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

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...

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.
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.

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.
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.

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.
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.

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.
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.

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.
Firm 1 is the Stackelberg leader and firm 2 is the Stackelberg
follower. The output of the Stackelberg follower is:
6.
12.
24.
48.
None of the above.

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. Firm 1 is the Stackelberg leader and firm
2 is the Stackelberg follower. The profit of the Stackelberg
follower is:
$864.
$576.
$432.
$288.
$1,152.

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. Suppose that the two firms are Cournot
rivals. Firm 2 will earn a profit of:
$512.
$732.
$836.
$1,014.
None of the above.

Consider a market with two identical firms. The market demand is
P = 26 – 2Q, where Q = q1 + q2. MC1 = MC2 = 2.
1. Solve for output and price with collusion.
2. Solve for the Cournot-Nash equilibrium.
3. Now assume this market has a Stackelberg leader, Firm 1.
Solve for the quantity, price, and profit for each firm.
4. Assume there is no product differentiation and the firms
follow a Bertrand pricing model. Solve for the...

1. Consider a market with inverse demand P (Q) = 100 Q and two
firms with cost function C(q) = 20q.
(A) Find the Stackelberg equilibrium outputs, price and total
profits (with firm 1 as the leader).
(B) Compare total profits, consumer surplus and social welfare
under Stackelberg and Cournot (just say which is bigger).
(C) Are the comparisons intuitively expected?
2. Consider the infinite repetition of the n-firm Bertrand game.
Find the set of discount factors for which full...

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