Reference the following information about the market demand function for questions 1 to 15. These questions are on different types of market structures - monopoly, perfect competition, Cournot oligopoly market, and the Stackelberg oligopoly market.

The market demand function is given the following equation:P = 4000 - Qwhere Q is the industry's output level.

Question 1

Suppose, initially, this market is served by a single firm.

Let the total cost function of this firm be given the function C(Q) = 200Q. The firm's marginal cost of production (MC) is equal to the firm's average cost (AC):MC = AC = 200.

What is theoutput levelproduced by the profit-maximizing firm in this industry?

3800

2850

1900

950

Question 2

What will be themarket pricecharged by the monopolist at the profit-maximizing level of output?

950

1900

2100

2850

Question 3

What will be theprofitearned by the monopolist at the profit-maximizing level of output?

$3060,000

$3610,000

$3910,000

$3310,000

Question 4

What would be the industry output level if this was aperfectly competitive industryinstead?

3950

3800

2850

1900

Question 5

Now that you have calculated the monopoly equilibrium output level and the perfectly competitive industry output, can you calculate the numerical value of the inefficiency loss (deadweight loss) generated in the economy if the market is served by the monopolist?

Hint:Often it helps to draw the diagram with the demand curve, marginal revenue, and marginal cost information and then label the equilibrium output levels for each industry and the corresponding price levels.

$1500,000

$1650,000

$1805,000

$1900,000

Question 6

Can you calculate theconsumer surplusgenerated in the monopoly market?

$1805,000

$1850,000

$1900,000

$1950,000

Question 7

Now suppose two firms supply this market instead of one firm. Thus,Q = Q1 + Q2where Q1 denotes the output produced by firm 1 and Q2 denotes the output produced by firm 2.

What are the levels of equilibriumoutput produced byfirm 1 and firm 2 in theCournot model equilibrium?

Marginal profit function of firm 1 = 3800 -2Q1 - Q2

Marginal profit function of firm 2 = 3800 - Q1 - 2Q2

1036.54, 1036.54

1126.55, 1126.55

1266.67, 1266.67

1284.36, 1284.36

Question 8

What will thetotal industry outputproduced when firms engage inCournot market competition?

2568.72

2533.34

2253.10

2073.08

Question 9

What will be theequilibrium market pricein the Cournot model?

$866.64

$1066.66

$1466.66

$1476.66

Question 10

What will be theprofitearned by each of the symmetric firms in the Cournot market equilibrium?

$1406,660.22 and $1406,660.22

$1604,440.22 and $1604,440.22

$1646,660.22 and $1646,660.22

$1466.440.22 and $1466,440.22

Question 11

Now suppose the two firms engage in Stackelberg market competition. Assume firm 1 is the leader (first-mover) and firm 2 is the follower firm (second-mover).

What will be the equilibriumoutputlevel produced by theStackelberg leader(first-mover) firm?

Marginal profit function of Stackelberg leader = 1900 - Q1

1900

2150

1150

950

Question 12

What will be the equilibrium output produced by theStackelberg follower(second-mover) firm?

850

950

1150

1350

Question 13

What will be themarket pricein this Stackelberg model?

1050

1350

1150

1275

Question 14

Can you calculate the profit earned by theStackelberg leaderand theStackelberg follower?

$1605,000 and $905,200

$1850,000 and $902,500

$1805,000 and $902,500

$1800,500 and $905,200

Question 15

Can youidentify the resultswe learned from solving this problem on market structure?

The monopoly market output is greater than the oligopoly market output and the oligopoly market output is greater than the competitive industry output.

The competitive market output is greater than the oligopoly market output and the oligopoly market output is lower than the monopoly output.

The competitive market output is greater than the oligopoly market output and the oligopoly market output is equal to the monopoly output.

The competitive market output is greater than the oligopoly market output and the oligopoly market output is greater than the monopoly output