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Econ 302 Exam 4 FA07

# Econ 302 Exam 4 FA07 - Exam 4 Ec302 secs 7 and 13 Rashid...

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Exam 4 Ec302, secs 7 and 13. Rashid. Part 1. You may answer as many questions as you wish in either Part 1 or Part 2 but your total cannot exceed 50. (There are about 15 bonus questions--- in case you missed a topic, or there is ambiguity in the question etc) No calculators allowed Multiple Choice Identify the choice that best completes the statement or answers the question. ____ 1. Suppose that the duopolists Carl and Simon face a demand function for pumpkins of Q = 16,800 – 800P, where Q is the total number of pumpkins that reach the market and P is the price of pumpkins. Suppose fur- ther that each farmer has a constant marginal cost of \$1 for each pumpkin produced. If Carl believes that Si- mon is going to produce Q s pumpkins this year, then the reaction function tells us how many pumpkins Carl should produce in order to maximize his profits. Carl’s reaction function is R C ( Q s ) = a. 16,800 – 800 Q s . b. 8,000 – . c. 16,800 – 1,600 Q s . d. 4,000 – . e. 12,000 – Q s . ____ 2. If the inverse demand for bean sprouts were given by P ( Y ) = 300 – 3 Y and the total cost of producing Y units for any firm were TC ( Y ) = 30 Y and if the industry consisted of two Cournot duopolists, then in equilibrium each firm’s production would be a. 45 units. b. 22.50 units. c. 30 units. d. 15 units. e. 25 units. ____ 3. Suppose that Grinch and Grubb go into the wine business in a small country where wine is difficult to grow. The demand for wine is given by p = \$360 – .2 Q , where p is the price and Q is the total quantity sold. The in- dustry consists of just the two Cournot duopolists, Grinch and Grubb. Imports are prohibited. Grinch has con- stant marginal costs of \$45 and Grubb has marginal costs of \$15. How much Grinch’s output in equilibrium? ____ 4. Suppose that the market demand curve for bean sprouts is given by P = 1,480 – 2 Q , where P is the price and Q is total industry output. Suppose that the industry has two firms, a Stackleberg leader and a follower. Each firm has a constant marginal cost of \$80 per unit of output. In equilibrium, total output by the two firms will be

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____ 5. A city has two major league baseball teams, A and B . The number of tickets sold by either team depends on the price of the team’s own tickets and the price of the other team’s tickets. If team A charges P a for its tickets and team B charges P b for its tickets, then ticket sales, measured in hundreds of thousands per season, are 10 – 2 P a + P b for team A and 5 + P a – 2 P b for team B . The marginal cost of an extra spectator is zero for both teams. Each team believes the other’s price is independent of its own choice of price, and each team sets its own price so as to maximize its revenue. What price do they charge per ticket?
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Econ 302 Exam 4 FA07 - Exam 4 Ec302 secs 7 and 13 Rashid...

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