

Free

Multiple Choice

A

Q 3Q 3

Two companies are the only snowplow merchants in a small town. Inverse market demand curve is P = 100 - 10Q, where Q = q

_{1}+ q_{2}(Firm 1's output = q_{1}; Firm 2's output = q_{2}). Each firm has marginal costs of $25. In the Nash equilibrium in this market, Firm 2 produces ____. A) 5 B) 4 C) 2.5 D) 2Free

Multiple Choice

C

Q 4Q 4

(Table: College Football Recruitment) The table shows the payoffs associated with two levels of spending for recruitment of star football players.
Payoffs: University of Michigan's Football Revenue, Michigan State's Football Revenue
What is the Nash equilibrium?
A) Each school will spend a little money on recruiting.
B) Each school will spend lots of money on recruiting.
C) The University of Michigan will spend a little money on recruiting, and Michigan State University will spend lots of money on recruiting.
D) There are two Nash equilibria: (1) both schools spend lots of money recruiting and (2) both schools spend little money recruiting.

Free

Multiple Choice

Q 5Q 5

Two firms are producing identical goods in a market characterized by the inverse demand curve P = 60 - 2Q, where Q is the sum of Firm 1 and Firm 2's output, q

_{1}+ q_{2}. Each firm's marginal cost is constant at $12, and fixed costs are zero. Answer the following questions, assuming that the firms are Cournot competitors. In this case, Firm 2 earns $____ in profit. A) 130 B) 128 C) 126 D) 124Free

Multiple Choice

Q 6Q 6

The inverse demand for shampoo is given by P = 30 - 0.03Q, where P is the price per bottle in dollars and Q is bottles brought to market in hundreds. There are two manufacturers in the local market. Firm 1's cost function is given by C

_{1}= 0.05q_{1}^{2}, where q_{1}is the number of bottles it brings to market. Firm 2's cost function is given by C_{2}= 0.03q_{2}^{2}, where q_{2}is the number of bottles it brings to market. The two firms are Cournot competitors who set output so that Q = q_{1}+ q_{2}. In equilibrium, the market price is $____. A) 21.23 B) 20.12 C) 19.18 D) 17.63Free

Multiple Choice

Q 7Q 7

The inverse demand for designer blankets is given by P = 40 - 0.01Q, where P is the price per blanket and Q is the total number of blankets brought to market. Two shops in the market supply specialty blankets. Shop 1's cost function is given by C

_{1}= 0.02q_{1}^{2}, where q_{1}is the number it brings to market. Shop 2's cost function is given by C_{2}= 0.02q_{2}^{2}, where q_{2}is the number it brings to market. Given that the two shops compete by setting output (Cournot), the profit maximizing level of output for Shop 2 is ____. A) 532.34 B) 571.42 C) 1,064.68 D) 1,142.84Free

Multiple Choice

Q 8Q 8

Ney Inc. and ARN Parts are the only two producers of bulldozer bucket teeth. The owners of the two firms conspire to charge a monopoly price, with each firm serving half the market. The market inverse demand curve is P = 1,000 - 10Q, where Q measures the daily number of sets of bulldozer bucket teeth and P is the price per set. The marginal cost of production for either firm is constant at $200, and fixed costs are zero. The profit for Ney Inc. is $_____.
A) 6,000
B) 8,000
C) 12,000
D) 16,000

Free

Multiple Choice

Q 9Q 9

The market inverse demand curve for thrust bearings is P = 15 - 1.5Q, where Q is measured in hundreds of bearings per day and P is the price per bearing. The marginal cost is $3. Suppose two firms, which are Bertrand competitors, produce identical thrust bearings for this market. If this market were monopolized, the market price would be $____.
A) 10
B) 9
C) 8
D) 7

Free

Multiple Choice

Q 10Q 10

In a Bertrand competition, with differentiated goods in a market structure of two firms, firm A's first-order condition can be expressed as:
A) .
B) .
C) .
D) .

Free

Multiple Choice

Q 11Q 11

The market inverse demand curve for thrust bearings is P = 15 - 1.5Q, where Q is measured in hundreds of bearings per day and P is the price per bearing. The marginal cost is $3. Suppose two firms, which are Bertrand competitors, produce identical thrust bearings for this market. If this market were monopolized, the market quantity would be ____.
A) 800
B) 600
C) 400
D) 200

Free

Multiple Choice

Q 12Q 12

Gotcha, the only seller of stun guns, faces the inverse market demand curve P = 400 - 12Q, where Q measures the number of stun guns per day and P is the price per stun gun. The marginal cost is constant at $64. Gotcha's profit-maximizing quantity is ____.
A) 20
B) 18
C) 16
D) 14

Free

Multiple Choice

Q 13Q 13

Two firms that are engaged in Stackelberg competition face the market inverse demand curve P = 100 - 2Q, where Q is the total market output comprising Firm 1's output, q

_{1}, and Firm 2's output, q_{2}. Each firm produces the product at a constant marginal cost of $22. If Firm 2's reaction function is q_{2}= 22 - 0.5q_{1}, what is Firm 1's (the first-mover's) inverse demand curve? A) P = 88 - 2q_{1}B) P = 56 - q_{1}C) P = 100 - 2(q_{2}- 22 + 0.05q_{1}) D) P = 88 - 1.5q_{1}Free

Multiple Choice

Q 14Q 14

Suppose that Mystic Energy and E-Storm are the only two producers of hydrogen fuel cells. The market inverse demand curve for hydrogen fuel cells is P = 1,300 - 0.08Q, where Q is the number of fuels cells per month and P is the price per fuel cell. The marginal cost is constant at $500. Acting as a cartel, the owners of Mystic Energy and E-Storm agree to evenly split the market output. In this case, E-Storm earns a profit of $ ____.
A) 1,500,000
B) 1,000,000
C) 750,000
D) 500,000

Free

Multiple Choice

Q 15Q 15

The inverse demand for shampoo is given by P = 30 - 0.03Q, where P is the price per bottle in dollars and Q is bottles brought to market in hundreds. There are two manufacturers in the local market. Firm 1's cost function is given by C

_{1}= 0.05q_{1}^{2}, where q_{1}is the number of bottles it brings to market. Firm 2's cost function is given by C_{2}= 0.03q_{2}^{2}, where q_{2}is the number of bottles it brings to market. The two firms are Cournot competitors who set output so that Q = q_{1}+ q_{2}. In equilibrium, the market quantity is ____. A) 147.53 B) 213.12 C) 295.06 D) 360.65Free

Multiple Choice

Q 16Q 16

The market inverse demand curve for thrust bearings is P = 15 - 1.5Q, where Q is measured in hundreds of bearings per day and P is the price per bearing. The marginal cost is $3. Suppose two firms, which are Bertrand competitors, produce identical thrust bearings for this market. In this case, the market price is $____.
A) 9
B) 7
C) 5
D) 3

Free

Multiple Choice

Q 17Q 17

Suppose that Etsy (an e-commerce site focused on handmade or vintage items) necklace vendors compete in a Bertrand market structure with differentiated products. Demand for style 1, produced by vendor 1, is given by where p

_{1}is price of style 1 and p_{2}is the price of style 2, produced by vendor 2. Demand for style 2 is The costs of providing these necklaces are C_{1}= q_{1}and C_{2}= 0.75q_{2}respectively. The equilibrium price for style 2 is $____. A) 20.62 B) 26.32 C) 30.66 D) 32.54Free

Multiple Choice

Q 18Q 18

The inverse demand for tacos is given by P = 10 - 0.02Q, where P is the price per taco and Q is the total number of tacos brought to market. There are two taco shops in the local market. Shop 1's cost function is given by C

_{1}= 0.01q_{1}^{2}, where q_{1}is the number of tacos it brings to market. Shop 2's cost function is given by C_{2}= 0.01q_{2}^{2}, where q_{2}is the number of tacos it brings to market. Assume the two shops compete by setting output (Cournot). Let Q = q_{1}+ q_{2}. In equilibrium, the market price is $____. A) 5 B) 3 C) 2.5 D) 1.5Free

Multiple Choice

Q 19Q 19

(Figure: Market for Two-Firm Industry I) The graph depicts the market demand curve for a two-firm industry. If the two firms collude and evenly split the market output, how much output will each firm produce?
A) 400 units
B) 200 units
C) 150 units
D) 300 units

Free

Multiple Choice

Q 20Q 20

Two firms are producing identical goods in a market characterized by the inverse demand curve P = 60 - 2Q, where Q is the sum of Firm 1 and Firm 2's output, q

_{1}+ q_{2}. Each firm's marginal cost is constant at $12, and fixed costs are zero. Answer the following questions, assuming that the firms are Cournot competitors. In this case, the market price is $____. A) 30 B) 28 C) 26 D) 24Free

Multiple Choice

Q 21Q 21

Taggart Express operates in a monopolistically competitive industry. Its inverse demand curve is P = 80 - Q. The total cost curve is TC = 20Q and marginal cost is constant at $20. What is the long-run equilibrium price?
A) $60
B) $75
C) $50
D) $20

Free

Multiple Choice

Q 22Q 22

Two firms are producing identical goods in a market characterized by the inverse demand curve P = 60 - 2Q, where Q is the sum of Firm 1 and Firm 2's output, q

_{1}+ q_{2}. Each firm's marginal cost is constant at $12, and fixed costs are zero. Answer the following questions, assuming that the firms are Cournot competitors. In this case, Firm 1 would produce ____ units to maximize profit. A) 16 B) 12 C) 8 D) 6Free

