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Questions › JNU › JNU SIS 2015 › Q25
2 marks, −1Microeconomics › Monopolistic competition and oligopoly › Cournot competitionHardabout 2 min

JNU SIS 2015 Question 25: Monopolistic competition and oligopoly

Suppose a home firm competes with a foreign firm in the domestic market. The two firms produce homogenous products and compete in quantities. The demand function faced by the firms is Q=200−2PQ = 200 - 2PQ=200−2P, where QQQ is the total quantity and PPP is the price. Each firm has a constant marginal cost of production given by MC=10MC = 10MC=10. In addition, the home country government imposes a per unit tariff of 10 on imports. The quantity produced by the home country, qHq_HqH​; quantity produced by the foreign firm, qFq_FqF​; and market price, PPP; are

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Suppose a home firm competes with a foreign firm in the domestic market. The two firms produce homogenous products and compete in quantities. The demand function faced by the firms is Q = 200 - 2P, where Q is the total quantity and P is the price. Each firm has a constant marginal cost of production given by MC = 10. In addition, the home country government imposes a per unit tariff of 10 on imports. The quantity produced by the home country, q_H; quantity produced by the foreign firm, q_F; and market price, P; are (A) q_F = 190/3; q_H = 190/3; P = 110/3 (B) q_F = 200/3; q_H = 140/3; P = 130/3 (C) q_F = 150/3; q_H = 160/3; P = 145/3 (D) None of the above

Monopolistic competition and oligopoly has come up 104 times in 7 exams since 2004.

What this question tests

This question is on Cournot competition, part of Monopolistic competition and oligopoly in Microeconomics.

Firms choosing quantities simultaneously, reaction curves, and equilibrium as the number of firms or costs change.

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