List of top Microeconomics Questions on Demand analysis

There are two firms in an industry producing a homogeneous product. The market demand function is given by \( P = 1 - (q_1 + q_2) \), where \( q_1 \) and \( q_2 \) are the output levels of Firm 1 and Firm 2, respectively. Firm 1’s cost function is common knowledge and equals zero. Firm 2’s cost function is private information. Firm 1 believes that Firm 2’s cost function is \( 0.5q_2 \) with probability 0.5 and that Firm 2’s cost function is \( 0.25q_2 \) with probability 0.5. The firms choose their quantities simultaneously. Let \( q_1^* \) denote the quantity produced by Firm 1 in the Bayesian Nash equilibrium of this game. Then, the value of \( 24q_1^* \) is _____________ (round off to one decimal place).
The inverse demand function for a monopolist is given by \( P = 100 - kQ \), where \( P \) is the unit price of the good, \( Q \) is the quantity and \( k \) is a constant. The cost function facing the monopolist is given as \( C(Q) = 50 + 2Q(1 + Q) \). If the profit maximizing output is 7, the maximum profit is ________________ (in integer).
For a closed economy with no government expenditure and taxes, the aggregate consumption function (\(C\)) is given by: \[ C = 100 + 0.75 \, Y_d \] where \( Y_d \) is the disposable income. If the total investment is 80, the equilibrium output is ____________ (in integer).
Consider a three-firms oligopoly market with a linear demand function given by \( P = 25 - Q \), where \( P \) is the unit price and \( Q \) is the total quantity supplied. The total quantity \( Q = q_1 + q_2 + q_3 \), where \( q_i \) is the output from the \( i^{th} \) firm with \( i = 1,2,3 \). The total cost (TC) curve of firm \( i \) is given by \( TC_i = \alpha_i + 5q_i \), where \( \alpha_i \)'s are positive real numbers. Assuming a Cournot solution exists, the value of \( Q \) is:
There are two firms in an industry producing a homogeneous product. The market demand function is given by \( P = 1 - (q_1 + q_2) \), where \( q_1 \) and \( q_2 \) are the output levels of Firm 1 and Firm 2, respectively. Firm 1’s cost function is common knowledge and equals zero. Firm 2’s cost function is private information. Firm 1 believes that Firm 2’s cost function is \( 0.5q_2 \) with probability 0.5 and that Firm 2’s cost function is \( 0.25q_2 \) with probability 0.5. The firms choose their quantities simultaneously. Let \( q_1^* \) denote the quantity produced by Firm 1 in the Bayesian Nash equilibrium of this game. Then, the value of \( 24q_1^* \) is _____________ (round off to one decimal place).

Consider the following statements:
Statement 1: The new classical policy ineffectiveness proposition asserts that, systematic monetary policy and fiscal policy actions that change aggregate demand will not affect output and employment even in short run.
Statement 2: According to Real Business Cycle (RBC) model, the aggregate economic variables are the outcomes of the decisions made by many individual agents acting to maximize their utility subject to production possibilities and resource constraints.

The inverse demand function for a monopolist is given by \( P = 100 - kQ \), where \( P \) is the unit price of the good, \( Q \) is the quantity and \( k \) is a constant. The cost function facing the monopolist is given as \( C(Q) = 50 + 2Q(1 + Q) \). If the profit maximizing output is 7, the maximum profit is ________________ (in integer).

For a closed economy with no government expenditure and taxes, the aggregate consumption function (\(C\)) is given by: \[ C = 100 + 0.75 \, Y_d \] where \( Y_d \) is the disposable income. If the total investment is 80, the equilibrium output is ____________ (in integer).

The demand function is given as \( \log Q = \log A + 0.5 \log P \), where \( Q \) is quantity, \( P \) is the unit price of the good and \( A \) is a positive real number. The own price elasticity of demand is: