1. A ________ shows how much a firm will produce as a function of how much it thinks its competitors will produce.

Select one:

a. Nash equilibrium curve

b. contract curve

c. reaction curve

d. demand curve

e. none of the above

2.In a Cournot duopoly, we find that Firm 1's reaction function is Q1= 50 - 0.5Q2, and Firm 2's reaction function is Q2= 75 - 0.75Q1. What is the Cournot equilibrium outcome in this market?

Select one:

a. Q1= 60 and Q2= 60

b. Q1= 20 and Q2= 20

c. Q1= 20 and Q2= 60

d. Q1= 60 and Q2= 20

3.Suppose mountain spring water can be produced at no cost and that the demand and marginal revenue curves for mountain spring water are given as follows:

Qd = 6000 - 5P,MR = 1200 - 0.4Q, MC = 0

What is the profit maximizing price of a monopolist?

Select one:

none of the above

a. $800

b. $600

c. $400

d. $900

4.Suppose mountain spring water can be produced at no cost and that the demand and marginal revenue curves for mountain spring water are given as follows:

Qd = 6000 - 5P,MR = 1200 - 0.4Q, MC = 0

What will be the price in the long run if the industry is a Cournot duopoly?

Select one:

a. $600

b. $800

c. $900

d. Competition will drive the price to zero.

e. $400

5.Suppose the market demand curve isP = 40 - 2Qdand the constant marginal cost of production isMC = 20. The market is shared by two firms. If the firms collude and share the output equally,

Select one:

a. each firm will produce 2.5 units and the market price will be $10.

b. Q1= Q2= 5

c. each firm will produce 2.5 units and the market price will be $20.

d. each firm will produce 5 units and the market price will be $30.

6.The market structure in which strategic considerations are most important is:

Select one:

a. pure monopoly.

b. monopolistic competition.

c. oligopoly.

d. pure competition.

7.What is one difference between the Cournot and Stackelberg models?

Select one:

a. Profits are zero in Cournot and positive in Stackelberg.

b. In Cournot, both firms make output decisions simultaneously, and in Stackelberg, one firm sets its output level first.

c. In Cournot, a firm has the opportunity to react to its rival.

d. In Stackelberg, both firms make output decisions simultaneously, and in Cournot, one firm sets its output level first.

30 - Firm 2's Reaction Curve 15 B 10 7.5 Firm I's Reaction Curva 7.5 10 15 30 07 The points A, B and C in the figure correspond, in that order, to: Select one: O competitive, collusion, and Cournot equilibrium. Cournot, collusion, and competitive equilibrium. O collusion, Cournot, and competitive equilibrium. O competitive, Cournot, and collusion equilibrium