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Unformatted text preview: ˇ Copiˇ c, Ec101, Fall 2010, Practice Midterm 2, 11/22/2010, Key. You will notice several corrections (I put a 4 in figure 2 where should be a 5 - the corrections are based on the way figure 2 is now, and not what i wanted to do). There was also a mistake in my answer to question 3. I apologize for these mistakes – it was a practice test, so I hope it was useful for study. 1.b. Derive the monopolist quantity of production, the duopoly quantity under price and quantity competition. 2. d. Derive the monopolist profit, and note that he would only improve the produc- tion if the difference in profits is larger than f . The expression in d. follows by using a 2- b 2 = ( a + b )( a- b ). 3. d. CORRECTION (the answer is (d) and not (c)). Derive the duopoly profits of the firms: if f is in the right range, relative to c and c , then it would make sense for one firm to improve production as long as the other does not (in that case, there are 2 equilibria- one firm improves its production, and the other doesn’t, and vice versa); none of the other...
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This note was uploaded on 09/05/2011 for the course ECON 101 taught by Professor Buddin during the Fall '08 term at UCLA.
- Fall '08