Instructions: Include also how you have calculated to get to the result. You may get points even if the final result is not correct. A correct result without explaining how you got to the result is not enough to get full scores.

1.) A consumer spends his income of 400 on good A or on good B or on any combination of A and B. One unit of A costs 2 and one unit of B 6.

Make a graph and draw a budget line for the consumer.

In the case of a, income rises from 400 to 600, other things remaining equal. Draw an additional new budget line to illustrate the change.

In the case of a, the price of 1 unit of B falls from 2 to 1, other things remaining equal. Draw an additional new budget line to illustrate the change. The effect in c, can be divided into two parts. Income and price effect, explain this.

2.) Oligopoly is a market structure concerned with strategic interactions between firms in which the action of one firm influences another firm and vice versa.

Explain how Cournot, Stackelberg, Bertrand, and cartel differ in structures?

How they differ in terms of welfare analysis?

3.) For a cartel duopoly with 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. The total quantity produced is calculated to 12 with a price of 18. What is the total profit, consumer surplus and total welfare?