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ARE 100B - Midterm 2 Key, version A

# ARE 100B - Midterm 2 Key, version A - ARE lOOb M Whitney...

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ARE lOOb M. Whitney Spring 2009 YOURNAME: ____________________________________ _ SECOND MIDTERM This exam has two sections. Section A consists of 10 multiple-choice questions, each worth 10 points .. Total possible points in Section A = 100. Section B consists of 5 problems each worth 30 points. Partial credit is given for correct approach even if final answer is incorrect, so show your work! Total possible points in Section B = 150. Total points in this exam: 250

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SECTION A Multiple choice--I 0 points each I. Suppose two fIrms, A and B, have formed a cartel. Their cost functions are: Tea = 10 qa + .1 qa"2 TCb = 14 qb + .05 qb"2 If you observe that fInn A is producing 50 units, what else do you expect is true? a. Price is \$20. b. Finn A's ATC is \$20. @Finn B's ATC is \$17. d. All of the above. e. None of the above. 2. Implicit cooperation among firms is a characteristic of which model below? a monopolistic competition ® dominant finn with a competitive fringe c. ex ante competition/ex post monopoly d. all of the above. e. none of the above. 3. In which type of auction below would the practice of "sniping" be effective in helping the seller achieve a better price? a. English! American auction b. Dutch auction c. Sealed-bid auction d. On-line auction (§) None of the above. Questions 4 and 5 refer to the payoff matrix below: Player 2 Player 1 (8, 10) (4,3) (9, I) (3,2) (-4,6) (6, 7) (7, -5) (8,6) (5,3) 4. Which, if any, player has a dominant strategy in this game? a Player 1 b. Player2 c. Both players @ Neither player 5. How many Nash equilibria in pure strategies exist in this matrix? a None b.One @Two d. Three
6. What is the difference between market price under (i) Bertrand oligopoly, and (ii) perfect competition? Assume all firms produce homogeneous (not differentiated) goods.

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