The inverse demand curve for a Stackelberg duopoly is P = 10,000 – 6Q. The leaders
cost structure is CL(QL) = 15QL. The followers cost structure is CF(QF) = 25QF.a.
Determine the reaction function for the follower.b. Determine the equilibrium output
levels for both the leader and the follower.c. What are the profits for the leader? For the
follower?
The supply function for good X is given by Qx = 200 + 4PX – 3PY – 5PW, where PX is
the price of X, PY is the price of good Y and PW is the price of input W. If PX = 500, PY
= 250, PW = 30, then the supply curve is
A. Qx = 1300.
B. Qx = -700 + 4Px.
C. Qx = -550 + 4Px.
D. Qx = 150 + 4Px.
Firms 1 and 2 compete in a Cournot duopoly. If firm 2 adopts a strategy that raises firm
1s marginal cost:
A. firm 1 will increase its output.
B. firm 2 will gain market share.
C. firm 2 will enjoy lower profits.
D. All of the statements associated with this question are correct.
The maximum quantity of good Y that is affordable is:
A. M/PX.
B. M/X.
C. M/PY.
D. M/Y.
A new firm successfully enters a three-firm Cournot oligopoly without changing the
demand and cost structures. The new price becomes:
A. 75 percent of the original price.
B. 50 percent of the original price.
C. the same as the original price.
D. unknown for lack of other information.
Which of the following is incorrect?
A. Predatory pricing is easy to prove in court.
B. Learning curve effects may enable an incumbent to produce at a lower cost than a
potential entrant.
C. A firm can benefit from strategies that raise the marginal costs of its rivals.
D. A firm can benefit from strategies that raise the fixed costs of all the firms in the
industry.
A student figured out that the HHI for an industry was 15,000. What is the proper
conclusion?
A. The market is monopolistic.
B. The market is close to perfectly competitive or monopolistically competitive.
C. The student made some computational errors.
D. There is free entry in the market.
To avoid the winners curse, a bidder should:
A. not participate in Dutch auctions.
B. only participate in second-price and English auctions.
C. revise upward his private estimate of the value of the item.
D. revise downward his private estimate of the value of the item.
To maximize net benefits in the table, it is most appropriate to use:
A. four units of the control variable, since the marginal benefit exceeds marginal cost.
B. six units of the control variable, since the marginal cost exceeds marginal benefit.
C. five units of the control variable, since net marginal benefits are zero.
D. None of the statements associated with this question are correct.
Suppose that production for good X is characterized by the following production
function, Q = K0.5L0.5, where K is the fixed input in the short run. If the per-unit rental
rate of capital, r, is $25 and the per-unit wage, w, is $15, then the variable cost of using
81 units of capital and 9 units of labor is:
A. $2,160
B. $2,025
C. $135
D. There is insufficient information to determine the variable costs.
Which of the following statements is true?
A. A mineral rights auction is not the same as a common-value auction.
B. An auctioneer is always indifferent between different kinds of auctions.
C. The Dutch and first-price, sealed-bid auctions are strategically equivalent.
D. An English auction always yields lower expected revenues than a second-price,
sealed-bid auction.
The total earnings of a worker are represented by E = 150 + $12(24 – L), where E is
earnings and L is the number of hours of leisure. How much will the worker earn if he
takes 16 hours of leisure per day?
A. $96
B. $246
C. $278
D. $342