Consider two firms competing to sell a homogeneous product by setting price. The inverse demand curve is given by P = 6 - Q. If each firm's cost function is Ci(Q;) = 2Qj, then consumer surplus in this market is Multiple Choice O $2. O $4. O $8. O indeterminable as there is insufficient information.A single firm that charges the monopoly price in the market earns 800. If another rm successfully enters the market, the incumbents profits fall to 400 and the entrant earns 400. If the incumbent engages in limit pricing, its profits are 500. For what interest rate, 1', is limit pricing a protable strategy for the incumbent? Multiple Choice O.5751 OOO You are the manager of a firm that produces output in two plants. The demand for your firm's product is P = 78 150, where Q = 01+ 02. The marginal costs associated with producing in the two plants are MC1 = 301 and MC2= 202. What price should be charged to maximize prots? Multiple Choice 0 $20. 5 $40.5 $60. 5 $80. 5 DO. Firms 1 and 2 compete in a Cournot duopoly. Iffirm 2 adopts a strategy that raises rm 1's marginal cost, Multiple Choice 0 rm 1 will in crease its output. rm 2 will gain market share. 0 rm 2 will enjoy lower prots. rm 1will increase its output. firm 2 will gain market share, and rm 2 will enjoy lower prots. Hunger Industries operated as a monopolist for the past several years. earning annual profits amounting to $40 million. which it could have maintained ifMunch Incorporated did not enter the market. The result ofthis increased competition is lower prices and lower profits; Hunger Industries now earns $20 million annually. The managers of Hunger Industries are trying to devise a plan to drive Munch Incorporated out of the market so Hunger can regain its monopoly position {and profit}. One of Hunger's managers suggests pricing its product 50 percent below marginal cost for exactly one year. The estimated impact of such a move is a loss of $100 million. Ignoring antitrust concerns, compute the present value of Hunger lndustries' profits if it remains a duopolist in this market when the interest rate is 2 percent. Multiple Choice 0 $950 million 0 $990 million 0 $1,020 million \f