Question
1.Consider a homogenous good industry with four firms. Total demand is given by D(p)=200-p. The variable (=marginal) cost of each of the firms is c1=10,
1.Consider a homogenous good industry with four firms. Total demand is given by D(p)=200-p. The variable (=marginal) cost of each of the firms is c1=10, c2=20, c3=30 and c4=35. Firms compete in prices.Suppose firms 1 and 2 merge into one entity and produce with a marginal cost of 20. Which of the following statements is correct?
After the merger, the price in the industry increases by $20.
After the merger, the price in the industry decreases by $10.
After the merger, the price in the industry increases by $10.
After the merger, the price in the industry decreases by $20.
2.Consider an industry in which the production technology yields the cost function C(Q)=1800+(3Q)2.
Which of the following statements is correct?
If Q<10, the cost function is sub-additive.
If Q<20, the cost function is sub-additive.
If Q<20, the cost function is sub-additive.
The cost function is sub-additive for all Q>0.
None of the above.
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