Multiple Choice

Q 23Q 23

(Table: Gascolator Producers I) Banner and Sense are Bertrand competitors producing identical gascolators (a main line strainer). The inverse market demand curve for gascolators is P = 2,000 - 4Q, where Q is the quantity of gascolators and P is the price per gascolator. Banner and Sense produce gascolators at a constant marginal cost of $80. If Banner charges a price of $100 and Sense charges $80, Banners quantity sold is ____.
A) 480
B) 475
C) 240
D) 0

Free

Multiple Choice

Q 24Q 24

Which of the following statements is TRUE regarding collusion, Bertrand (identical products), and Cournot competition?
I) Prices are highest in collusion, next highest in Cournot, and lowest in Bertrand.
II) Output is highest in Bertrand, next highest in Cournot, and lowest in collusion.
III) Profit is highest in Bertrand, next highest in Cournot, and lowest in collusion.
A) I and II
B) III
C) I
D) II

Free

Multiple Choice

Q 25Q 25

The inverse demand for tacos is given by P = 10 - 0.02Q, where P is the price per taco and Q is the total number of tacos brought to market. There are two taco shops in the local market. Shop 1's cost function is given by C

_{1}= 0.01q_{1}^{2}, where q_{1}is the number of tacos it brings to market. Shop 2's cost function is given by C_{2}= 0.01q_{2}^{2}, where q_{2}is the number of tacos it brings to market. Assume the two shops compete by setting output (Cournot). Let Q = q_{1}+ q_{2}. Shop 1 produces ____ to maximize profit. A) 250 B) 200 C) 150 D) 125Free

Multiple Choice

Q 26Q 26

Chauncey's Burgers sells hamburgers in a monopolistically competitive industry. Chauncey faces an inverse demand curve of P = 9 - 0.4Q, where Q is measured in hamburgers per hour and P is the price per hamburger. The total cost is TC = 20 + Q, and marginal cost is constant at $1. What is Chauncey's hourly profit?
A) $15
B) $20
C) $35
D) $70

Free

Multiple Choice

Q 27Q 27

The inverse demand for designer blankets is given by P = 40 - 0.01Q, where P is the price per blanket and Q is the total number of blankets brought to market. Two shops in the market supply specialty blankets. Shop 1's cost function is given by C

_{1}= 0.02q_{1}^{2}, where q_{1}is the number it brings to market. Shop 2's cost function is given by C_{2}= 0.02q_{2}^{2}, where q_{2}is the number it brings to market. Given that the two shops compete by setting output (Cournot), the profit maximizing level of output for Shop 1 is ____. A) 532.34 B) 571.42 C) 1,064.68 D) 1,142.84Free

Multiple Choice

Q 28Q 28

Which of the following characteristics does Bertrand competition with differentiated goods have in common with Bertrand competition with identical goods?
A) Price equals marginal cost.
B) Firms earn zero economic profit.
C) Firms set prices simultaneously.
D) Each firm's product is a perfect substitute for the other firm's product.

Free

Multiple Choice

Q 29Q 29

(Table: Car Dealerships I)
Payoffs: Anastasia's Monthly Profit, Dasha's Monthly Profit
If state law prevented car dealerships from opening on Sunday, Anastasia's Hyundai would earn _____, and Dasha's Nissan would earn _____.
A) $70K; $70K
B) $100K; $100K
C) $80K; $80K
D) $40K; $40K

Free

Multiple Choice

Q 30Q 30

In Bertrand competition with differentiated products and zero marginal costs, Firm A faces the demand curve q

_{A}= 80 - 2P_{A}+ 0.50P_{B}_{.}If Firm A expects Firm B to charge a price of $20, what price should Firm A charge? A) $14.25 B) $18.00 C) $22.50 D) $24.75Free

Multiple Choice

Q 31Q 31

Gotcha, the only seller of stun guns, faces the inverse market demand curve P = 400 - 12Q, where Q measures the number of stun guns per day and P is the price per stun gun. The marginal cost is constant at $64. Suppose a new firm, Ouchy, enters the stun gun market. Ouchy's marginal cost is also constant at $64. Gotcha and Ouchy agree to form a cartel and evenly split the market output. The market price in this case is $____.
A) 400
B) 324
C) 232
D) 212

Free

Multiple Choice

Q 32Q 32

(Figure: Market Demand Curve I) The graph shows the market demand curve. The equilibrium market quantity in a Bertrand Competition with identical goods is ____.
A) 8
B) 6
C) 5.34
D) 4

Free

Multiple Choice

Q 33Q 33

The inverse demand for shampoo is given by P = 30 - 0.03Q, where P is the price per bottle in dollars and Q is bottles brought to market in hundreds. There are two manufacturers in the local market. Firm 1's cost function is given by C

_{1}= 0.05q_{1}^{2}, where q_{1}is the number of bottles it brings to market. Firm 2's cost function is given by C_{2}= 0.03q_{2}^{2}, where q_{2}is the number of bottles it brings to market. The two firms are Cournot competitors who set output so that Q = q_{1}+ q_{2}. The profit maximizing level of output for firm 2 is ____. A) 147.53 B) 213.12 C) 295.06 D) 360.65Free

Multiple Choice

Q 34Q 34

Consider the following information:
Inverse market demand: P = 12 - 0.5(q

_{1}+ q_{2}), where q_{1}and q_{2}are Firm 1 and Firm 2's output Firm 1's reaction function: q_{1}= 9 - 0.5q_{2}Firm 2's reaction function: q_{2}= 9 - 0.5q_{1}The marginal cost of production for both firms is constant at $3. The equilibrium prices in Cournot and Stackelberg competition are _____ and _____, respectively. A) $8; $7 B) $9; $10 C) $4; $3.50 D) $6; $5.25Free

Multiple Choice

Q 35Q 35

In a Bertrand competition with differentiated goods market structure, each firm's profit function depends on:
A) its own quantity but not those of other firms.
B) both its own quantity and those of other firms.
C) its own price but not those of other firms.
D) both its own price and those of other firms.

Free

Multiple Choice

Q 36Q 36

In a Cournot market structure with two firms, firm A's first-order condition can be expressed as:
A) .
B) .
C) .
D) .

Free

Multiple Choice

Q 37Q 37

The Nash equilibrium in Bertrand competition with identical goods:
A) occurs when each firm produces an amount at which marginal revenue equals marginal cost.
B) occurs when each firm sets price equal to marginal cost.
C) occurs when each firm sets price equal to average total cost.
D) does not exist.

Free

Multiple Choice

Q 38Q 38

Suppose that Etsy (an e-commerce site focused on handmade or vintage items) necklace vendors compete in a Bertrand market structure with differentiated products. Demand for style 1, produced by vendor 1, is given by where p

_{1}is price of style 1 and p_{2}is the price of style 2, produced by vendor 2. Demand for style 2 is The costs of providing these necklaces are C_{1}= q_{1}and C_{2}= 0.75q_{2}respectively. The equilibrium price for style 1 is $____. A) 20.62 B) 26.32 C) 30.66 D) 32.54Free

Multiple Choice

Q 39Q 39

Suppose that two firms are engaged in Bertrand competition with identical goods and each firm has a marginal cost of $33. Suppose Firm A charges a price of $50 and Firm B charges $40. In this case, the market share for Firm A is ____%.
A) 100
B) 50
C) 40
D) 0

Free

Multiple Choice

Q 40Q 40

The inverse demand for designer blankets is given by P = 40 - 0.01Q, where P is the price per blanket and Q is the total number of blankets brought to market. Two shops in the market supply specialty blankets. Shop 1's cost function is given by C

_{1}= 0.02q_{1}^{2}, where q_{1}is the number it brings to market. Shop 2's cost function is given by C_{2}= 0.02q_{2}^{2}, where q_{2}is the number it brings to market. Given that the two shops compete by setting output (Cournot), the equilibrium market price is $____. A) 32.65 B) 30.76 C) 28.58 D) 23.43Free

Multiple Choice

Q 41Q 41

Ney Inc. and ARN Parts are the only two producers of bulldozer bucket teeth. The owners of the two firms conspire to charge a monopoly price, with each firm serving half the market. The market inverse demand curve is P = 1,000 - 10Q, where Q measures the daily number of sets of bulldozer bucket teeth and P is the price per set. The marginal cost of production for either firm is constant at $200, and fixed costs are zero. Suppose Ney Inc. cheats on the cartel agreement by producing an additional 10 sets of bucket teeth per day (while ARN Parts adheres to the cartel agreement). In this case, ARN Parts will earn a profit of $_____.
A) 6,000
B) 9,000
C) 12,000
D) 8,000

Free

Multiple Choice

Q 42Q 42

A two-firm cartel that produces at a constant marginal cost of $20 faces a market inverse demand curve of P = 100 - 0.50Q. Initially, both firms agree to act like a monopolist, each producing 40 units of output. If one of the firms cheats on the agreement (assuming the other firm is compliant and continues to produce at 40 units), how much output should the cheating firm produce to maximize profits?
A) 41 units
B) 60 units
C) 80 units
D) 44 units

Free

Multiple Choice

Q 43Q 43

Two firms are producing identical goods in a market characterized by the inverse demand curve P = 60 - 2Q, where Q is the sum of Firm 1 and Firm 2's output, q

_{1}+ q_{2}. Each firm's marginal cost is constant at $12, and fixed costs are zero. Answer the following questions, assuming that the firms are Cournot competitors. In this case, Firm 2 would produce ____ units to maximize profit. A) 16 B) 12 C) 8 D) 6Free

Multiple Choice

Q 44Q 44

The inverse demand for tacos is given by P = 10 - 0.02Q, where P is the price per taco and Q is the total number of tacos brought to market. There are two taco shops in the local market. Shop 1's cost function is given by C

