Exam 26: Oligopoly-Part A

North Bend currently has one McDonald's fast-food franchise.Demand for hamburgers in North Bend is given by Q = 400 - 10P.Any McDonald's franchise has costs of C = 60 + 3Q for producing Q hamburgers.If a second McDonald's franchise were to move into North Bend (and both behaved as duopolists), the profit of the original McDonald's would fall from

Roach Motors is the dominant used-car dealer in a small Midwestern city.After paying $50,000 for overhead, Roach Motors' cost per car is $500.There are 4 other small used-car lots in this town, but since they are not large enough to purchase cars through the same discount sources as Roach, each firm faces the cost function C = 5,000 + 700Q + 5Q².The demand for used cars is Q = 300 - P₁/10.Assuming Roach sets the market price so as to maximize its profit, how many cars will each of the follower firms supply?

An industry has two firms each of which produces output at a constant unit cost of $10 per unit.The demand function for the industry is q = 1,000,000/p.The Cournot equilibrium price for this industry is

An industry has two colluding firms that act so as to maximize total profit in the industry and then split the profits equally.Firm 1 has cost function c( y)= 8y.Firm 2 has cost function c( y)= y².Each firm produces an integer number of units.Market demand is given by Y( p)= 72 - p.

An industry has two firms-a Stackelberg leader and a follower.The price of the industry output is given by P = 84 - Q, where Q is the total output of the two firms.The follower has a marginal cost of $0.The leader has a marginal cost of $21.How much should the leader produce in order to maximize profits?

An industry has two firms-a Stackelberg leader and a follower.The price of the industry output is given by P = 36 - Q, where Q is the total output of the two firms.The follower has a marginal cost of $0.The leader has a marginal cost of $9.How much should the leader produce in order to maximize profits?

An industry has two firms.Firm 1's cost function is c(y)= 2y +500 and firm 2's cost function is c(y)= 2y + 400.The demand curve for the output of this industry is a downward-sloping straight line.In a Cournot equilibrium, where both firms produce positive amounts of output,

One unit of zinc and one unit of copper are needed to produce a unit of brass.The world's supply of zinc and the world's supply of copper are owned by two different monopolists.For simplicity assume that it costs nothing to mine zinc and copper, that no other inputs are needed to produce brass, and that the brass industry operates competitively.Then the price of a unit of brass equals the cost of the inputs used to make it.The demand function for brass is q = 900 - 2p, where p is the price of brass.The zinc and copper monopolists each set a price, believing that the other monopolist will not change its price.What is the equilibrium price of brass?

The duopolists Carl and Simon face a demand function for pumpkins of Q = 8,200 - 400P, where Q is the total number of pumpkins that reach the market and P is the price of pumpkins.Suppose further that each farmer has a constant marginal cost of $.50 for each pumpkin produced.If Carl believes that Simon is going to produce Q_s pumpkins this year, then the reaction function tells us how many pumpkins Carl should produce in order to maximize his profits.Carl's reaction function is

Suppose that the inverse demand for bean sprouts is given by P(Y)= 750 -2Y and the total cost of producing Y units for any firm is TC(Y)= 30Y.If the industry consists of two Cournot duopolists, then in equilibrium each firm's production is

In the Bertrand model of duopoly, each firm sets its price, believing that the other's price will not change.When both firms have identical production functions and produce with constant returns to scale, the Bertrand equilibrium price is equal to marginal cost.

A certain type of mushroom used to be produced on 50 farms, each of which had a cost function c(y)= y₂ + 1, where y > 0 and c(0)= 0.The firms operated as competitors.The demand curve for this kind of mushroom is given by D(p)= 52 - p.Marauding deviant Ninja turtles invaded many of the mushroom farms leaving absolute devastation and loathsome slime in their wake.(The turtles had no effect on the cost functions of farms that were not invaded.)

A duopoly faces the inverse demand curve p = 160 - 2q.Firm 1's total cost function is given by C₁(q₁)= 8q₁ and firm 2's total cost function is given by C₂(q₂)=0 10q₂.In a Cournot equilibrium,

There are two firms in the blastopheme industry.The demand curve for blastophemes is given by p = 3,600 - 4q.Each firm has one manufacturing plant and each firm i has a cost function C(q_i)= q²i, where q_i is the output of firm i.The two firms form a cartel and arrange to split total industry profits equally.Under this cartel arrangement, they will maximize joint profits if

The duopolists Carl and Simon face a demand function for pumpkins of Q = 2,200 - 400P, where Q is the total number of pumpkins that reach the market and P is the price of pumpkins.Suppose further that each farmer has a constant marginal cost of $1.50 for each pumpkin produced.If Carl believes that Simon is going to produce Q_s pumpkins this year, then the reaction function tells us how many pumpkins Carl should produce in order to maximize his profits.Carl's reaction function is