midterm - Winter 2005 Prof. Cai Econ 106G: Midterm Exam...

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1 Winter 2005 Prof. Cai Econ 106G: Midterm Exam 10:20-11:50 Friday, February 11, 2005 The midterm exam consists of THREE questions, with total points of 100. Q1 and Q2 account for 30 points each, and Q3 accounts for 40 points. You have one and half hour to work on them. Optimally use your time. Read each question very carefully, clearly write down each step, and mark your answers. Good luck! 1.(30 points) In a market there are three firms. The total market demand is given by 100 p Q =− , where 123 Qqq q =++ . All three firms have a constant marginal cost of 10. Firm 1 chooses its quantity 1 q first. After observing 1 q , firms 2 and 3 make their quantity choices simultaneously. (a) Derive the best responses for firms 2 and 3. For any given 1 q , derive the Cournot equilibrium for the subgame where firms 2 and 3 make their quantity choices simultaneously. (15 points) (b) Derive firm 1’s optimal quantity. How much will firm 2 and firm 3 produce in equilibrium? What are the profits of the three firms in equilibrium? (15 points). 2. (30 points) Suppose there are 4 people in a committee whose policy positions are represented as from the far left to the far right, 1, 2, 3, and 4. Accordingly we call them committee member/player 1, 2, 3, or 4. There is an election for the position of committee
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This note was uploaded on 05/26/2009 for the course ECON 106 taught by Professor Cai during the Winter '04 term at UCLA.

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midterm - Winter 2005 Prof. Cai Econ 106G: Midterm Exam...

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