_{1}= 0.01q_{1}^{2}, where q_{1}is the number of tacos it brings to market. Shop 2's cost function is given by C_{2}= 0.01q_{2}^{2}, where q_{2}is the number of tacos it brings to market. Assume the two shops compete by setting output (Cournot). Let Q = q_{1}+ q_{2}. Shop 2 produces ____ to maximize profit. A) 250 B) 200 C) 150 D) 125Free

Multiple Choice

Q 45Q 45

Suppose that two manufacturers produce identical fireproof safes at a constant marginal cost of $90. The market inverse demand curve for fireproof safes is P = 450 - 2Q, where Q is the total output of fireproof safes produced by the two manufacturers, q

_{1}+ q_{2}. The firms compete by simultaneously choosing their quantity to produce. At Nash equilibrium, what is the market price of a fireproof safe? A) $340 B) $210 C) $160 D) $130Free

Multiple Choice

Q 46Q 46

An industry faces the demand curve Q = 400 - 4P, where each firm produces an identical good at a constant marginal cost of $10. The Bertrand equilibrium price is $____ for each firm.
A) 400
B) 200
C) 100
D) 10

Free

Multiple Choice

Q 47Q 47

Suppose that Mystic Energy and E-Storm are the only two producers of hydrogen fuel cells. The market inverse demand curve for hydrogen fuel cells is P = 1,300 - 0.08Q, where Q is the number of fuels cells per month and P is the price per fuel cell. The marginal cost is constant at $500. Acting as a cartel, the owners of Mystic Energy and E-Storm agree to evenly split the market output. In this case, E-Storm produces ____.
A) 5,000
B) 3,000
C) 2,500
D) 1,500

Free

Multiple Choice

Q 48Q 48

(Table: Gascolator Producers I) Banner and Sense are Bertrand competitors producing identical gascolators (a main line strainer). The inverse market demand curve for gascolators is P = 2,000 - 4Q, where Q is the quantity of gascolators and P is the price per gascolator. Banner and Sense produce gascolators at a constant marginal cost of $80. If Banner charges a price of $100 and Sense charges $101, Sense's quantity sold is ____.
A) 240
B) 120
C) 100
D) 0

Free

Multiple Choice

Q 49Q 49

In Bertrand competition with differentiated goods, the demand curve for bags of Wilson tennis balls is q

_{W}= 80 - 4P_{W}+ 2P_{D}, and the demand curve for bags of Dunlop tennis balls is q_{D}= 80 - 2P_{D}+ P_{W}. The two firms both have zero marginal costs. How many bags of tennis balls does each firm produce? A) q_{W}= 44; q_{D}= 44 B) q_{W}= 64; q_{D}= 48 C) q_{W}= 16; q_{D}= 24 D) q_{W}= 38; q_{D}= 32Free

Multiple Choice

Q 50Q 50

In a Bertrand competition, with differentiated goods in a market structure of two firms, firm A's reaction function gives:
A) optimal quantity for A as a function of quantity for B.
B) optimal price for A as a function of price for B.
C) optimal price for A as a function of quantity for A and quantity for B.
D) optimal quantity for A as a function of price for B.

Free

Multiple Choice

Q 51Q 51

In a Cournot market structure with two firms, firm A's profit function can be expressed as:
A) , where P(Q) is market (inverse) demand, and is total cost for firm A.
B) , where P(Q) is market (inverse) demand, and is total cost for firm A.
C) , where P(Q) is market (inverse) demand, and is total cost for firm A.
D) , where P(Q) is market (inverse) demand, and is total cost for firm A as a function of firm B's output.

Free

Multiple Choice

Q 52Q 52

Gotcha, the only seller of stun guns, faces the inverse market demand curve P = 400 - 12Q, where Q measures the number of stun guns per day and P is the price per stun gun. The marginal cost is constant at $64. Suppose a new firm, Ouchy, enters the stun gun market. Ouchy's marginal cost is also constant at $64. Gotcha and Ouchy agree to form a cartel and evenly split the market output. In this case, Gotcha's output level is ____.
A) 14
B) 11
C) 9
D) 7

Free

Multiple Choice

Q 53Q 53

In an identical-product Bertrand oligopoly, the market inverse demand curve is P = 100 - 0.5Q. Firm A's average cost and marginal cost are constant at $20; Firm B's average cost and marginal cost are constant at $10. What is the equilibrium price in this market?
A) $10
B) $15
C) $20
D) $19.99

Free

Multiple Choice

Q 54Q 54

The inverse market demand curve is P = 170 - 4Q. Two firms in this market are evenly splitting the output. Each firm produces the product at a constant marginal cost of $10. Which of the following statements is TRUE?
I) If one firm produces 2 more units of output, its profits will rise to $864.
II) If neither firm cheats, each firm will earn a profit of $800.
III) If one firm produces 3 more units of output, the other firm's profits will fall to $680.
A) I and III
B) II and III
C) I and II
D) I, II, and III

Free

Multiple Choice

Q 55Q 55

Which of the following are model assumptions of Bertrand competition with identical goods?
I) The firms compete by choosing the quantity of output produced.
II) The firms agree to coordinate their output and pricing decisions to act like a monopolist.
III) The firms compete by choosing the price of their product.
A) I
B) II
C) III
D) I, II, and III

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Multiple Choice

Q 56Q 56

A market is characterized with the inverse demand curve P = 130 - 1.5Q, and marginal cost of production is constant at $10. If this market is served by a two-firm cartel that evenly splits the market output, how much output does each firm produce?
A) 20 units
B) 80 units
C) 40 units
D) 65 units

Free

Multiple Choice

Q 57Q 57

Suppose that two firms are engaged in Bertrand competition with identical goods and each firm has a marginal cost of $33. In a Nash Equilibrium, the price is $____.
A) 66
B) 33
C) 35
D) 20

Free

Multiple Choice

Q 58Q 58

Gotcha, the only seller of stun guns, faces the inverse market demand curve P = 400 - 12Q, where Q measures the number of stun guns per day and P is the price per stun gun. The marginal cost is constant at $64. Suppose a new firm, Ouchy, enters the stun gun market. Ouchy's marginal cost is also constant at $64. Gotcha and Ouchy agree to form a cartel and evenly split the market output. In this case, Ouchy's output level is ____.
A) 14
B) 11
C) 9
D) 7

Free

Multiple Choice

Q 59Q 59

(Table: Airline Baggage Fees II) British Airways and American Airlines have to decide whether or not to charge baggage fees. The revenue for each company that would result from the four possible outcomes is presented in the table. In the Nash equilibrium, British Airways will earn $____ million in revenues.
A) 120
B) 100
C) 80
D) 40

Free

Multiple Choice

Q 60Q 60

Suppose two colas compete in a Bertrand market structure with differentiated products. Demand for the first cola is given by where p

_{1}is price for cola 1 and p_{2}is the price for cola 2. Demand for the second cola is The costs of providing the colas are C_{1}= q_{1}and C_{2}= q_{2,}respectively. The second cola firm will charge $____ for its cola. A) 50.32 B) 48.13 C) 46.23 D) 44.54Free

Multiple Choice

Q 61Q 61

(Table: Gascolator Producers I) Banner and Sense are Bertrand competitors producing identical gascolators (a main line strainer). The inverse market demand curve for gascolators is P = 2,000 - 4Q, where Q is the quantity of gascolators and P is the price per gascolator. Banner and Sense produce gascolators at a constant marginal cost of $80. If Banner charges a price of $80 and Sense charges $80, Banner's quantity sold is ____.
A) 480
B) 475
C) 240
D) 0

Free

Multiple Choice

Q 62Q 62

Two companies are the only snowplow merchants in a small town. Inverse market demand curve is P = 100 - 10Q, where Q = q

_{1}+ q_{2}(Firm 1's output = q_{1}; Firm 2's output = q_{2}). Each firm has marginal costs of $25. In the Nash equilibrium in this market, Firm 1 produces ____. A) 5 B) 4 C) 2.5 D) 2Free

Multiple Choice

Q 63Q 63

(Figure: Market Demand Curve I) The graph shows the market demand curve. The equilibrium market quantity in Cournot competition with identical goods is ____.
A) 8
B) 6
C) 5.34
D) 4

Free

Multiple Choice

Q 64Q 64

As firms enter a monopolistically competitive industry, the existing firms' demand curves will:
A) remain unchanged.
B) shift outward and become more inelastic.
C) shift inward and become more elastic.
D) shift outward and become more elastic.

Free

Multiple Choice

Q 65Q 65

In a Cournot market structure with two firms, firm A's second-order condition sufficient for maximization is:
A) 0.
B) 0.
C) .
D) .

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Multiple Choice

Q 66Q 66

The output of firms is determined simultaneously in _____ competition but sequentially in _____ competition.
A) Cournot; Bertrand with differentiated goods
B) Stackelberg; Cournot
C) collusion; Cournot
D) Cournot; Stackelberg

Free

Multiple Choice

Q 67Q 67

Suppose that Mystic Energy and E-Storm are the only two producers of hydrogen fuel cells. The market inverse demand curve for hydrogen fuel cells is P = 1,300 - 0.08Q, where Q is the number of fuels cells per month and P is the price per fuel cell. The marginal cost is constant at $500. Acting as a cartel, the owners of Mystic Energy and E-Storm agree to evenly split the market output. In this case, the market price is $ ____.
A) 1,200
B) 1,100
C) 1,000
D) 900

Free

Multiple Choice

Q 68Q 68

Suppose that two firms are competing on price. The firms produce identical goods, and the marginal cost of each firm is constant at $15. If one firm is charging a price of $18, the other firm should:
A) raise its price to $18.01.
B) charge $17.99.
C) also charge $18.
D) cut its output to raise the market price well above $18.

