# Microeconomics Study Set 46

## Quiz 11 :Imperfect Competition

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(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?
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B

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

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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 C1 = 0.05q12, where q1 is the number of bottles it brings to market. Firm 2's cost function is given by C2 = 0.03q22, where q2 is the number of bottles it brings to market. The two firms are Cournot competitors who set output so that Q = q1 + q2. In equilibrium, the market quantity is ____.
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D

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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, q1 + q2. 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.
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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 $3. Suppose two firms, which are Bertrand competitors, produce identical thrust bearings for this market. If this market were monopolized, the market price would be$____.
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Two companies are the only snowplow merchants in a small town. Inverse market demand curve is P = 100 - 10Q, where Q = q1 + q2 (Firm 1's output = q1; Firm 2's output = q2). Each firm has marginal costs of $25. In the Nash equilibrium in this market, Firm 2 produces ____. Multiple Choice Answer: Tags Choose question tag In a Cournot market structure with two firms, firm A's reaction function gives: Multiple Choice Answer: Tags Choose question tag The inverse demand for tacos is given by P = 10 - 0.02Q, where P is the price per taco and Q is the total number of tacos brought to market. There are two taco shops in the local market. Shop 1's cost function is given by C1 = 0.01q12, where q1 is the number of tacos it brings to market. Shop 2's cost function is given by C2 = 0.01q22, where q2 is the number of tacos it brings to market. Assume the two shops compete by setting output (Cournot). Let Q = q1 + q2. In equilibrium, the market price is$____.
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(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?
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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, q1, and Firm 2's output, q2. Each firm produces the product at a constant marginal cost of $22. If Firm 2's reaction function is q2 = 22 - 0.5q1, what is Firm 1's (the first-mover's) inverse demand curve? Multiple Choice Answer: Tags Choose question tag In monopolistic competition, the long-run equilibrium price _____ marginal cost because _____. Multiple Choice Answer: Tags Choose question tag 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 ____.
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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 C1 = 0.02q12, where q1 is the number it brings to market. Shop 2's cost function is given by C2 = 0.02q22, where q2 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 ____.
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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, q1 + q2. Each firm's marginal cost is constant at $12, and fixed costs are zero. Answer the following questions, assuming that the firms are Cournot competitors. In this case, the market price is$____.
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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 p1 is price of style 1 and p2 is the price of style 2, produced by vendor 2. Demand for style 2 is The costs of providing these necklaces are C1 = q1 and C2 = 0.75q2 respectively. The equilibrium price for style 2 is $____. Multiple Choice Answer: Tags Choose question tag The inverse demand for shampoo is given by P = 30 - 0.03Q, where P is the price per bottle in dollars and Q is bottles brought to market in hundreds. There are two manufacturers in the local market. Firm 1's cost function is given by C1 = 0.05q12, where q1 is the number of bottles it brings to market. Firm 2's cost function is given by C2 = 0.03q22, where q2 is the number of bottles it brings to market. The two firms are Cournot competitors who set output so that Q = q1 + q2. In equilibrium, the market price is$____.
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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 $500. Acting as a cartel, the owners of Mystic Energy and E-Storm agree to evenly split the market output. In this case, E-Storm earns a profit of$ ____.
Multiple Choice
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 $200, and fixed costs are zero. The profit for Ney Inc. is$_____.
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 ____. Multiple Choice Answer: Tags Choose question tag 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 \$____.