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mid206nans - Eco 171 Industrial Organization Second Midterm...

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Eco 171 - Industrial Organization Second Midterm Exam Name : Section: Instructions There are 6 short questions and 2 problems, each worth 1/3 of the total points. Answer in the space provided (no need to use it all.) If necessary use the back of the page. For the short questions, don’t forget to explain your answer.DONT FORGET TO WRITE DOWN YOUR NAME Part I. Short questions . 1. Consider two industries a and b. The fi rst industry has twice the number of fi rms of the second industry, but their Her fi ndahl index is the same. Can you tell which industry is more competitive in the sense that their average price markups are lower? 2. Consider game 1 played in class with the di ff erence that marginal cost is 0.2. Suppose q = 1 / 2 . Would it make sense for a fi rm to set its price equal to 1/2? Explain. 1
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3. In the Cournot model, the residual demand of a fi rm is more elastic the larger is the output of the other fi rms. True or False. Explain.
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