Free

Multiple Choice

Q 69Q 69

Suppose the outboard motor market is characterized by Stackelberg competition. The market inverse demand curve for outboard motors is P = 10,000 - 50Q, where Q is the total market output produced by Mercury Marine and Yamaha, q

_{M}+ q_{Y}. Suppose that the marginal cost for both firms is constant at $1,000. If Yamaha is the first-mover, what is the equilibrium price? A) $1,800 B) $2,600 C) $3,250 D) $4,000Free

Multiple Choice

Q 70Q 70

Gotcha, the only seller of stun guns, faces the inverse market demand curve P = 400 - 12Q, where Q measures the number of stun guns per day and P is the price per stun gun. The marginal cost is constant at $64. Gotcha's profit-maximizing price is $____.
A) 400
B) 324
C) 232
D) 212

Free

Multiple Choice

Q 71Q 71

Suppose that Mystic Energy and E-Storm are the only two producers of hydrogen fuel cells. The market inverse demand curve for hydrogen fuel cells is P = 1,300 - 0.08Q, where Q is the number of fuels cells per month and P is the price per fuel cell. The marginal cost is constant at $500. Acting as a cartel, the owners of Mystic Energy and E-Storm agree to evenly split the market output. In this case, Mystic Energy produces ____.
A) 5,000
B) 3,000
C) 2,500
D) 1,500

Free

Multiple Choice

Q 72Q 72

In the Cournot model, under the assumption that all firms operating in the industry have the same cost structure, we can write firm i's profit-maximization problem as _____, where Q

_{i}^{O}is the combined output of all other firms in the market and is firm i's cost function. A) ; B) ; C) ; D)Free

Multiple Choice

Q 73Q 73

The inverse demand for tacos is given by P = 10 - 0.02Q, where P is the price per taco and Q is the total number of tacos brought to market. There are two taco shops in the local market. Shop 1's cost function is given by C

_{1}= 0.01q_{1}^{2}, where q_{1}is the number of tacos it brings to market. Shop 2's cost function is given by C_{2}= 0.01q_{2}^{2}, where q_{2}is the number of tacos it brings to market. Assume the two shops compete by setting output (Cournot). Let Q = q_{1}+ q_{2}. In equilibrium, the market output is ____. A) 500 B) 400 C) 300 D) 250Free

Multiple Choice

Q 74Q 74

Gotcha, the only seller of stun guns, faces the inverse market demand curve P = 400 - 12Q, where Q measures the number of stun guns per day and P is the price per stun gun. The marginal cost is constant at $64. Suppose a new firm, Ouchy, enters the stun gun market. Ouchy's marginal cost is also constant at $64. Gotcha and Ouchy agree to form a cartel and evenly split the market output. Gotcha holds to the agreement, but Ouchy decides to produce 5 more stun guns than its level under the cartel agreement. In this case, the market output is ____.
A) 7
B) 12
C) 14
D) 19

Free

Multiple Choice

Q 75Q 75

Gotcha, the only seller of stun guns, faces the inverse market demand curve P = 400 - 12Q, where Q measures the number of stun guns per day and P is the price per stun gun. The marginal cost is constant at $64. Suppose a new firm, Ouchy, enters the stun gun market. Ouchy's marginal cost is also constant at $64. Gotcha and Ouchy agree to form a cartel and evenly split the market output. Gotcha holds to the agreement, but Ouchy decides to produce 5 more stun guns than its level under the cartel agreement. In this case, the market price is $ ____.
A) 232
B) 205
C) 192
D) 172

Free

Multiple Choice

Q 76Q 76

Consider two firms engaged in Bertrand competition with differentiated goods and zero marginal costs.
Firm A's demand curve is q

_{A}= 60 - 0.50P_{A}+ 0.40P_{B}. Firm B's demand curve is q_{B}= 72 - 0.50P_{B}+ 0.40P_{A}. In a Nash equilibrium, approximately how much profit does Firm A earn? A) $4,800 B) $3,210 C) $6,040 D) $5,588Free

Multiple Choice

Q 77Q 77

CellBat and DuraBat are the only makers of lawn mower batteries. Their batteries are identical, produced at a constant marginal cost of $25. The market inverse demand curve for lawn mower batteries is P = 145 - 0.5Q, where Q is the total output produced by CellBat and DuraBat, q

_{C}+ q_{D}. How many batteries will each firm produce in Cournot equilibrium? A) CellBat and DuraBat will each produce 60 batteries. B) CellBat will produce 40 batteries, and DuraBat will produce 80 batteries. C) CellBat and DuraBat will each produce 80 batteries. D) CellBat and DuraBat will each produce 90 batteries.Free

Multiple Choice

Q 78Q 78

Suppose that Mystic Energy and E-Storm are the only two producers of hydrogen fuel cells. The market inverse demand curve for hydrogen fuel cells is P = 1,500 - 0.08Q, where Q is the number of fuels cells per month and P is the price per fuel cell. The marginal cost is constant at $500. Acting as a cartel, the owners of Mystic Energy and E-Storm agree to evenly split the market output. In this case, Mystic Energy earns a profit of $ ____.
A) 3,062,500
B) 1,531,250
C) 6,125,000
D) 500,000

Free

Multiple Choice

Q 79Q 79

Which of the following is NOT a feature of Cournot competition?
A) Firms sell identical products.
B) Firms compete by choosing a quantity to produce.
C) All goods sell at the same price.
D) One firm sets its quantity to produce before the other firm.

Free

Multiple Choice

Q 80Q 80

Suppose that Mystic Energy and E-Storm are the only two producers of hydrogen fuel cells. The market inverse demand curve for hydrogen fuel cells is P = 1,000 - 0.08Q, where Q is the number of fuels cells per month and P is the price per fuel cell. The marginal cost is constant at $500. Acting as a cartel, the owners of Mystic Energy and E-Storm agree to evenly split the market output. In this case, each firm earns a profit of $ ____.
A) 2,343,750
B) 781,250
C) 390,625
D) 1,562,500

Free

Multiple Choice

Q 81Q 81

The inverse demand for designer blankets is given by P = 40 - 0.01Q, where P is the price per blanket and Q is the total number of blankets brought to market. Two shops in the market supply specialty blankets. Shop 1's cost function is given by C

_{1}= 0.02q_{1}^{2}, where q_{1}is the number it brings to market. Shop 2's cost function is given by C_{2}= 0.02q_{2}^{2}, where q_{2}is the number it brings to market. Given that the two shops compete by setting output (Cournot), the equilibrium market quantity is ____. A) 532.34 B) 571.42 C) 1,064.68 D) 1,142.84Free

Multiple Choice

Q 82Q 82

(Figure: Market for Two-Firm Industry II) The graph depicts the market demand curve for a two-firm industry with no fixed costs. Suppose that the two firms are colluding by acting like a monopolist, with each firm producing half the market output. If one of the firms cheats on the cartel agreement and produces an additional unit of output, its profits will rise from:
A) $16 to $18.
B) $32 to $36.
C) $24 to $32.
D) $16 to $24.

Free

Multiple Choice

Q 83Q 83

The inverse demand for tacos is given by P = 10 - 0.02Q, where P is the price per taco and Q is the total number of tacos brought to market. There are two taco shops in the local market. Shop 1's cost function is given by C

_{1}= 0.01q_{1}^{2}, where q_{1}is the number of tacos it brings to market. Shop 2's cost function is given by C_{2}= 0.01q_{2}^{2}, where q_{2}is the number of tacos it brings to market. Assume the two shops compete by setting output (Cournot). Let Q = q_{1}+ q_{2}. In this case, Shop 1 will earn $____ in profit. A) 470.35 B) 468.75 C) 234.25 D) 224.75Free

Multiple Choice

Q 84Q 84

An industry faces the demand curve Q = 200 - P, where each firm produces an identical good at a constant marginal cost of $8. What are the Bertrand equilibrium price and quantity?
A) Q = 96; P = $8
B) Q = 96; P = $104
C) Q = 192; P = $8
D) Q = 192; P = $104

Free

Multiple Choice

Q 85Q 85

Suppose that Mystic Energy and E-Storm are the only two producers of hydrogen fuel cells. The market inverse demand curve for hydrogen fuel cells is P = 1,300 - 0.08Q, where Q is the number of fuels cells per month and P is the price per fuel cell. The marginal cost is constant at $500. Acting as a cartel, the owners of Mystic Energy and E-Storm agree to evenly split the market output. In this case, each firm produces ____.
A) 5,000
B) 3,000
C) 2,500
D) 1,500

Free

Multiple Choice

Q 86Q 86

(Table: Airline Baggage Fees II) British Airways and American Airlines have to decide whether or not to charge baggage fees. The revenue for each company that would result from the four possible outcomes is presented in the table. In the Nash equilibrium, American Airlines will earn $____ million in revenues.
A) 120
B) 100
C) 80
D) 40

Free

Multiple Choice

Q 87Q 87

The market inverse demand curve for thrust bearings is P = 15 - 1.5Q, where Q is measured in hundreds of bearings per day and P is the price per bearing. The marginal cost is $3. Suppose two firms, which are Bertrand competitors, produce identical thrust bearings for this market. If this market were a perfectly competitive market, the market price would be $____.
A) 9
B) 7
C) 5
D) 3

Free

Multiple Choice

Q 88Q 88

Two firms are in Bertrand competition with differentiated goods. Firm A faces the demand curve q

_{A}= 40 - P_{A}+ 0.50P_{B}. What is Firm A's total revenue? A) TR_{A}= 40P_{A}- + 0.50P_{A}P_{B}B) TR_{A}= (40 - P_{A}+ 0.50P_{A})P_{B}C) TR_{A}= (40 - P_{A}+ 0.50P_{A})q_{A}. D) TR_{A}= (40 - P_{B}+ 0.50P_{B})P_{A}Free

Multiple Choice

Q 89Q 89

In Bertrand competition with identical goods, the market outcome is MOST like:
A) a monopoly.
B) perfect competition.
C) a two-firm cartel.
D) monopolistic competition.

