11) Firms 1 and 2 are duopolists that choose quantities in order to maximize pro
ID: 1130404 • Letter: 1
Question
11) Firms 1 and 2 are duopolists that choose quantities in order to maximize profits. Further suppose that Firm 1's best response function is q1 = 80 – 0.50q2. while Firm2's best response function is q2 = 60 – 0.40q1. The Nash-Cournot equilibrium quantities are: q1 = _____ units for firm 1 and q2 =_____ units form firm 2.
A) 62.5; 62.5
B) 35; 62.5
C) 35; 35
D) 62.5; 35
E) None of the above
12) If a firm operating in a perfectly competitive industry maximizes short-run profits by producing some quantity of output q* > 0, which of the following must be true at that level of output? A) p > MC B) MR > MC C) p AVC D) All of the above E) B and C only 13) Suppose there are N firms in a perfectly competitive industry. Each firm is producing output Q using production function Q=K^0.40 X L^0.60. Which of the following statements must be true about the long-run competitive equilibrium?
A) p = AC = MC
B) profit = 0
C) w > r
D) All of the above.
E) A and B only
14) Suppose that for each firm in the perfectly competitive market for potatoes, long-run average cost is minimized at $0.20 per pound when 500 pounds are grown. The market demand function for potatoes is Q = 10,000/p. If the long-run supply curve is horizontal, then in the long run equilibrium the total expenditure by all consumers on potatoes will be ______ and there will be _______ firms in the industry.
A) $50,000, 20
B) $10,000, 20
C) $10,000, 100
D) $50,000, 100
E) None of the above
15) Consider an industry populated by identical firms, facing constant input prices, and having all the other characteristics of a perfectly competitive market. Which of the following statements describes the new long-run market equilibrium resulting from a shift in demand?
A) a shift in demand has no effect on the long-run average cost and so there is no change in equilibrium price and quantity.
B) a shift in demand will change the equilibrium price and quantity.
C) a shift in demand has no effect on the long-run average cost, resulting in change in equilibrium quantity but not price.
D) a shift in demand has no effect on the long-run average cost, resulting in change in equilibrium price but not quantity.
E) a shift in demand is not possible
A) h.
B) c.
C) c + f.
D) c + d + e + f.
E) None of the above
17) The above figure shows the demand, marginal revenue and marginal cost curves for a monopoly. Under monopoly, consumer surplus equals
A) a + b.
B) a + b + c.
C) a + b + c + d + e + f.
D) a E) None of the above. 7
18) Suppose a monopolist has a cost function C(Q) = 100 + 10Q + 2Q2 , and the inverse demand curve it faces is p = 90 - 2Q. This monopoly will maximize profit when it produces _____ units of output, by charging price ______ per unit. The maximum profit earned by this monopolist will be ______.
A) 13.33; $63.33; $433.20
B) 10; $70; $700
C) 10; $70; $400
D) 10; $70; $300
E) 13.33; $63.33; $844.19
19) The above figure shows the cost curves for a competitive firm. If the price is _______, then this firm will _______, and it ______ shut down in the short run.
A) less than $10; incur economic loss; will not.
B) greater than $10; earn economic profit; will not.
C) less than $10; incur economic loss; may or may not.
D) B and C only
E) A and B only
20) Consider a competitive profit-maximizing firm in the short run and suppose that the current market price is greater than minimum AC. If this firm finds that at its current level of production, MR > MC, it will ______. On the other hand if it finds that, at its current level of production, MR < MC, it will _______.
A) increase output; decrease output
B) decrease output; increase output
C) decrease output; shut down
D) shut down; decrease output
E) increase output; shut down
$1q MC 15t- AC 1 1 .. 40Explanation / Answer
11. Ans: 62.5 ; 35
Explanation:
q1 = 80 - 0.5q2
Substituting the value of q2 in the above equation
q1 = 80 - 0.5(60 - 0.4q1)
= 80 - 30 + 0.2q1
q1 - 0.2q1 = 50
0.8q1 = 50
q1 = 50 / 0.8 = 62.5
q2 = 60 - 0.4(62.5) = 35
12. Ans: P >= AVC
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.