Assume two firms 1 and 2. The inverse market demand function is given by:

P=30-(q₁+q₂)

Each firm produces with marginal costs of

MC = 6

Fixed costs are zero.

The next questions refer to the Cournot duopoly.

What is Firm 1's total revenue function?

Question 1 options:

	TR1=30q1 -q1 -q22
	TR1=30-2q1-q2
	TR1=30q1 -q12-q2
	None of the above.

Question 2 (1 point)

What is Firm 1's marginal revenue function?

Question 2 options:

	MR1=30-2q1 -q2
	MR1=30-q1-2q2
	MR1=30-2q1-2q2
	None of the above.

Question 3 (1 point)

What is Firm 1's response function?

Question 3 options:

	q1=12-0.5q2
	q1=12-q2
	q1=12-2q2
	None of the above

Question 4 (1 point)

If Firm 1 thinks that Firm 2 chooses to supply q₂=10, then Firm 1's profit maximizing quantity would be q₁*=

Question 4 options:

	6
	7
	8
	10

Question 5 (1 point)

If Firm 2 thinks that Firm 1 chooses to supply q₁=7, then Firm 2's profit maximizing quantity would be q₂*=

Question 5 options:

	6.5
	7.5
	8.5
	9.5

Question 6 (1 point)

In equilibrium, each firm will supply q_i=

Question 6 options:

	5
	6
	7
	8

Question 7 (1 point)

The market price in equilibrium will be P*(q₁+q₂)=

Question 7 options:

	14
	16
	18
	20

Question 8 (1 point)

In equilibrium, each firm's total revenue is equal to TR_i=

Question 8 options:

	106
	108
	110
	112

Question 9 (1 point)

In equilibrium, each firm's total variable cost is TVC_i=

Question 9 options:

	8
	16
	32
	48

Question 10 (1 point)

In equilibrium, each firm's total profit is _i=

Question 10 options:

	32
	40
	48
	64

Question 11 (1 point)

In equilibrium, total consumer surplus is CS=

Question 11 options:

	128
	169
	196
	225

Question 12 (1 point)

In equilibrium, total welfare is W=

Question 12 options:

	225
	256
	281
	312

Stackelberg

The next questions refer to the Stackelberg Leader Follower model. Assume Firm 1 is the leader.

Question 13 (1 point)

What is the leader's total revenue function?

Question 13 options:

	TR1=42q1 -1.5q12
	TR1 =30q1 -1.0q12
	TR1 =18q1 -0.5q12
	TR1=6q1-0.25q12

Question 14 (1 point)

What is the leader's marginal revenue function?

Question 14 options:

	MR1=6-0.5q1
	MR1 =18-1q1
	MR1 =30-2q1
	MR1 =42-3q1

Question 15 (1 point)

What is the leader's chosen optimum quantity q₁*=

Question 15 options:

	6
	9
	12
	15

Question 16 (1 point)

What is the follower's s optimum quantity q₂*=

Question 16 options:

	6
	9
	12
	15

Question 17 (1 point)

The market price in equilibrium will be P*(q₁+q₂)=

Question 17 options:

	12
	14
	16
	18

Question 18 (1 point)

In equilibrium, the leader's profit is ₁=

Question 18 options:

	36
	72
	108
	144

Question 19 (1 point)

In equilibrium, the follower's profit is ₂=

Question 19 options:

	36
	72
	108
	144

Question 20 (1 point)

In equilibrium, consumer surplus is CS=

Question 20 options:

	132
	142
	152
	162

Question 21

In equilibrium, total welfare is W=

Question 21 options:

	270
	280
	290
	300

Cartel

For the next questions assume that Firm 1 and Firm 2 form a cartel (thus acting together like a monopolist).

Question 22

What will be the cartel's marginal revenue function? (where Q=q₁+q₂)

Question 22 options:

	MRC=30-Q
	MRC=30-2Q
	MRC=30-3Q
	MRC=30-4Q

Question 23

The cartel's profit maximizing price is PC*=

Question 23 options:

	6
	12
	14
	18

Question 24

The cartel's profit maximizing quantity is Q*=

Question 24 options:

	12
	14
	18
	20

Question 25

Consumer surplus under the cartel solution is CS =

Question 25 options:

	50
	72
	98
	128

Question 26

Total producer surplus (cartel rent) under the cartel solution is equal to PS =

Question 26 options:

	100
	144
	196
	256

Question 27

Total welfare under the cartel solution is equal to W=

Question 27 options:

	150
	216
	294
	384

Bertrand

The next questions refer to Bertrand competition.

Question 28

Betrand criticized the Cournot model. Bertrand's point of criticism was that firms cannot be assumed to compete through

Question 28 options:

	quantities supplied
	qualities produced
	prices set
	product differentiation

Question 29 (1 point)

In equilibrium, Bertrand competition is equivalent to the model of

Question 29 options:

	Monopolistic competition
	Perfect competition
	Unfair competition
	Ruinous competition

Question 30 (1 point)

Which statement is true? In equilibrium,

Question 30 options:

	The cartel equilibrium price is highest
	The Stackelberg leader-follower equilibrium price is higher than the Cournot duopoly equilibrium price
	Both a. and b. are correct.
	None of the above is correct.

Answer rating: 100% (QA)

Lets go through each question one by one Cournot Duopoly Question 1 What is Firm 1s total revenue function The total revenue function is calculated by multiplying the price P by the quantity q1 TR1 P ... View the full answer