Free

Multiple Choice

Q 90Q 90

Which of the following statements is TRUE?
I) Oligopoly is a form of imperfect competition.
II) Oligopoly firms produce only differentiated products.
III) Unlike perfectly competitive markets, oligopoly markets have only a small number of firms.
A) I
B) II and III
C) I and III
D) I, II, and III

Free

Multiple Choice

Q 91Q 91

In Stackelberg competition, the market inverse demand curve is P = 20 - 2(q

_{1}+ q_{2}), where q_{1}and q_{2}are Firm 1 and Firm 2's output measured in hundreds of units. Firm 1, the first-mover, has a marginal cost of $4, and Firm 2 has a marginal cost of $2. How much output does each firm produce? A) q_{1}= 150; q_{2}= 120 B) q_{1}= 350; q_{2}= 275 C) q_{1}= 80; q_{2}= 106 D) q_{1}= 260; q_{2}= 245Free

Multiple Choice

Q 92Q 92

Two companies are the only snowplow merchants in a small town. Inverse market demand curve is P = 100 - 10Q, where Q = q

_{1}+ q_{2}(Firm 1's output = q_{1}; Firm 2's output = q_{2}). Each firm has marginal costs of $25. In the Nash equilibrium in this market, the market price is $____. A) 50 B) 60 C) 25 D) 40Free

Multiple Choice

Q 93Q 93

A Nash equilibrium occurs when:
A) each firm is doing the best it can in light of the actions taken by other firms.
B) each firm is doing the worst it can in light of the actions taken by other firms.
C) an oligopoly industry is characterized by excess demand despite a market-clearing price.
D) an oligopoly industry is characterized by excess supply despite a market-clearing price.

Free

Multiple Choice

Q 94Q 94

Consider a two-firm oligopoly facing a market inverse demand curve of P = 100 - 2(q

_{1}+ q_{2}), where q_{1}is the output of Firm 1 and q_{2}is the output of Firm 2. Firm 1's marginal cost is constant at $12, while Firm 2's marginal cost is constant at $20. In Cournot equilibrium, how much output does each firm produce? A) q_{1}= 20; q_{2}= 14 B) q_{1}= 16; q_{2}= 12 C) q_{1}= 18; q_{2}= 8 D) q_{1}= 14; q_{2}= 11Free

Multiple Choice

Q 95Q 95

(Figure: Monopolistically Competitive Firm I) The graph depicts a monopolistically competitive firm. The firm's current economic profit is _____, and its long-run economic profit is _____.
A) $6,000; $0
B) $4,000; $0
C) $2,000; $2,500
D) $4,000; $3,000

Free

Multiple Choice

Q 96Q 96

An industry faces the demand curve Q = 400 - 4P, where each firm produces an identical good at a constant marginal cost of $10. The Bertrand equilibrium market quantity is ____.
A) 400
B) 360
C) 200
D) 180

Free

Multiple Choice

Q 97Q 97

The fudge makers compete in a Bertrand market structure with differentiated products. The demand curve for Fudge Factory is given by where p

_{F}is the price for fudge at Fudge Factory and p_{C}is the price at Chocolate Corner. The demand curve for Chocolate Corner is given by Fudge Factory's cost is C_{F}= 5q_{F}and Chocolate Corner's cost is C_{C}= 5q_{C}. In equilibrium, the price of fudge at the Chocolate Corner is $____. A) 143.54 B) 337.51 C) 465.32 D) 540.01Free

Multiple Choice

Q 98Q 98

Consider two firms engaged in Bertrand competition with differentiated goods and zero marginal costs.
Firm A's demand curve: q

_{A}= 120 - 3P_{A}+ 2P_{B}Firm B's demand curve: q_{B}= 120 - 3P_{B}+ 2P_{A}In a Nash equilibrium, what is each firm's price? A) P_{A}= $5; P_{B}= $5 B) P_{A}= $10; P_{B}= $10 C) P_{A}= $30; P_{B}= $30 D) P_{A}= $20; P_{B}= $20Free

Multiple Choice

Q 99Q 99

Suppose two sweaters compete in a Bertrand market structure with differentiated products. Demand for the first sweater is given by where p

_{1}is price for sweater 1 and p_{2}is the price for sweater 2. Demand for the second sweater is The costs of providing the sweaters are C_{1}= q_{1}and C_{2}= q_{2}respectively. The first sweater firm will charge $____ for its sweater. A) 50.32 B) 48.13 C) 46.23 D) 44.54Free

Multiple Choice

Q 100Q 100

The inverse demand for shampoo is given by P = 30 - 0.03Q, where P is the price per bottle in dollars and Q is bottles brought to market in hundreds. There are two manufacturers in the local market. Firm 1's cost function is given by C

_{1}= 0.05q_{1}^{2}, where q_{1}is the number of bottles it brings to market. Firm 2's cost function is given by C_{2}= 0.03q_{2}^{2}, where q_{2}is the number of bottles it brings to market. The two firms are Cournot competitors who set output so that Q = q_{1}+ q_{2}. The profit maximizing level of output for Firm 1 is ____. A) 14,753 B) 21,312 C) 29,506 D) 36,065Free

Multiple Choice

Q 101Q 101

(Figure: Market for Four-Firm Industry I) The graph depicts a four-firm industry with no fixed costs. Suppose that the four firms are colluding by acting like a monopolist, with each firm producing one-fourth of the market output. If one of the firms cheats on the cartel agreement and produces an additional unit of output, the profits of each of the compliant firms go from:
A) $36 to $30.
B) $16 to $14.
C) $12 to $8.
D) $18 to $12.

Free

Multiple Choice

Q 102Q 102

In a Cournot market structure, each firm's profit function depends on:
A) its own quantity but not the quantities of other firms.
B) both its own quantity and the quantities of other firms.
C) its own price but not the price of other firms.
D) both its own price and the prices of other firms.

Free

Multiple Choice

Q 103Q 103

Pizza Plus operates in a monopolistically competitive industry and faces an inverse demand curve of P = 30 - 2Q, where Q is measured in hundreds of pizzas per week and P is the price per pizza. The marginal cost per pizza is $6. What price should Pizza Plus charge per pizza to maximize profit?
A) $18
B) $16
C) $14
D) $12

Free

Multiple Choice

Q 104Q 104

Crush and Frenzy both produce motorized bicycles, which are identical in all aspects. The total demand in this market is for Q motorized bicycles. The price of Crush's bicycle is P

_{C}and the price of Frenzy's bicycle is P_{F}. If the firms are engaged in Bertrand competition, which of the following statements is TRUE? I) If P_{C}> P_{P}, Crush sells Q bicycles. II) If P_{C}= P_{F}, Crush sells 0.50Q bicycles. III) If P_{C}< P_{F}, Crush sells zero bicycles. A) I and III B) I, II, and III C) II D) II and IIIFree

Multiple Choice

Q 105Q 105

Two firms are producing identical goods in a market characterized by the inverse demand curve P = 60 - 2Q, where Q is the sum of Firm 1 and Firm 2's output, q

_{1}+ q_{2}. Each firm's marginal cost is constant at $12, and fixed costs are zero. Answer the following questions, assuming that the firms are Cournot competitors. In this case, Firm 1 earns $____ in profit. A) 130 B) 128 C) 126 D) 124Free

Multiple Choice

Q 106Q 106

Ney Inc. and ARN Parts are the only two producers of bulldozer bucket teeth. The owners of the two firms conspire to charge a monopoly price, with each firm serving half the market. The market inverse demand curve is P = 1,000 - 10Q, where Q measures the daily number of sets of bulldozer bucket teeth and P is the price per set. The marginal cost of production for either firm is constant at $200, and fixed costs are zero. The profit for ARN Parts is $_____.
A) 6,000
B) 8,000
C) 12,000
D) 16,000

Free

Multiple Choice

Q 107Q 107

The inverse demand for tacos is given by P = 10 - 0.02Q, where P is the price per taco and Q is the total number of tacos brought to market. There are two taco shops in the local market. Shop 1's cost function is given by C

_{1}= 0.01q_{1}^{2}, where q_{1}is the number of tacos it brings to market. Shop 2's cost function is given by C_{2}= 0.01q_{2}^{2}, where q_{2}is the number of tacos it brings to market. Assume the two shops compete by setting output (Cournot). Let Q = q_{1}+ q_{2}. In this case, Shop 2 will earn $____ in profit. A) 470.35 B) 468.75 C) 234.25 D) 224.75Free

Multiple Choice

Q 108Q 108

(Figure: Market Demand Curve I) The graph shows the market demand curve. The equilibrium price in Bertrand competition with identical goods is $____.
A) 24
B) 18.64
C) 12
D) 8

Free

Multiple Choice

Q 109Q 109

In Cournot competition, the market inverse demand curve is P = 240 - 0.5Q, where Q is the total output produced by Firm A and Firm B, q

_{A}+ q_{B}_{.}The marginal cost for each firm is constant at $30. If Firm B produces 140 units of output, how much output should Firm A produce? A) 80 B) 140 C) 34 D) 90Free

Multiple Choice

Q 110Q 110

In a Cournot market with two firms, the inverse market demand curve is P = 50 - 2Q, where Q = q

_{1}+ q_{2}(Firm 1's output = q_{1}; Firm 2's output = q_{2}). If Firm 2 produces 10 units of output, what is Firm 1's residual demand curve? A) P = 30 - 2q_{1}B) P = 40 - 2q_{1}C) P = 10 - 2q_{1}D) P = 40 - q_{1}Free

Multiple Choice

Q 111Q 111

The equilibrium of the Bertrand model with differentiated goods is found by:
A) setting price equal to marginal cost for each good.
B) setting quantity demanded equal to quantity supplied for each good.
C) solving for the intersection of the reaction curves in which each good's price is expressed as function of the other good's price.
D) solving for the intersection of the reaction curves in which each good's quantity is expressed as function of the other good's quantity.

