Suppose a single firm has constant marginal cost and faced the demand curve 
a. Illustrate in this graph how a monopolist who cannot price discriminate would price this good. What is the monopoly price and quantity?
b. Suppose two firms with the same marginal cost as the monopolist operated in this market instead. Suppose quantity is the strategic variable and the two firms simultaneously choose quantity. On a graph with firm 1's output on the horizontal and firm 2's output on the vertical, illustrate firm 2's best response function with numerical labels for each intercept.
c. Add firm 1's best response function and determine the Nash equilibrium quantities.
d. What's the equilibrium price resulting from the quantities you determined in (c)?
e. What would be the equilibrium price if the strategic variable for the firms were price instead?
What will be an ideal response?
b.
c.
d. The equilibrium price is 60. (This is just read off the demand curve for output of 80.)
e. This would be Bertrand competition under which price is equal to MC -- i.e. p=20 and total output is 120.
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All of the following are problems associated with maintaining a cartel except
a. cartels are illegal. b. a large amount of information is needed to coordinate a cartel. c. profits are not maximized by a cartel so it will evolve into a monopoly. d. each member of the cartel has an incentive to "chisel" by expanding output.
If you lost 50 percent on $100 worth of stock in a 3x margin account, then you would lose:
A. $600. B. $300. C. $50. D. $150.
Recall the Application about the factors involved in causing recessions, and the causes of recessions in the United States from 1893 to 1990 to answer the following question(s).According to this Application, the recession of 1929 was primarily due to:
A. a decrease in aggregate demand caused by the private sector. B. a decrease in aggregate demand resulting from decreases in government spending. C. a decrease in aggregate supply due to rising gold prices. D. an increase in aggregate supply resulting from European bank collapses.
Refer to the information provided in Figure 6.1 below to answer the question(s) that follow.
Figure 6.1Refer to Figure 6.1. Assume Tom's budget constraint is AC. He will have leftover income if he purchases the bundle represented by point
A. A. B. B. C. E. D. D.