Question

SCENARIO 3: Consider an industry consisting of two firms producing an identical product. The inverse market demand equation is P = 100 − 2Q. The total cost equations for firms 1 and 2 are TC1 = 4Q1 and TC2 = 4Q2, respectively.

9. Refer to SCENARIO 3. Suppose that the two firms are Cournot rivals. Firm 1’s reaction function is: a. Q1 = 12 − Q2. b. Q1 = 12 − 0.25Q2. c. Q1 = 24 − 0.5Q2. d. Q1 = 24 − 0.25Q2. e. None of the above.  

10. Refer to SCENARIO 3. Suppose that the two firms are Cournot rivals. Firm 2’s reaction function is: a. Q1 = 12 − Q2. b. Q1 = 12 − 0.25Q2. c. Q1 = 24 − 2Q2. d. Q1 = 24 − 0.25Q2. e. None of the above.

11. Refer to SCENARIO 3. Suppose that the two firms are Cournot rivals. The equilibrium level of output for firm 1 is: a. 8. b. 16. c. 24. d. 32. e. None of the above.

12. Refer to SCENARIO 3. Suppose that the two firms are Cournot rivals. The equilibrium level of output for firm 2 is: a. 8. b. 16. c. 24. d. 32. e. None of the above.

13. Refer to SCENARIO 3. Suppose that the two firms are Cournot rivals. The market price is: a. $16. b. $24. c. $32. d. $36. e. None of the above.

14. Refer to SCENARIO 3. Suppose that the two firms are Cournot rivals. Firm 1 will earn a profit of: a. $512. b. $732. c. $836. d. $1,014. e. None of the above.

15. Refer to SCENARIO 3. Suppose that the two firms are Cournot rivals. Firm 2 will earn a profit of: a. $512. b. $732. c. $836. d. $1,014. e. None of the above.

16. Refer to SCENARIO 3. Firm 1 is the Stackelberg leader and firm 2 is the Stackelberg follower. The output of the Stackelberg leader is: a. 6. b. 12. c. 24. d. 48. e. None of the above.

17. Refer to SCENARIO 3. Firm 1 is the Stackelberg leader and firm 2 is the Stackelberg follower. The output of the Stackelberg follower is: a. 6. b. 12. c. 24. d. 48. e. None of the above.

18. Refer to SCENARIO 3. Firm 1 is the Stackelberg leader and firm 2 is the Stackelberg follower. The market price is: a. $28. b. $32. c. $36. d. $40. e. None of the above.

19. Refer to SCENARIO 3. Firm 1 is the Stackelberg leader and firm 2 is the Stackelberg follower. The profit of the Stackelberg leader is: a. $288. b. $432. c. $486. d. $576. e. None of the above.

20. Refer to SCENARIO 3. Firm 1 is the Stackelberg leader and firm 2 is the Stackelberg follower. The profit of the Stackelberg follower is: a. $288. b. $432. c. $486. d. $576. e. None of the above.

21. Refer to SCENARIO 3. Suppose that the two firms are Bertrand rivals. The equilibrium level of output for firm 1 is: a. 8. b. 10. c. 12. d. 24. e. None of the above.

22. Refer to SCENARIO 3. Suppose that the two firms are Bertrand rivals. The equilibrium level of output for firm 2 is: a. 8. b. 10. c. 12. d. 24. e. None of the above.

23. Refer to SCENARIO 3. Suppose that the two firms are Bertrand rivals. The market price is: a. $4. b. $6. c. $8. d. $10. e. None of the above.

24. Refer to SCENARIO 3. Suppose that the two firms are Bertrand rivals. Firm 1 will earn a profit of: a. −$100. b. $0. c. $10. d. $100. e. Cannot be determined from the information provided.

Answer 1