Indicate whether the statement is TRUE, FALSE, or UNCERTAIN and explain why. Answer 1 & 2 1. If a monopsonist faces a perfectly elastic supply curve, there will be no deadweight loss relative to the competitive outcome 2. In a Cournot duopoly market, the two firms agree to produce half of the monopoly output level for that market and split the resulting profit. Since the monopoly profit is the highest profit that can be obtained, the two firms will always stick to that agreement even if it’s not legally (or in any other way) binding.

Indicate whether the statement is TRUE, FALSE, or UNCERTAIN and explain why. Answer 1 & 2 1. If a monopsonist faces a perfectly elastic supply curve, there will be no deadweight loss relative to the competitive outcome 2. In a Cournot duopoly market, the two firms agree to produce half of the monopoly output level for that market and split the resulting profit. Since the monopoly profit is the highest profit that can be obtained, the two firms will always stick to that agreement even if it’s not legally (or in any other way) binding.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter15: Imperfect Competition

Section: Chapter Questions

Problem 15.10P: Inverse elasticity rule Use the first-order condition (Equation 15.2 ) for a Cournot firm to show...

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