Multiple Choice aentify the letter of the choice that best completes the statement or answers the question. © 1. Suppose that the government imposes price regulation in the 2 firm Bertrand-location-on-a-line model of differentiated products. Which of the following statements best describes the outcome. a. Firm will choose to differentiate their products as much as possible. b. Firms will differentiated their products as little as possible. c._ Firms will behave as they would in the Hotelling model. (© Both answers b and c are correct. 15 2, ‘Biatement 1: “If rent seeking behavior is present then the efficiency loss due to monopoly is likely to be Jarge fraction of the total surplus generated in the market.” Statement 2: “It is typically casy to quantify the amount of efficiency loss due to x-inefficiency.” a, Statement 2 is true, but 1 is false (bo Statement 1 is true, but 2 is false . Both statemens are false 4. Both statements are true fo 43, The diagram below describes a monopoly. If the monopoly maximizes profit, what is the producer surplus? a) $750 y $625 cc. $400 None of the above answers are correct.Short Auswer 6. Suppose that an industry has a dominant firm with market demand equal to P= 100-4Q and cost = 16Q. If the competitive fringe bas @ supply curve where P = 200f then find the following: (i) the residual demand curve; Gi the marginal revenue curve of the residual demand curve; (i) the amount produced by the dominant firm; (iv) the amount produced by the competitive fringe; and (y) the market price, Show your work, For full credit ‘your work will need to be logically organized and easy to follow. P= loo -#@ =P G nae ~-79P Qe = ook me ame\ G A 4. Which of the following limit the use of third degree price discrimination? a. Ifthe firm can’t identify the different groups of customers, there will be a problem. b. Ifthe firm can’t prevent resal between customers, there will be a problem. c,. If the firm has no market power, there will be a problem. @.) All of the above are correct. 5, Which of the following models is equivalent to Nash equilibrium in prices? @ ‘The Bertrand model ’b. The Cournot model c, The Stackleberg model 4. None of the above models are equivalent to Nash equilibrium in prices.8, ‘Two firms are in e Cournot duopoly where the demand is P = 200 - ql - q2 and the cost for firm one = 20q1 and the cost for firm 2 is 20q2, Find the Cournot equilibrium reaction functions; the amount each firm produces and the market price. Show your work. For full credit your answer must be logically displayed and easy to follow. 1 w= (200 ~4, ~42)4, -20 Ga pr the Coo obSuppose that a monopoly faces a demand curve given by P = 1000-4Q where P is the price in dollars and Q is the quantity produced, Ifthe mozopoly’s cost function is Cost=16Q, then find the profit maximizing price and quantity, as well asthe firm’s profil. Show your work. Full credit answers must have all stages of the solution logically displayed in organized fashion. MR= 1000 -54 mcrle A+ the pref moaxmmam MR =I 4 Sy 1060 ~$@ = (6