Firm 1 and firm 2 compete in a Cournot oligopoly in homogeneous goods. Firm 1 is a domestic firm, that the government would like to favour. They can either give firm 1 a per unit subsidy or impose a per unit tax on firm 2. O a. We do not have enough information to compare consumer surplus under the two policies. Ⓒ b. Consumer surplus will be higher under the policy which gives firm 1 a per unit subsidy. O c. Consumer surplus will be higher under the policy which imposes a per unit tax on firm 2. O d. Consumer surplus will be the same under both policies.

Firm 1 and firm 2 compete in a Cournot oligopoly in homogeneous goods. Firm 1 is a domestic firm, that the government would like to favour. They can either give firm 1 a per unit subsidy or impose a per unit tax on firm 2. O a. We do not have enough information to compare consumer surplus under the two policies. Ⓒ b. Consumer surplus will be higher under the policy which gives firm 1 a per unit subsidy. O c. Consumer surplus will be higher under the policy which imposes a per unit tax on firm 2. O d. Consumer surplus will be the same under both policies.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Assume there are two firms, firm A and B, engaged in Cournot competition. The industry demand curve is given by P = 60-Q, where Q = QA+QB denotes industry output. Each firm faces a marginal cost of production equal to $30. In equilibrium, what will be the output level of firm A? O O O O 10 20 30 40
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Price and cost (dollars per unit) Pi P₂ P3 MR S=MC Q₂ Q3 Quantity (units per hour) Which of the following is true? In the above figure, if the market is O a. perfect competition, output will beQ3 and price will beP3. O b. a monopoly, output will beQ1 and price will beP3. O c. a monopoly, output will beQ3 and price will beP3 O d. perfect competition, output will beQ1 and price will beP1.
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