Question

1. Consider a rent seeking environment involving a monopoly and consumers. The normal outcome is that the _______ willing to pay more to influence behavior, and the _______ usually successful in influencing government behavior.

Group of answer choices

monopoly is, consumers are

consumers are, consumers are

consumers are, the monopoly is

monopoly is, monopoly is

2. Assume the inverse demand function for a Bertrand oligopoly is P = 500 – Q/5, and that the firm’s total cost function is TC = 400 + 200Q. What is the firm’s profit maximizing output?

Group of answer choices

1,500

800

750

1,200

1,250

3.Assume the following occurs in a market: consumers expect a lower price; there is an increase in the price of a complement; there is an increase in the number of firms; and there is decrease in government regulation. Which of the following correctly summarizes the outcome?

Group of answer choices

a.The equilibrium price will decrease, but any change in the equilibrium quantity is uncertain.

b.The equilibrium price will decrease, but the equilibrium quantity will remain the same.

c.None of the choices shown is correct.

d.The equilibrium quantity will increase, but any change in the equilibrium price is uncertain.

e.No predictions can be made with the information.

Answer 1

0 d) monopoly monopoly Monopoly are usually successful in influencing the behauiour of government they are willing and at to pay more to Influence behansione P= 500 0/5 TC = 400 + 200Q Me= 200 (Bertrand condition) P = MC soo = 2010 Thus, ophion A) 1500 is Comeet ansever. LUUPULLIU Q 300 (5) 1500 = Q Scanned by TapScanner

As consumers expect a lower price, they U demand more If there is a Increase in price of complement, as demand for gwent good decreases Increase in no of firms leads to increase in supply Decrease bo good regulation alss leads t5 Inwesas possible graphs axe as follows: P1 e S ای Q = 0 So, we con conclude that opsion a) oquilibrium price will decrease but any change in equilibrum quantity is uncertam l may Increase or remain same) Thus, option a) is correct. Scanned by TapScanner