Neco 2021 Economics Question 13

Practice objective / multiple choice question 13 from the 2021 Neco Economics examination.

Neco 2021 Economics Objective / Multiple Choice Medium Difficulty
Question 13 NECO • 2021 • ECONOMICS • objective

Two firms produce a homogeneous product. Market demand is \(P = 200 - Q\) where \(Q = q_1 + q_2\). Firm 1 has constant marginal cost \(MC_1 = 20\) and Firm 2 has constant marginal cost \(MC_2 = 40\). Assuming Cournot competition, find (i) each firm's equilibrium output, (ii) the market price, (iii) each firm's profit, and (iv) the total profit if the firms collude as a monopoly.

Answer Options

A. Cournot outputs: q1 = \frac{200}{3}, q2 = \frac{140}{3}; Market price = \frac{250}{3}; Profits: \pi1 = \frac{40000}{9}, \pi2 = \frac{19600}{9}; Collusive monopoly profit = 7,500 Naira
Correct Answer B. Cournot outputs: q1 = \frac{200}{3}, q2 = \frac{140}{3}; Market price = \frac{260}{3}; Profits: \pi1 = \frac{40000}{9}, \pi2 = \frac{19600}{9}; Collusive monopoly profit = 8,000 Naira
C. Cournot outputs: q1 = \frac{180}{3}, q2 = \frac{120}{3}; Market price = \frac{200}{3}; Profits: \pi1 = \frac{32400}{9}, \pi2 = \frac{14400}{9}; Collusive monopoly profit = 7,200 Naira
D. Cournot outputs: q1 = \frac{210}{3}, q2 = \frac{130}{3}; Market price = \frac{260}{3}; Profits: \pi1 = \frac{44100}{9}, \pi2 = \frac{16900}{9}; Collusive monopoly profit = 8,500 Naira
Correct Answer
B
Correct Option:
Cournot outputs: q1 = \frac{200}{3}, q2 = \frac{140}{3}; Market price = \frac{260}{3}; Profits: \pi1 = \frac{40000}{9}, \pi2 = \frac{19600}{9}; Collusive monopoly profit = 8,000 Naira

About This Question

This is Neco 2021 Economics Question 13. It is one of the objective questions from the 2021 Neco Economics examination.

Difficulty level: Medium .

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