Oligopoly Theory

Cournot

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)

Saved

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)

Saved

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)

Saved

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 isq₁=

Question 18 options:

36

72

108

144

Question 19(1 point)

In equilibrium, the follower's profit isq2₂=

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

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.