Monopolistic Competition and Oligopoly

Monopolistic Competition and Oligopoly - Practice...

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Practice Questions: Chapters 6 and 7 Monopolistic Competition and Oligopoly 1. A firm operating in a monopolistically competitive market faces demand and marginal revenue curves as given below: P = 10 - 0.1Q MR = 10 - 0.2Q The firm's total and marginal cost curves are: TC = - 10Q + 0.0333Q 3 + 130 MC = -10 + 0.0999Q 2 , where P is in dollars per unit, output rate Q is in units per time period, and total cost C is in dollars. a. Determine the price and output rate that will allow the firm to maximize profit or minimize losses. b. Compute a Lerner index. 2. Suppose that the market demand for mountain spring water is given as follows: P = 1200 - Q Mountain spring water can be produced at no cost. a. What is the profit maximizing level of output and price of a monopolist? b. What level of output would be produced by each firm in a Cournot duopoly in the long run? What will the price be? c. What will be the level of output and price in the long run if this industry were perfectly competitive? 3.
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This note was uploaded on 05/04/2008 for the course BUAD 305 taught by Professor Davila during the Spring '07 term at USC.

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Monopolistic Competition and Oligopoly - Practice...

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