Free

Multiple Choice

Q 112Q 112

The market inverse demand curve is P = 60 - Q. The three firms in this industry are acting like a monopolist, evenly splitting output. The marginal cost is $6. Suppose one of the firms produces an additional unit of output. The cheating firm's profit will change from:
A) $50 to $40.
B) $34 to $67.
C) $230 to $252.
D) $243 to $260.

Free

Multiple Choice

Q 113Q 113

(Table: Gascolator Producers I) Banner and Sense are Bertrand competitors producing identical gascolators (a main line strainer). The inverse market demand curve for gascolators is P = 2,000 - 4Q, where Q is the quantity of gascolators and P is the price per gascolator. Banner and Sense produce gascolators at a constant marginal cost of $80. If Banner charges a price of $100 and Sense charges $101, Banner's quantity sold is ____.
A) 480
B) 475
C) 237.50
D) 0

Free

Multiple Choice

Q 114Q 114

The inverse demand for shampoo is given by P = 30 - 0.03Q, where P is the price per bottle in dollars and Q is bottles brought to market in hundreds. There are two manufacturers in the local market. Firm 1's cost function is given by C

_{1}= 0.05q_{1}^{2}, where q_{1}is the number of bottles it brings to market. Firm 2's cost function is given by C_{2}= 0.03q_{2}^{2}, where q_{2}is the number of bottles it brings to market. The two firms are Cournot competitors who set output so that Q = q_{1}+ q_{2}. In equilibrium, firm 2 will earn $ ____ in profit. A) 1,741.37 B) 2,725.04 C) 3,482.74 D) 4,466.41Free

Multiple Choice

Q 115Q 115

Coffee table makers compete in a Bertrand market structure with differentiated products. The demand curve for Frank's Coffee Table is given by where p

_{F}is the price for a coffee table at Frank's Coffee Table and p_{C}is the price at Carrie's Coffee Table. The demand curve for Carrie's Coffee Table is given by Frank's Coffee Table cost is C_{F}= 5q_{F}and Carrie's Coffee Table cost is C_{C}= 5q_{C}. In equilibrium, the price of a coffee table at the Carrie's Coffee Table is $____. A) 143.54 B) 337.51 C) 465.32 D) 540.01Free

Multiple Choice

Q 116Q 116

Which of the following is an example of Stackelberg competition?
A) Firestone offers rebates to keep its tire prices below Goodyear's.
B) A price war between American Airlines and United Airlines leads both airlines to set ticket prices equal to marginal cost.
C) Natura Pet Products introduced the first grain-free dog food; eventually, other dog food companies entered this market but had to limit their production plans, given Natura Pet Products' sizable market share.
D) GlaxoSmithKline and Pfizer compete in the HIV drug market by annually announcing their production quotas during the second week of January.

Free

Multiple Choice

Q 117Q 117

(Figure: Market Demand Curve I) The graph shows the market demand curve. The equilibrium price in a Cournot duopoly with identical goods is $____.
A) 24
B) 18.64
C) 12
D) 8

Free

Multiple Choice

Q 118Q 118

(Figure: Market Demand Curve I) The graph shows the market demand curve. The equilibrium market quantity in a two-firm cartel is ____.
A) 8
B) 6
C) 5.34
D) 4

Free

Multiple Choice

Q 119Q 119

(Figure: Market for Two-Firm Industry III) According to the figure, which of the following statements is TRUE? I. If Firm B expects Firm A to charge $3, Firm B should charge $5.50.
II) If Firm A expects Firm B to charge $6, Firm A should charge $7.
III) The Nash equilibrium is for each firm to charge the same price.
A) III
B) II
C) I and II
D) I, II, and III

Free

Multiple Choice

Q 120Q 120

(Table: Car Dealerships I)
Payoffs: Anastasia's Monthly Profit, Dasha's Monthly Profit
If car dealerships are allowed to be open on Sunday, what is the Nash equilibrium?
A) Anastasia earns $70K and Dasha earns $70K.
B) Anastasia earns $100K and Dasha earns $100K.
C) Anastasia earns $80K and Dasha earns $80K.
D) There is no Nash equilibrium in this market.

Free

Multiple Choice

Q 121Q 121

The inverse demand for shampoo is given by P = 30 - 0.03Q, where P is the price per bottle in dollars and Q is bottles brought to market in hundreds. There are two manufacturers in the local market. Firm 1's cost function is given by C

_{1}= 0.05q_{1}^{2}, where q_{1}is the number of bottles it brings to market. Firm 2's cost function is given by C_{2}= 0.03q_{2}^{2}, where q_{2}is the number of bottles it brings to market. The two firms are Cournot competitors who set output so that Q = q_{1}+ q_{2}. In equilibrium, firm 1 will earn $ ____ in profit. A) 1,741.37 B) 2,725.04 C) 3,482.74 D) 4,466.41Free

Multiple Choice

Q 122Q 122

The market inverse demand curve for thrust bearings is P = 15 - 1.5Q, where Q is measured in hundreds of bearings per day and P is the price per bearing. The marginal cost is $3. Suppose two firms, which are Bertrand competitors, produce identical thrust bearings for this market. In this case, the market quantity is ____.
A) 900
B) 800
C) 700
D) 600

Free

Multiple Choice

Q 123Q 123

(Table: Gascolator Producers I) Banner and Sense are Bertrand competitors producing identical gascolators (a main line strainer). The inverse market demand curve for gascolators is P = 2,000 - 4Q, where Q is the quantity of gascolators and P is the price per gascolator. Banner and Sense produce gascolators at a constant marginal cost of $80. If Banner charges a price of $80 and Sense charges $80, Sense's quantity sold is ____.
A) 320
B) 240
C) 180
D) 0

Free

Multiple Choice

Q 124Q 124

The market inverse demand curve is P = 90 - Q, where Q is the total market output consisting of Firm 1's output, q

_{1}, and Firm 2's output, q_{2}. Both firms have a constant marginal cost of $10. If Firm 1 selects its output level first, how much output does each firm produce? A) q_{1}= 40; q_{2}= 20 B) q_{1}= 30; q_{2}= 15 C) q_{1}= 18; q_{2}= 18 D) q_{1}= 28; q_{2}= 14Free

Multiple Choice

Q 125Q 125

Which of the following statements is TRUE?
I) The gain in profit from cheating on a cartel agreement is greater if there are more firms in the cartel.
II) In a cartel, compliant firms will earn rising profits as cheating firms lower prices by expanding output.
III) If a firm cheats on a cartel agreement, the loss in profit to the compliant firm will be smaller in a two-firm cartel than a four-firm cartel.
A) I, II, and III
B) II
C) I and III
D) III

Free

Multiple Choice

Q 126Q 126

(Table: Gascolator Producers I) Banner and Sense are Bertrand competitors producing identical gascolators (a main line strainer). The inverse market demand curve for gascolators is P = 2,000 - 4Q, where Q is the quantity of gascolators and P is the price per gascolator. Banner and Sense produce gascolators at a constant marginal cost of $80. If Banner charges a price of $100 and Sense charges $80, Sense's quantity sold is ____.
A) 480
B) 475
C) 240
D) 0

Free

Multiple Choice

Q 127Q 127

A market is served by two firms in Cournot competition, each with a constant marginal cost of $100. The market inverse demand curve is P = 2,000 - 50Q, where Q is the total market output produced by the two firms, q

_{1}+ q_{2}. What is Firm 1's reaction function? A) q_{1}= 19 - 0.5q_{2}B) q_{1}= 210 - q_{2}C) q_{1}= 400 - 0.5P D) q_{1}= 400 - 100q_{2}Free

Multiple Choice

Q 128Q 128

In a monopolistically competitive industry, which of the following statements is TRUE?
I) Firms produce identical products.
II) There are significant barriers to entry.
III) Firms consider the production decisions of their rivals when setting output levels.
IV) Firms act like monopolies by producing where marginal revenue equals marginal cost.
A) I, II, and III
B) I and III
C) II
D) IV

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Multiple Choice

Q 129Q 129

The market inverse demand curve for thrust bearings is P = 15 - 1.5Q, where Q is measured in hundreds of bearings per day and P is the price per bearing. The marginal cost is $3. Suppose two firms, which are Bertrand competitors, produce identical thrust bearings for this market. If this market were perfectly competitive, the market quantity would be ____.
A) 900
B) 800
C) 700
D) 600

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Multiple Choice

Q 130Q 130

Suppose that two firms are engaged in Bertrand competition with identical goods and each firm has a marginal cost of $33. Suppose Firm A charges a price of $50 and Firm B charges $40. In this case, the market share for Firm B is ____%.
A) 100
B) 50
C) 40
D) 0

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Multiple Choice

Q 131Q 131

Ney Inc. and ARN Parts are the only two producers of bulldozer bucket teeth. The owners of the two firms conspire to charge a monopoly price, with each firm serving half the market. The market inverse demand curve is P = 1,000 - 10Q, where Q measures the daily number of sets of bulldozer bucket teeth and P is the price per set. The marginal cost of production for either firm is constant at $200, and fixed costs are zero. Suppose Ney Inc. cheats on the cartel agreement by producing an additional 10 sets of bucket teeth per day (while ARN Parts adheres to the cartel agreement). In this case, Ney Inc. will earn a profit of $_____.
A) 6,000
B) 9,000
C) 12,000
D) 16,000

