Q1. what is efficiency effect? what is the replacement effect? use these definitions to analyse whether a competitive firm or an incumbent monopolist has a greater incentive to innovate

Q2. Both Carol and Jackie produce a homogenous product. They both have zero marginal costs and simultaneously choose output. The market demand curve for the product is P = 1 - Q, where Q total output. In equilibrium what is the output of Carol and Jackie?

a. qj = qc = 1/3

b. qj = qc = 1/2

c. qj = qc = 1/4

d. qj = , qc = 1/4

e. None of the above

Q3. Both Carol and Jackie produce a homogenous product. They both have zero marginal costs. Jackie chooses her output first; having observed qj, Carol then chooses her output level. The market demand curve for the product is P = 1 - Q, where Q total output. In equilibrium what is the output of Carol and Jackie.

a.qj = qc = 1/3

b. qj = qc = 1/2

c. qj = qc = 1/4

d. qj = , qc = 1/4

e. None of the above