need help on questions 20-24 Page <4>of 6+ZOOMConsider a market with two firms, A and B. Firm A's marginal cost is: MC,= 100+¼q,, while firm[20]B's marginal cost is: MC, = 80 + 2qp. Striking up a cartel agreement, these firms collectively decide toproduce 200 units (i.e., 200 = qa + qB). Wishing to maximize their joint (cartel) profit, quotas should be setsuch that A produces less than B.A.TrueВ.False[21]Continuing question (20), if firm A sticks to its quota level of output, firm B will wish to produceА.more than its quota level of output.less than its quota level of output.its quota level of output.all of the above are possible.В.С.D.Consider US Steel (i.e., a producer of steel) and Pom Wonderful (i.e., a producer of pomegranate[22]juice). Since these two firms produce very different products, it's reasonable to assume they do not competeagainst each other, and thus operate in different markets. Accordingly, if you were to construct a pricereaction curve for US Steel based on the Bertrand Model of price competition, with the price of US Steel'sproduct (Ps) on the vertical axis and the price of Pom Wonderful’s product (Pp) on the horizontal axis, youwould expect this reaction curve to have a:А.positive slope.negative slopea slope equal to zero.В.С.Suppose a particular market consists of three firms, A, B, and C. Assume these firms compete[23]according to the Cournot model of quantity competition. Also, each firm's marginal cost equals zero.Accordingly, if the market demand equation is: Q = 500 - 2P, where Q is the market quantity and P is themarket price, then the equation of firm A's reaction function is (Note: q, denotes A's quantity produced, qBdenotes B's quantity produced, and qc denotes C's quantity produced.):А.IA = 50049B +В.500 - 49B49cС.250 - 2qB24 cD.= 250 - qB[24]demand: Q= 600 - P, where Q is the market quantity and P is the market price. Suppose each firm has a totalcost given as: TC=100q, where q is the amount produced by the firm. Accordingly, the greater the numberof firms in the market, the market price will converge to (i.e., get closer to):Imagine a market has several firms, each behaving as Cournot competitors, with the following marketА.100В.200С.500D.Infinity

MCA =100 + 0.25qA MCB =80 + 2qB Q = 200 units = qA + qB We know profit is maximized where Q= 200.

[20] Consider a market with two firms, A and B. Firm A's marginal cost is: MC, = 100 + ¼q»• while firm B's marginal cost is: MC, = 80 + 2qp. Striking up a cartel agreement, these firms collectively decide to produce 200 units (i.e., 200 = q, + qµ). Wishing to maximize their joint (cartel) profit, quotas should be set such that A produces less than B. A. True В. False [21] Continuing question (20), if firm A sticks to its quota level of output, firm B will wish to produce А. more than its quota level of output. less than its quota level of output. its quota level of output. all of the above are possible. В. C. D.

[20] Consider a market with two firms, A and B. Firm A's marginal cost is: MC, = 100 + ¼q»• while firm B's marginal cost is: MC, = 80 + 2qp. Striking up a cartel agreement, these firms collectively decide to produce 200 units (i.e., 200 = q, + qµ). Wishing to maximize their joint (cartel) profit, quotas should be set such that A produces less than B. A. True В. False [21] Continuing question (20), if firm A sticks to its quota level of output, firm B will wish to produce А. more than its quota level of output. less than its quota level of output. its quota level of output. all of the above are possible. В. C. D.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter15: Imperfect Competition

Section: Chapter Questions

Problem 15.9P

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