Consider a Market Consisting of Two Firms Where the Inverse

question 22

Multiple Choice

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 $50.Based on this information,we can conclude that equilibrium price in the different oligopoly models will follow which of the following orderings?

• A) P^Bertrand < P^Stackelberg < P^Cournot < P^Collusion
• B) P^Stackelberg < P^Collusion < P^Cournot < P^Bertrand
• C) P^Collusion < P^Cournot < P^Stackelberg < P^Bertrand
• D) P^Bertrand < P^Cournot < P^Stackelberg < P^Collusion

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Definitions:

Direct Materials

Raw materials that are directly used in the production of a product and can be easily traced to the finished product.

Conversion Costs

Sum of labor costs and overhead expenses associated with the transformation of raw materials into finished goods.

First-In

Typically part of the phrase "First-In, First-Out" (FIFO), a method used to assign costs to inventory on the basis that the first items entered into inventory are the first sold.

Equivalent Units

A term used in cost accounting to denote a conversion measure that expresses the amount of work done on partially completed units in terms of fully completed units.