Assume two firms 1 and 2. The inverse market demand function is given by:

P=30-(q₁+q₂)

Each firm produces with marginal costs of

MC = 6

Fixed costs are zero.

The next questions refer to the Cournot duopoly.

Question 1(1 point)

What is Firm 1's total revenue function?

Question 1 options:

TR₁=30q₁-q₁-q₂²

TR₁=30-2q₁-q₂

TR₁=30q₁-q₁²-q₂

None of the above.

Question 2(1 point)

What is Firm 1's marginal revenue function?

Question 2 options:

MR₁=30-2q₁-q₂

MR₁=30-q₁-2q₂

MR₁=30-2q₁-2q₂

None of the above.

Question 3(1 point)

What is Firm 1's response function?

Question 3 options:

q₁=12-0.5q₂

q₁=12-q₂

q₁=12-2q₂

None of the above

Question 4(1 point)

If Firm 1 thinks that Firm 2 chooses to supply q₂=10, then Firm 1's profit maximizing quantity would be q₁*=

Question 4 options:

6

7

8

10

Question 5(1 point)

If Firm 2 thinks that Firm 1 chooses to supply q₁=7, then Firm 1's profit maximizing quantity would be q₁*=

Question 5 options:

6.5

7.5

8.5

9.5

Question 6(1 point)

In equilibrium, each firm will supply q_i=

Question 6 options:

5

6

7

8

Question 7(1 point)

The market price in equilibrium will be P*(q₁+q₂)=

Question 7 options:

14

16

18

20

Question 8(1 point)

In equilibrium, each firm's total revenue is equal to TR_i=

Question 8 options:

106

108

110

112

Question 9(1 point)

In equilibrium, each firm's total variable cost is TVC_i=

Question 9 options:

8

16

32

48

Question 10(1 point)

In equilibrium, each firm's total profit is_i=

Question 10 options:

32

40

48

64

Question 11(1 point)

In equilibrium, total consumer surplus is CS=

Question 11 options:

128

169

196

225

Question 12(1 point)

In equilibrium, total welfare is W=

Question 12 options:

225

256

281

312

Stackelberg

The next questions refer to the Stackelberg Leader Follower model. Assume Firm 1 is the leader.

Question 13(1 point)

What is the leader's total revenue function?

Question 13 options:

TR₁=42q₁-1.5q₁²

TR₁=30q₁-1.0q₁²

TR₁=18q₁-0.5q₁²

TR₁=6q₁-0.25q₁²

Question 14(1 point)

What is the leader's marginal revenue function?

Question 14 options:

MR₁=6-0.5q₁

MR₁=18-1q₁

MR₁=30-2q₁

MR₁=42-3q₁

Question 15(1 point)

What is the leader's chosen optimum quantity q₁*=

Question 15 options:

6

9

12

15

Question 16(1 point)

What is the follower's s optimum quantity q₂*=

Question 16 options:

6

9

12

15

Question 17(1 point)

The market price in equilibrium will be P*(q₁+q₂)=

Question 17 options:

12

14

16

18

Question 18(1 point)

In equilibrium, the leader's profit is₁=

Question 18 options:

36

72

108

144

Question 19(1 point)

In equilibrium, the follower's profit is₂=

Question 19 options:

36

72

108

144

Question 20(1 point)

In equilibrium, consumer surplus is CS=

Question 20 options:

132

142

152

162

Question 21(1 point)

In equilibrium, total welfare is W=

Question 21 options:

270

280

290

300

Cartel

For the next questions assume that Firm 1 and Firm 2 form a cartel (thus acting together like a monopolist).

Question 22(1 point)

What will be the cartel's marginal revenue function? (where Q=q₁+q₂)

Question 22 options:

MR_C=30-Q

MR_C=30-2Q

MR_C=30-3Q

MR_C=30-4Q

Question 23(1 point)

The cartel's profit maximizing price is PC*=

Question 23 options:

6

12

14

18

Question 24(1 point)

The cartel's profit maximizing quantity is Q*=

Question 24 options:

12

14

18

20

Question 25(1 point)

Consumer surplus under the cartel solution is CS =

Question 25 options:

50

72

98

128

Question 26(1 point)

Total producer surplus (cartel rent) under the cartel solution is equal to PS =

Question 26 options:

100

144

196

256

Question 27(1 point)

Total welfare under the cartel solution is equal to W=

Question 27 options:

150

216

294

384

Bertrand

The next questions refer to Bertrand competition.

Question 28(1 point)

Betrand criticized the Cournot model. Bertrand's point of criticism was that firms cannot be assumed to compete through

Question 28 options:

quantities supplied

qualities produced

prices set

product differentiation

Question 29(1 point)

In equilibrium, Bertrand competition is equivalent to the model of

Question 29 options:

Monopolistic competition

Perfect competition

Unfair competition

Ruinous competition

Question 30(1 point)

Which statement is true? In equilibrium,

Question 30 options:

The cartel equilibrium price is highest

The Stackelberg leader-follower equilibrium price is higher than the Cournot duopoly equilibrium price

Both a. and b. are correct.

None of the above is correct.

Game Theory

Porsche vs. Targa

The next questions refer to the following game. Porsche and Ferrari compete in the sports car market with new models. Below table shows the firms strategies and payoffs.

