1. Demand in an industry is Q=10-p. Two duopolists compete in output (Cournot competition)
with equal constant marginal cost at 1, i.e. MC1 = MC2 = 1.
a. Find and draw the reaction functions of the firms.
Eco 380, Spring 2015, Answers to Assignment 4
1. (a) Assume the manufacturer charges a price of w.
Set MR = MC for the retailer. We get 600 10Q = w. This is the demand curve that
the manufacturer faces.
Eco 380, Spring 2015, Answers to Assignment 3
1. Plot the AC curves. Industry Bs AC curve is always decreasing whereas industry
As is U-shaped. Therefore Industry B makes larger firms more efficient for any level
Eco 380, Spring 2015, Answers to Assignment 1
1. Consider a monopolist which has the cost function: C(Q) = 100 + 4*Q + 2*Q2
This implies that the marginal cost function is: MC(Q) = 4 + 4*Q
Consumer Demand is
Question 1. Consider an infinitely repeated Cournot duopoly of homogeneous products with
marginal cost c=30 and inverse demand function P = 150-Q, where Q=q1+q2. Assume discount
factor <1 and the market will c
PRN Ch 15
The purpose of the market definition is to identify
the sellers and buyers who establish the price for
the product in the area
Define market for product
Define geographical market
No clear answer
PRN Ch 1
Provides you an understanding of the structure of product markets
Combines the theory and practice by going through empirical exercises
and antitrust cases
How different market structure
1. Assume that the manufacturing of cellular phones is a perfectly competitive industry. The market
demand for cellular phones is described by a linear demand function QD = (6000-50P)/9. There are 50
Efficiency & Technical Progress
PRN Ch 2
Perfect Competition (PC)
A firm in PC is a price taker
No influence on the price at which the good is sold
Faces horizontal demand curve at market price p
PC may arise because
1. A firm produces car, qc, with input price w. Its costs are given by C(qc;w) = 50qc+60w(1/2)qcqc.
a. Provide the measure of economies of scale for this cost function.
b. Compute the measure of economies of s
Eco 380, Spring 2015, Answers to Assignment 2
1. (a) In a Bertrand equilibrium firms set P=MC. So the equilibrium here is (10, 10).
(b) At a price of $10, consumers purchase 4500 units.
CS = * 4500 * (100