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Multiple Choice

Q 132Q 132

(Figure: Market Demand Curve I) The graph shows the market demand curve. The equilibrium price in a two-firm cartel is $____.
A) 24
B) 18.64
C) 12
D) 8

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Multiple Choice

Q 133Q 133

Two firms are producing identical goods in a market characterized by the inverse demand curve P = 60 - 2Q, where Q is the sum of Firm 1 and Firm 2's output, q

_{1}+ q_{2}. Each firm's marginal cost is constant at $12, and fixed costs are zero. Answer the following questions, assuming that the firms are Cournot competitors. a. Calculate each firm's reaction function. b. How much output does each firm produce? c. What is the market price? d. How much profit does each firm earn?Free

Essay

Q 134Q 134

Suppose two Bertrand firms produce similar but not identical products. Their demand curves follow.
Firm A: q

_{A}= 10 - 3P_{A}+ P_{B}Firm B: q_{B}= 10 - 3P_{B}+ P_{A}Assume that marginal cost is zero for both firms. a. Graph each firm's reaction function and identify the Nash equilibrium. b. How much output does each firm produce?Free

Essay

Q 135Q 135

(Figure: Market Demand Curve I) The graph shows the market demand curve.
What are the equilibrium price and market output under the following market structures?
a. a two-firm cartel
b. Bertrand competition with identical goods
c. Cournot duopoly with identical goods

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Essay

Q 136Q 136

Ney Inc. and ARN Parts are the only two producers of bulldozer bucket teeth. The owners of the two firms conspire to charge a monopoly price, with each firm serving half the market. The market inverse demand curve is P = 1,000 - 10Q, where Q measures the daily number of sets of bulldozer bucket teeth and P is the price per set. The marginal cost of production for either firm is constant at $200, and fixed costs are zero.
a. What is each firm's profit?
b. Now suppose that Ney Inc. reneges on the cartel agreement and decides to produce an additional 10 sets of bucket teeth per day. What is each firm's new profit?

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Essay

Q 137Q 137

(Table: Airline Baggage Fees I)
British Airways and American Airlines have to decide whether or not to charge baggage fees. The revenue for each company that would result from the four possible outcomes is presented in the table. British Airways will earn _____ and American Airlines will earn _____ in the Nash equilibrium.

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Essay

Q 138Q 138

The graph depicts a monopolistically competitive firm in the short run. Complete the following table.

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Essay

Q 139Q 139

The inverse demand for tacos is given by P = 10 - 0.02Q, where P is the price per taco and Q is the total number of tacos brought to market. There are two taco shops in the market. Shop 1's cost function is given by C

_{1}= 0.01q_{1}^{2}, where q_{1}is the number of tacos it brings to market. Shop 2's cost function is given by C_{2}= 0.01q_{2}^{2}, where q_{2}is the number of tacos it brings to market. Given that the two shops compete by setting output (Cournot), answer the following. a. Identify shop 1's reaction function to firm 2's output. b. Identify shop 2's reaction function to firm 1's output. c. Identify the equilibrium output level of each shop and the equilibrium price for tacos.Free

Essay

Q 140Q 140

Two companies are the only snowplow merchants in a small town. Inverse market demand curve is P = 100 - 10Q, where Q = q

_{1}+ q_{2}(Firm 1's output = q_{1}; Firm 2's output = q_{2}). Each firm has marginal costs of $25. What is the Nash equilibrium in this market?Free

Essay

Q 141Q 141

In Stackelberg competition, the market inverse demand curve is P = a - bq

_{1}- bq_{2}, where q_{1}+ q_{2}is the market output, Q, produced by Firm 1 and Firm 2. Marginal cost is given by MC = c. If Firm 1 chooses its output level before Firm 2, how much output will Firm 1 produce?Free

Essay

Q 142Q 142

The fudge makers compete in a Bertrand market structure with differentiated products. The demand curve for Fudge Factory is given by
where p

_{F}is the price for fudge at Fudge Factory and p_{C}is the price at Chocolate Corner. The demand curve for Chocolate Corner is given by Fudge Factory's cost is C_{F}= 5q_{F}and Chocolate Corner's cost is C_{C}= 5q_{C}. Use calculus for the following. a. Identify Fudge Factory's profit function and its reaction function. b. Identify Chocolate Corner's profit function and its reaction function. c. Identify the equilibrium prices at the two fudge makers.Free

Essay

Q 143Q 143

Two portrait painters compete in a Bertrand market structure with differentiated products. The demand curve for the first is given by
where p

_{F}is the price for a portrait from the first and p_{S}is the price from the second. The demand curve for the second painter's portraits is given by The two painters' cost functions are C_{F}= q_{F}and C_{S}= q_{S,}respectively. Use calculus for the following: a. Identify the first painter's profit function and its reaction function. b. Identify the second painter's profit function and its reaction function. c. Identify the equilibrium prices charged for portraits by the two painters.Free

Essay

Q 144Q 144

The inverse demand for shampoo is given by P = 30 - 0.03Q, where P is the price per bottle in dollars and Q is bottles brought to market in hundreds. There are two manufacturers in the local market. Firm 1's cost function is given by C

_{1}= 0.05q_{1}^{2}, where q_{1}is the number of bottles it brings to market. Firm 2's cost function is given by C_{2}= 0.03q_{2}^{2}, where q_{2}is the number of bottles it brings to market. The two firms are Cournot competitors who set output so that Q = q_{1}+ q_{2}. Use calculus for the following. a. Write firm 1's profit function and identify firm 1's reaction function to firm 2's output. b. Write firm 2's profit function and identify firm 2's reaction function to firm 1's output. c. Identify the equilibrium price and output of each firm.Free

Essay

Q 145Q 145

Suppose two colas compete in a Bertrand market structure with differentiated products. Demand for the first cola is given by
where p

_{1}is price for cola 1 and p_{2}is the price for cola 2. Demand for the second cola is The costs of providing the colas are C_{1}= q_{1}and C_{2}= q_{2,}respectively. a. Identify firm 1's profit function. b. Identify firm 2's profit function. c. Identify firm 1's reaction function. d. Identify firm 2's reaction function. e. Identify the equilibrium price charged for each cola.Free

Essay

Q 146Q 146

Using the concept of a Nash equilibrium, explain why cartels are difficult to maintain. What factors make it easier to maintain a cartel?

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Essay

Q 147Q 147

Answer the following questions.
a. Define monopolistic competition.
b. How is monopolistic competition similar to monopoly?
c. How is monopolistic competition similar to perfect competition?

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Essay

Q 148Q 148

Coca Cola and Polar soda companies are engaged in Stackelberg competition. They face the market inverse demand curve P = 200 - 4Q, where Q is the total market output consisting of Coca Cola's output, q

_{1}, and Polar's output, q_{2}. Each firm produces at a constant marginal cost of $10. In a Stackleberg equilibrium, Coca Cola will produce _____ cans of soda while Polar will produce _____ cans of soda.Free

Essay

Q 149Q 149

(Table: Gascolator Producers I) Banner and Sense are Bertrand competitors producing identical gascolators (a main line strainer).
The inverse market demand curve for gascolators is P = 2,000 - 4Q, where Q is the quantity of gascolators and P is the price per gascolator. Banner and Sense produce gascolators at a constant marginal cost of $80. Complete the table.

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Essay

Q 150Q 150

Two firms that are Bertrand competitors are producing differentiated goods at a marginal cost of zero. The demand curves facing each firm are as follows:
q

_{1}= 72 - 6P_{1}+ 4P_{2}q_{2}= 72 - 6P_{2}+ 4P_{1}a. Suppose that Firm 2 sets P_{2}= $12. What price should Firm 1 set to maximize profit? b. Suppose that Firm 2 sets P_{2}= $3. What price should Firm 1 set to maximize profit? c. In a Nash equilibrium, what is the price charged by each firm?Free

Essay

Q 151Q 151

The inverse demand for coffeemakers is given by P = 80 - 0.02Q, where P is the price and Q is the total number sold in the local market. There are two manufacturers operating in the local market. Firm 1's cost function is given by C

_{1}= 0.01q_{1}^{2}, where q_{1}is the number brought to market by firm 1. Firm 2's cost function is given by C_{2}= 0.02q_{2}^{2}, where q_{2}is the number brought to market by firm 2. The two firms are Cournot competitors that compete by setting output so that Q = q_{1}+ q_{2}. Use calculus for the following. a. Write firm 1's profit function and identify firm 1's reaction function to firm 2's output. b. Write firm 2's profit function and identify firm 2's reaction function to firm 1's output. c. Identify the equilibrium price and output of each firm.Free

Essay

Q 152Q 152

The market inverse demand curve for thrust bearings is P = 15 - 1.5Q, where Q is measured in hundreds of bearings per day and P is the price per bearing. The marginal cost is $3.
a. Suppose two firms, which are Bertrand competitors, produce identical thrust bearings for this market. What is the price of thrust bearings? How many thrust bearings are produced?
b. If the thrust bearing market were perfectly competitive, what would be the price and quantity produced?
c. If the thrust bearing market were monopolized, what would be the price and quantity produced?

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Essay

Q 153Q 153

An industry faces the demand curve Q = 400 - 4P, where each firm produces an identical good at a constant marginal cost of $10. What are the Bertrand equilibrium price and quantity?

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Essay

Q 154Q 154

(Figure: Cartel I)
If two firms selling identical products act as a cartel and split the market evenly, each firm will earn profits of _____. Why is quantity collusion not considered a Nash equilibrium?

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Essay

Q 155Q 155

Answer the following questions.
a. What are the assumptions of Bertrand competition with identical goods?
b. Suppose that two firms are engaged in Bertrand competition with identical goods and each firm has a marginal cost of $33. What is the Nash equilibrium?
c. In Bertrand competition with identical goods, Firm A charges $50 and Firm B charges $40. What are the firms' market shares?

