1. Compare and contrast three firm performance indicators. {10 Marks} 2. Amahle and Kholwa are the only two tombstone manufacturers in the world. Each firm has a cost function given by Cq=10q+q2, where q is number of tombstones produced. The market demand for tombstone is represented by the inverse demand equation: P=100-3Q where Q=q1 +q2 is the total output. Suppose that each firm maximises its profits taking its rivals output as given (i.e. the firm behave as Cournot oligopolists). a. What will be the equilibrium quantities selected by each firm? What is the total output and what is the market price? What are the profit levels for each firm? {10 Marks} b. It occurs to the managers of the two firms that they could do a lot better by colluding. If the two firms were to collude, what would be the profit maximizing choice of output? What is the industry price? What are the output and profits for each firm in this case? {10 Marks} c. Suppose Amahle can set its output level before Kholwa does. How much will the companies produce in this case? What is the market price, and the profits of each firm? Is Amahle better off by choosing its output first (why or why not)? {10 Marks} 3. Consider a homogeneous product market with 5 identical firms in the market. Let the market inverse demand be given by: =1002; Each firm produces with a cost function given by: =10; =1,..5. The CEOs of the five firms run into each other at a dinner during the World Economic Forum in Davos, Switzerland. They agree to form a cartel. While the firms agree to make joint output decisions, they cannot make side payments among themselves. a. What production quota should the cartel set to maximize the joint profits of the five firms? {10 Marks} b. What will be the output of each firm, the price of the product, {6 Marks} c. The profits of each firm? {4 Marks