Exam 28:Oligopoly-Part A

Suppose that two airlines are Cournot duopolists serving the Peoria-Dubuque route,and the demand curve for tickets per day is Q = 230 - 2p (so p=115 - Q/2).Total costs of running a flight on this route are 450+ 40q,where q is the number of passengers on the flight.Each flight has a capacity of 80 passengers.In Cournot equilibrium,each duopolist will run one flight per day and will make a daily profit of

In the Cournot model,each firm chooses its actions on the assumption that its rivals will react by changing their quantities in such a way as to maximize their own profits.

Two firms decide to form a cartel and collude in a way that maximizes industry profits.Each firm has zero production costs and each firm is given a positive output quota by the cartel.Which of the following statements is not true?

A city has two newspapers.Demand for either paper depends on its own price and the price of its rival.Demand functions for papers A and B respectively,measured in tens of thousands of subscriptions,are 21 - 2P_a + P_b and 21 +P_a 2 2P_b.The marginal cost of printing and distributing an extra paper just equals the extra advertising revenue from another reader,so each paper treats marginal costs as zero.Each paper maximizes its revenue assuming that the other's price is independent of its own price.If the papers enter a joint operating agreement where they set prices to maximize total revenue,by how much will newspaper prices rise?

A Stackelberg leader and follower choose their outputs to maximize their own profits.Local property taxes which constitute a lump sum tax for each of them are reduced by $500 per year for the leader and by $200 a year for the follower.In consequence,the firms

Suppose that the inverse demand for bean sprouts is given by P(Y)= 370- 4Y and the total cost of producing Y units for any firm is TC(Y)= 10Y.If the industry consists of two Cournot duopolists,then in equilibrium each firm's production 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.

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.

There are two major producers of corncob pipes in the world,both located in Herman,Missouri.Suppose that the inverse demand function for corncob pipes is described by p = 160 - 4q,where q is total industry output,and marginal costs are zero.What is the Cournot reaction function of firm 1 to the output,q₂,of firm 2?

An industry has two firms.The inverse demand function for this industry is p = 263-6q.Both firms produce at a constant unit cost of $29 per unit.What is the Cournot equilibrium price for this industry?

The price elasticity of demand for melocotones is constant and equal to -2.The melocotone market is controlled by two Cournot duopolists who have different cost functions.One of the duopolists has a constant marginal cost of $675 per ton and produces 50% of the total number of melocotones sold.The equilibrium price of a ton of melocotones must be

Suppose that two airlines are Cournot duopolists serving the Peoria-Dubuque route,and the demand curve for tickets per day is Q = 220 -2p (so p=110 - Q/2).Total costs of running a flight on this route are 1,400+20q,where q is the number of passengers on the flight.Each flight has a capacity of 80 passengers.In Cournot equilibrium,each duopolist will run one flight per day and will make a daily profit of

Ann and Bruce each own a pizza store in Frostbite Falls,Minnesota.Demand for pizza is given by Q =200 - 10P.Having the only two pizza stores in Frostbite Falls,they attempt to profitably split the market without violating the Sherman Antitrust Act.Each has the cost function C = 50 + 5Q.If Ann and Bruce behave as duopolists,each earns a profit of

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?

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)=10q₂.In a Cournot equilibrium,