4/10/25, 1:49 PM An Introduction to Microeconomics - - Unit 15 - Week-12
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Assignment not submitted Due date: 2025-04-16, 23:59 IST.
If already 1) In a duopolistic market, each firm decides its level of output on the assumption that 1 point
registered, click the other firm keeps its output constant. The reaction functions resulting from this
to check your behaviour are:
q2
payment status q 1 = 40 −
2
q1
q 2 = 55 −
3
Course
where, qi = output of firm i, i = 1,2. Find the equilibrium level of output of firm 1 (q1 ).
outline
14
About
16
NPTEL ()
15
How does an 11
NPTEL
online 2) In a duopolistic market, each firm decides its level of output on the assumption that 1 point
course the other firm keeps its output constant. The reaction functions resulting from this
work? () behaviour are:
Week 0 () q 1 = 40 −
q2
Week 01 () q1
q 2 = 55 −
3
where, qi = output of firm i, i = 1,2. Find the equilibrium level of output of firm 2 (q2 ).
Week 02 ()
25
Week 03 () 40
50
Week-04 ()
30
Week 05 ()
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4/10/25, 1:49 PM An Introduction to Microeconomics - - Unit 15 - Week-12
3) An established company has been the sole provider of services in a small market. A 1 point
Week-06 ()
new company has decided to open to compete with the established company. Both
companies face an issue of what to do about prices. Below you see the different payoff amounts
Week-07 ()
facing each company depending on whether they choose to keep the current price
on the market or to choose a lower price. Which of the following is a Nash equilibrium?
Week-08 ()
Week -09 ()
Week-10 ()
Week -11 ()
Scenario 2
Week-12 () Scenario 1
Lecture-120
Scenario 4
Profit Scenario 3
Maximization
and Returns to 4) Consider the diagram below. What price will the monopolist charge? 1 point
Scale (unit?
unit=179&less
on=180)
Lecture-121
Short Run
Supply Vs.
Long Run
Supply (unit?
unit=179&less
on=181)
Lecture-122
Long Run
Equilibrium
and Supply
Function (unit?
unit=179&less
on=182)
Lecture-123
Introduction to
Monopoly
(unit?
unit=179&less
on=183) A
C
Lecture-124
Marginal F
Revenue of B
the Monopolist
(unit?
5) In a perfectly competitive industry with identical firms, the long-run market supply 1 point
unit=179&less *
on=184)
curve is perfectly elastic at price P . Which of the following is not necessarily true in
long-run equilibrium?
Lecture-125
Monopoly: All firms earn zero economic profit.
Price Elasticity
Each firm produces at the minimum point of its long-run average cost (LRAC) curve.
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4/10/25, 1:49 PM An Introduction to Microeconomics - - Unit 15 - Week-12
of the Demand The number of firms in the industry is fixed.
and MR (unit?
unit=179&less
Market supply equals market demand at price P*.
on=185)
6) A monopolist faces a downward-sloping demand curve and sets output where 1 point
Lecture-126 marginal revenue (MR) equals marginal cost (MC). Which of the following statements is
Profit correct regarding the relationship between marginal revenue and the price elasticity of demand?
Maximization
for the If demand is unit elastic, marginal revenue is positive.
Monopolist Marginal revenue is always equal to price times the inverse of elasticity.
(unit?
Marginal revenue is negative when demand is elastic.
unit=179&less
on=186) Marginal revenue is zero when the absolute value of price elasticity of demand is equal to
1.
Lecture-127
Inverse
Elasticity
7) A monopolist sets prices according to the Inverse Elasticity Pricing Rule, given by: 1 point
Pricing Rule
P −M C 1
(unit? =
P |E d |
unit=179&less
on=187)
Where P is the price, MC is marginal cost, and Ed is the price elasticity of demand (in
Lecture-128 absolute value). Which of the following statements must be true if the monopolist is
Profit profit-maximizing and faces a linear demand curve with constant marginal cost?
Maximization
for the
Monopolist The greater the price elasticity of demand (in absolute value), the higher the Lerner Index
through Graph P −M C
( ) .
(unit? P
unit=179&less When the monopolist sets a price such that P=2⋅MC, the elasticity of demand must be
on=188) exactly 2.
Lecture-129 The monopolist will never operate on the inelastic portion of the demand curve in long-
No Supply run equilibrium.
Function for The Lerner Index remains constant regardless of elasticity if marginal cost is constant.
Monopoly
(unit?
8) A monopolist engages in third-degree price discrimination between two markets A 1 point
unit=179&less
on=189)
and B. The demand in market A is less elastic than in market B. Assuming the
monopolist maximizes total profit and marginal cost is constant across both markets, which of
Lecture-130 the following statements is necessarily true?
Monopoly:
Comparative The monopolist charges the same price in both markets since marginal cost is constant.
Statics (unit?
The monopolist charges a higher price in market B than in market A.
unit=179&less
on=190) The monopolist charges a higher price in market A and sells more units in market A.
The monopolist charges a higher price in market A than in market B.
Lecture-131
Imposition of
the Tax on the 9) Consider a market served by a profit-maximizing monopolist with no price 1 point
Monopolist discrimination. Assume linear demand and constant marginal cost. Which of the
(unit? following statements regarding the welfare implications of monopoly is correct?
unit=179&less
on=191) Monopoly leads to a higher consumer surplus and lower producer surplus compared to
perfect competition.
Lecture-132
Welfare Total surplus under monopoly equals that under perfect competition since monopoly
Effects of captures the deadweight loss as profit.
Monopoly
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4/10/25, 1:49 PM An Introduction to Microeconomics - - Unit 15 - Week-12
Pricing (unit? Monopoly results in deadweight loss because price is set above marginal cost, reducing
unit=179&less
the total surplus relative to perfect competition.
on=192)
The deadweight loss from monopoly arises because monopolists produce beyond the
Lecture-133 efficient level of output to maximize profits.
Price
Discrimination 10) Consider the following statements about oligopoly models under standard 1 point
(unit? assumptions of identical firms and homogeneous products:
unit=179&less
on=193) I. In Cournot competition, firms choose quantities simultaneously, and the resulting price
Lecture-134 is determined by market demand.
Monopoly: II. In Bertrand competition, with identical products and constant marginal cost, firms earn
Example (unit? positive economic profits in equilibrium.
unit=179&less III. In the Stackelberg model, the follower firm produces more than the leader in
on=194) equilibrium.
Lecture-135
IV. The Bertrand model can lead to a perfectly competitive outcome, even with only two
Responses firms.
from Policy
Makers (unit? Which of the above statements is/are correct?
unit=179&less
on=195)
I and II only
Lecture-136
Introduction to I and IV only
Oligopoly I, III, and IV only
(unit?
I and III only
unit=179&less
on=196) You may submit any number of times before the due date. The final submission will be
considered for grading.
Lecture-137
Nash Submit Answers
Equilibrium
(unit?
unit=179&less
on=197)
Lecture-138
Cournot Model
of Duopoly
(unit?
unit=179&less
on=198)
Lecture-139
Stackelberg
Model of
Duopoly (unit?
unit=179&less
on=199)
Lecture-140
Bertrand
Model of
Duopoly (unit?
unit=179&less
on=200)
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4/10/25, 1:49 PM An Introduction to Microeconomics - - Unit 15 - Week-12
Lecture-141
Market
Environment:
Comparison
Table (unit?
unit=179&less
on=201)
Quiz: Week
12:
Assignment
12
(assessment?
name=279)
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