Suppose that two airlines are Cournot duopolists serving the Peoria-Dubuque route, and the

Suppose that two airlines are Cournot duopolists serving the Peoria-Dubuque route, and the demand curve for tickets per day is Q ? 220 − 2p (so p ? 110 − Q/2). Total costs of running a flight on this route are 1,400 ? 20q, where q is the number of passengers on the flight. Each flight has a capacity of 80 passengers. In Cournot equilibrium, each duopolist will run one flight per day and will make a daily profit of

a.$400.

b.$800.

c.$220.

d.$700.

e.$3,000.

32.Suppose that the market demand curve for bean sprouts is given by P ? 880 − 4Q, where P is the price and Q is the total industry output. Suppose that the industry has two firms, a Stackelberg 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

a.100.

b.50.

c.150.

d.200.

e.25.

33.Suppose that the market demand curve for bean sprouts is given by P ? 820 − 2Q, where P is the price and Q is the total industry output. Suppose that the industry has two firms, a Stackelberg leader and a follower. Each firm has a constant marginal cost of $20 per unit of output. In equilibrium, total output by the two firms will be

a.200.

b.100.

c.300.

d.400.

e.50.

34.There are two firms in the blastopheme industry. The demand curve for blastophemes is given by p ? 3,600 − 4q. Each firm has one manufacturing plant and each firm i has a cost function C(q_i) ? q²i, where q_i is the output of firm i. The two firms form a cartel and arrange to split total industry profits equally. Under this cartel arrangement, they will maximize joint profits if

a.and only if each firm produces 200 units in its plant.

b.they produce a total of 400 units, no matter which firm produces them.

c.and only if they each produce a total of 450 units.

d.they produce a total of 300 units, no matter which firm produces them.

e.they shut down one of the two plants, having the other operate as a monopoly and splitting the profits.

35.There are two firms in the blastopheme industry. The demand curve for blastophemes is given by p ? 4,200 − 3q. Each firm has one manufacturing plant and each firm i has a cost function C(q_i) ? q²i, where q_i is the output of firm i. The two firms form a cartel and arrange to split total industry profits equally. Under this cartel arrangement, they will maximize joint profits if

a.they produce a total of 600 units, no matter which firm produces them.

b.they produce a total of 466.67 units, no matter which firm produces them.

c.and only if they each produce a total of 700 units.

d.and only if each firm produces of 300 units in its plant.

e.they shut down one of the two plants, having the other operate as a monopoly and splitting the profits.

36.A Stackelberg leader and follower choose their outputs to maximize their own profits. Local property taxes which constitute a lump sum tax for each of them are reduced by $500 per year for the leader and by $200 a year for the follower. In consequence, the firms

a.both increase their output, with the leader increasing its output by more.

b.both increase their output, with the follower increasing its output by more.

c.increase their output by equal amounts for each firm.

d.leave their outputs unchanged.

e.There is not enough information in the question to determine what the firms will do.

37.An industry has two colluding firms that act so as to maximize total profit in the industry and then split the profits equally. Firm 1 has cost function c(y) ? 8y. Firm 2 has cost function c(y) ? y². Each firm produces an integer number of units. Market demand is given by Y(p) ? 56 − p.

a.Firm 1 should produce 10 units and firm 2 should produce 10 units.

b.Firm 1 should produce 20 units and firm 2 should produce 4 units.

c.Each firm should produce 12 units.

d.Firm 1 should produce 24 units and firm 2 should produce 2 units.

e.None of the above.

38.An industry has two colluding firms that act so as to maximize total profit in the industry and then split the profits equally. Firm 1 has cost function c(y) ? 8y. Firm 2 has cost function c(y) ? y². Each firm produces an integer number of units. Market demand is given by Y(p) ? 72 − p.

a.Each firm should produce 16 units.

b.Firm 1 should produce 32 units and firm 2 should produce 2 units.

c.Firm 1 should produce 14 units and firm 2 should produce 14 units.

d.Firm 1 should produce 28 units and firm 2 should produce 4 units.

e.None of the above.

39.An industry has two firms—a Stackelberg leader and a follower. The price of the industry output is given by P ? 36 − Q, where Q is the total output of the two firms. The follower has a marginal cost of $0. The leader has a marginal cost of $9. How much should the leader produce in order to maximize profits?

a.12

b.18

c.9

d.7

e.None of the above.

40.An industry has two firms—a Stackelberg leader and a follower. The price of the industry output is given by P ? 84 − Q, where Q is the total output of the two firms. The follower has a marginal cost of $0. The leader has a marginal cost of $21. How much should the leader produce in order to maximize profits?

a.21

b.24

c.42

d.19

e.None of the above.