1. Economies of scope refers to

a. producing the related goods within one firm is cheaper than producing them separately.

b. producing unrelated goods within one firm is cheaper than producing them separately.

c. average fixed costs fall as output increases.

d. average total costs fall as output increases.

2. Consider a market consisting of two firms where the inverse demand curve is given by P = 500-2Q1 -2Q2. Each firm has a marginal cost of $100. Based on this information, we can obtain the reaction function of firm 1 is:

a. Q1 = 50-1/2Q2

b. Q1 = 100-2*Q2

c. Q1 = 100-1/2Q2

d. Q2 = 50-1/2Q1

3. Consider a market consisting of two firms where the inverse demand curve is given by P = 500 - 2Q1-2Q2. Each firm has a marginal cost of $100. Based on this information we can conclude that the

equilibrium oligopoly output under Cournot competition and Stackelberg competition would be

A. Cournot output is greater than Stackelberg leader’s output

B. Cournot output is less than Stackelberg follower’s output

C. Cournot output is less than Stackelberg leader’s output

D. Cournot output is equal to Stackelberg follower’s output

4. Which of the following is true?

a. Bertrand is a quantity-competition model.

b. In Cournot oligopoly market firms produce an identical product and engage in price ompetition.

c. In Stackelbery oligopoly markets, the follower has advantage over the leader.

d. In oligopoly market a change in marginal cost does not play a role in the competition.

e. none of the above is correct.

5. During spring break, students have an elasticity of demand for a trip to Florida of -3. How much should an airline charge students for a ticket if the price it charges the general public is $300? Assume the general public has an elasticity of -1.5.

a. $150.

b. $250.

c. $350.

d. $90.