QUESTION 16

The table below shows the costs and demand for the Primrose Oil industry.

uantity	Price	Total Cost
0	$86	$40
1	82	70
2	78	90
3	74	120
4	70	160
5	66	210
6	62	272
7	58	348
8	54	440

a) If this were a perfectly competitive industry, what would be the price, output and total industry profit? b) If, alternately, this were a monopoly industry, what would the price, output, and total profit be?

QUESTION 19

Popsi and Cuke entered into an (illegal) agreement whereby each agreed to reduce the amount spent on advertising by 50 percent. After a year of apparent success, Popsi is uneasy about the agreement and begins to wonder whether it should continue to abide by the agreement or, instead, go back to its pre-agreement level of advertising. The payoff matrix, expressed in millions of dollars of profits per year, for Popsi and Cuke's choices is shown in the table below. What do you think Popsi should do, and why?

	Popsi
Stick to agreement	Increase advertising budget
Cuke	Stick to agreement	Popsi's profit: $30	Popsi's profit: $35
Cuke's profit: $30	Cuke's profit: $15
Increase advertising budget	Popsi's profit: $15	Popsi's profit: $20
Cuke's profit: $35	Cuke's profit: $20

QUESTION 24

The following table gives the cost and demand data for a monopolist:

Output	Price $	Marginal Revenue $	Average Cost $	Marginal Cost $
0
1	100	100	138	100
2	95	90	109	80
3	90	80	86	40
4	85	70	82	70
5	80	60	80	72
6	75	50	79.2	75
7	70	40	80	85
8	65	30	82	96

Suppose that the monopolist is regulated and forced to charge a socially optimum price. What will be the price and output?