Porsche

Targa

Carrera

Ferrari

California

1,2

4,3

Spider

2,1

3,6

Question 31(1 point)

If Ferrari thinks that Porsche launches the Targa, then Ferrari's best strategy would be to launch the

Question 31 options:

Targa

Carrera

California

Spider

Question 32(1 point)

If Ferrari thinks that Porsche launches the Carrera, then Ferrari's best strategy would be to launch the

Question 32 options:

Targa

Carrera

California

Spider

Question 33(1 point)

For Ferrari, launching the Spider is

Question 33 options:

a dominant strategy

not a dominant strategy

a Ciao Bella strategy

not a Ciao Bello strategy

Question 34(1 point)

For Porsche, launching the Carrera is a

Question 34 options:

a dominant strategy

not a dominant strategy

Vorsprung-durch-Technik strategy

None of the above.

Question 35(1 point)

The Nash equilibrium of the game is

Question 35 options:

California-Targa

California-Carrera

Spider-Targa

Spider-Carrera

Question 36(1 point)

The Nash equilibrium of the game is

Question 36 options:

not a prisoner's dilemma

the social optimum

a prisoner's dilemma

the result of each car manufacturer having a dominant strategy

Question 37(1 point)

Assume cooperation were possible. Which deal between Porsche and Ferrari would allow for reaching the social optimum?

Question 37 options:

None. No cooperation already leads to the social optimum.

Porsche pays Ferrari $2 to launch the Spider instead of the California.

Ferrari pays Porsche $1 to launch the Targa instead of the Carrera.

Both b. and c. are correct.

Coordination Games

The next questions refer to the following game. Germany and France agreed to accept refugees from a refugee camp that is increasingly confronted with a humanitarian crisis.Each country can either commit to accepting a low contingent or a large contingent.

France

Small

Large

Germany

Small

-3,-3

2,-1Large

-1,2

-4,-4

Question 38(1 point)

Which statement is true? The game has

Question 38 options:

No Nash equilibrium

One Nash equilibrium

Two Nash equilibria

Three Nash equilibria

Question 39(1 point)

Which statement is true?

Question 39 options:

The players have no individual preference order

The game has a Pareto superior Nash equilibrium

The social optimum consists of both countries responding with a large contingency.

None of the above is true.

Question 40(1 point)

Which statement is true if Germany could commit to a contingent first?

Question 40 options:

Germany would choose small, France follow with small

Germany would choose large, France follow with large

Germany would choose large, France follow with small

Germany would choose small, France follow with large

Mixed Strategies

Consider the following game between two players Bad-Boy and Good-Girl. Bad-Boy can either behave or misbehave whereas Good-Girl can either punish or reward. Below payoff matrix shows the game as pure strategies.

Good Girl

Reward

Punish

Bad Boy

Behave

5, 5

-5,-5Misbehave

10,-10

-10,-5

Question 41(1 point)

What is the Nash equilibrium of the game in pure strategies?

Question 41 options:

Behave-Reward

Behave-Punish

Misbehave-Punish

There is no Nash equilibrium in pure strategies.

Question 42(1 point)

Assume Bad Boy knows that Good Girl rewards 80% of the time. Then, if Bad Boy misbehaves 100% of the time, Bad Boy's expected payoff is equal to

Question 42 options:

2

4

6

8

Question 43(1 point)

Assume Bad Boy knows that Good Girl rewards 80% of the time. Then, if Bad Boy misbehaves 100% of the time, Good Girl's expected payoff is equal to

Question 43 options:

-5

-6

-7

-8

Question 44(1 point)

Assume Bad Boy knows that Good Girl rewards 80% of the time. Then, if Bad Boy misbehaves 100% of the time, which statement is true?

Question 44 options:

Bad Boy exploits Good Girl being so nice

Good Girl will feel exploited and consider a mixed strategy

Both a. and b. are correct

This is the best that Good Girl can do.

Question 45(1 point)

Assume Good Girl wants to consider a mixed strategy such that she randomly chooses "Reward" and "Punishment" such that Bad Boy is indifferent between "Behave" and "Misbehave". With what probability should Good Girl choose play "Reward."

Question 45 options:

1/2

1/3

1/4

1/5

Question 46(1 point)

Assume Good Girl knows that Bad Boy misbehaves 90% of the time. Then, if Good Girl punishes 100% of the time, Good Girl's expected payoff is equal to

Question 46 options:

1

2

3

4

Question 47(1 point)

Assume Good Girl knows that Bad Boy misbehaves 90% of the time. Then, if Good Girl punishes 100% of the time, Bad Boy's expected payoff is equal to

Question 47 options:

-9.5

-8.5

-7.5

-7

Question 48(1 point)

Assume Good Girl knows that Bad Boy misbehaves 90% of the time. Then, if Good Girl punishes 100% of the time, then which statement is true?

Question 48 options:

Good Girl takes advantage of Bad Boy being so misbehaved

Bad Boy will feel taken advantage of and consider a mixed strategy

Both a. and b. are correct

This is the best that Bad Boy can do.

Question 49(1 point)

Assume Bad Boy wants to consider a mixed strategy such that he randomly chooses "Behave" and "Misbehave" such that Good Girl is indifferent between "Reward" and "Punish." With what probability should Bad Boy play "Behave."

Question 49 options:

1/5

2/5

3/5

4/5

Question 50(1 point)

A game in which players choose their strategies randomly are called

Question 50 options:

random games

chance games

no-clue games

mixed-strategy games