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Essay

Q 156Q 156

The inverse market demand curve is P = 260 - Q, where Q is the output of Firm 1 and Firm 2, q

_{1}+ q_{2}. The output of the two firms is identical. a. Firm 1 and Firm 2 have the same cost structure: AC = MC = $20. If the firms are in Cournot competition, how much profit does each firm earn? b. Now suppose that Firm 2's production costs increase to AC = MC = $80. If the firms continue their Cournot competition, how much profit does each firm earn?Free

Essay

Q 157Q 157

Consider the breakfast cereal market. Post and General Mills must simultaneously decide whether to spend money on advertising their new tuna crunch cereal. If both companies advertise, each company will earn profits of $6 million. If neither company advertises, each company will earn profits of $8 million. However, if one company advertises and the other does not, the company that advertises earns profits of $12 million and the company that does not earns profits of $3 million. Explain why the following outcomes are either a Nash equilibrium or not a Nash equilibrium.
a. General Mills advertises and Post does not advertise.
b. Neither General Mills nor Post advertises.
c. Both General Mills and Post advertise.

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Essay

Q 158Q 158

Suppose that Etsy (an e-commerce site focused on handmade or vintage items) necklace vendors compete in a Bertrand market structure with differentiated products. Demand for style 1, produced by vendor 1, is given by
where p

_{1}is the price of style 1 and p_{2}is the price of style 2, produced by vendor 2. Demand for style 2 is The costs of providing these necklaces are C_{1}= q_{1}and C_{2}= 0.75q_{2,}respectively. a. Identify vendor 1's profit function. b. Identify vendor 2's profit function. c. Identify vendor 1's reaction function. d. Identify vendor 2's reaction function. e. Identify the equilibrium price for each necklace.Free

Essay

Q 159Q 159

Gotcha, the only seller of stun guns, faces the inverse market demand curve P = 400 - 12Q, where Q measures the number of stun guns per day and P is the price per stun gun. The marginal cost is constant at $64.
a. What is Gotcha's profit-maximizing price and quantity?
b. Suppose a new firm, Ouchy, enters the stun gun market. Ouchy's marginal cost is also constant at $64. Gotcha and Ouchy decide to form a cartel and evenly split the market output. What is the market price? How much output does each firm produce?
c. Now suppose that Ouchy no longer abides by the cartel agreement; it decides to produce and sell 5 additional stun guns per day. What happens to the market price and market output?

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Essay

Q 160Q 160

Dagger and Jackson offer different types of kayak tours, competing on price. Dagger faces q

_{D}= 1,000 - 20p_{D}+ 5p_{J}and constant marginal costs of $30. Jackson faces q_{J}= 1,000 - 20p_{J}+ 5p_{D}and constant marginal costs of $45. Graph the reaction function for each firm and indicate the Nash equilibrium.Free

Essay

Q 161Q 161

The inverse demand for designer blankets is given by P = 40 - 0.01Q, where P is the price per blanket and Q is the total number of blankets brought to market. Two shops in the local market supply specialty blankets. Shop 1's cost function is given by C

_{1}= 0.02q_{1}^{2}, where q_{1}is the number it brings to market. Shop 2's cost function is given by C_{2}= 0.02q_{2}^{2}, where q_{2}is the number it brings to market. Given that the two shops compete by setting output (Cournot): a. write shop 1's profit function. Let Q = q_{1}+ q_{2}. b. write shop 2's profit function.Free

Essay

Q 162Q 162

The inverse market demand curve for protocol droids is P = 4,000 - 2Q, where Q is the quantity of protocol droids and P is the market price. Protocol droids can be produced at a constant marginal cost of $1,000, and all protocol droids are identical.
a. Suppose the market for protocol droids is served by two firms that form a cartel and evenly split the market output. What are the market output and price level?
b. Suppose the market for protocol droids is served by two firms that are engaged in Bertrand competition. What are the market output and price level?
c. Suppose the market for protocol droids is served by two firms that are engaged in Cournot competition. The inverse market demand curve P = 4,000 - 2(q

_{1}+ q_{2}), where the market output, Q, is the sum of each firm's output, q_{1}+ q_{2.}What are the market output and price level? d. Suppose the market for protocol droids is served by two firms that are engaged in Stackelberg competition. The inverse market demand curve P = 4,000 - 2(q_{1}+ q_{2}), where the market output, Q, is the sum of each firm's output, q_{1}+ q_{2.}What are the market output and price level?Free

Essay

Q 163Q 163

The Tavern restaurant operates in a monopolistically competitive industry with an inverse demand curve of P = 60 - 10Q, where Q is measured in hundreds of patrons served per week and P is the average price per meal. The marginal cost per meal is $10. What price per meal should the Tavern charge to maximize profit?

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Essay

Q 164Q 164

Majestic Manicures operates in a monopolistically competitive market. Its inverse demand curve is P = 85 - 4Q, where Q is the number of daily manicures and P is the price per manicure. The total cost of providing manicures is TC = 13Q and marginal cost is $13.
a. What is Majestic Manicures' profit-maximizing output level and price?
b. What is Majestic Manicures' profit?
c. What will happen to Majestic Manicures' demand curve in the long run?
d. What is the expected long-run equilibrium price for manicures?

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Essay

Q 165Q 165

Two firms, Aero and Pareto, produce parachutes. Aero faces the demand curve q

_{A}= 4,000 - 2P_{A}+ P_{P}, and Pareto faces the demand curve q_{B}= 4,000 - 2P_{P}+ P_{A}. Aero's output, q_{A}, is sold at a price of P_{A}. Pareto's output, q_{P}, is sold at a price of P_{p}. The firms' parachutes are differentiated. For simplicity, assume marginal costs are zero. a. Solve for Aero's marginal revenue as a function of prices. b. Solve for Aero's reaction function. c. Solve for Pareto's marginal revenue as a function of prices. d. Solve for Pareto's reaction function. e. What price does each firm charge for its parachute?Free

Essay

Q 166Q 166

Suppose that Mystic Energy and E-Storm are the only two producers of hydrogen fuel cells. The market inverse demand curve for hydrogen fuel cells is P = 1,300 - 0.08Q, where Q is the number of fuels cells per month and P is the price per fuel cell. The marginal cost is constant at $500. Acting as a cartel, the owners of Mystic Energy and E-Storm agree to evenly split the market output.
a. How much output does each firm produce?
b. What is the market price per fuel cell?
c. If each firm has fixed costs of $250,000, what is each firm's profit?

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Essay

Q 167Q 167

Two firms are producing identical goods in a market characterized by the inverse demand curve P = 120 - 4Q, where Q is the sum of Firm 1's and Firm 2's output, q

_{1}+ q_{2}. Each firm's marginal cost is constant at $20. Graph the reaction function for each firm and indicate the Nash equilibrium.Free

Essay

Q 168Q 168

Consider the market for vegan soup. Two firms, Garden Kitchen and Veggie Spot are in Stackelberg competition. Veggie Spot observes Garden Kitchen's output level before choosing its desired output level. The market inverse demand curve for vegan soup is P = 18 - Q, where Q measures cups of soup produced by Garden Kitchen and Veggie Spot, q

_{K}and q_{F}, and P is the price per cup. Garden Kitchen and Veggie Spot produce soup at a constant marginal cost of $2. a. Derive Veggie Spot's reaction function. b. Derive Garden Kitchen's marginal revenue function. c. How much output does Garden Kitchen produce? d. How much output does Veggie Spot produce? e. What is the market price of vegan soup?Free

Essay

Q 169Q 169

The inverse demand for designer blankets is given by P = 40 - 0.01Q, where P is the price per blanket and Q is the total number of blankets brought to market. Two shops in the market supply specialty blankets. Shop 1's cost function is given by C

_{1}= 0.02q_{1}^{2}, where q_{1}is the number it brings to market. Shop 2's cost function is given by C_{2}= 0.02q_{2}^{2}, where q_{2}is the number it brings to market. Given that the two shops compete by setting output (Cournot): a. identify shop 1's reaction function to firm 2's output. b. identify shop 2's reaction function to firm 1's output. c. identify the equilibrium output level of each shop and the equilibrium price for blankets.Free

Essay

Q 170Q 170

Katya and Polina offer different types of kayak tours, competing on price. Katya faces q

_{D}= 1,000 - 20p_{D}+ 5p_{J}and constant marginal costs of $30. Polina faces q_{J}= 1,000 - 20p_{J}+ 5p_{D}and constant marginal costs of $45. If Polina charges $50 per kayak tour, then Katya should charge _____ per kayak tour.Free

Essay

Q 171Q 171

A monopolistically competitive firm faces the inverse demand curve P = 100 - Q, and its marginal cost is constant at $20. The firm is in long-run equilibrium.
a. Graph the firm's demand curve, marginal revenue curve, and marginal cost curve. Also, identify the profit-maximizing price and quantity on your graph.
b. What is the value of the firm's fixed costs?
c. What is the equation for the firm's ATC curve?
d. Add the ATC curve to your graph in part
a.

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Essay

Q 172Q 172

The inverse demand for tacos is given by P = 10 - 0.02Q, where P is the price per taco and Q is the total number of tacos brought to market. There are two taco shops in the local market. Shop 1's cost function is given by C

_{1}= 0.01q_{1}^{2}, where q_{1}is the number of tacos it brings to market. Shop 2's cost function is given by C_{2}= 0.01q_{2}^{2}, where q_{2}is the number of tacos it brings to market. Given that the two shops compete by setting output (Cournot), answer the following. Let Q = q_{1}+ q_{2}. a. What is shop 1's profit function? b. What is shop 2's profit function?Free

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