Suppose two identical Cournot duopolist firms operate at zero marginal cost (MC=0)

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Suppose two identical Cournot duopolist firms operate at zero marginal cost (MC=0). Themarket demand is p = a – bQ. Firm 1’s best-response function isA. q1 = a/2b.B. q1= a/b.C. q1= (a – bq2)/2b.D. q1= (a – 2bq2)/2b.7. Scenario Spring Water: Suppose a stream is discovered whose water has remarkable healingpowers. You decide to bottle the liquid and sell it. The market demand curve is linear and isgiven as follows: P = 30 – Q The marginal cost to produce this new drink is $3 (MC = 3) forevery firm in this market.Refer to Scenario Spring Water. What will be the price of this new drink if the industry is aCournot duopoly of two identical firms?A. $12B. $9C. $13.50D. $38. Refer to Scenario Spring Water. What will be the price of this new drink in the long run if theindustry is a Bertrand duopoly of two identical firms?A. $9B. $3C. $12D. $13.509. In the simplest version of the Cournot model, we assume the firmsA. set price independently and simultaneously.B. are not in a Nash equilibrium.C. set quantities independently and sequentially.D. set quantities independently and simultaneously.10. If a firm is selling a quantity that is not on its best-response curve itA. is in a Nash equilibrium.B. will want to change its behavior.C. will go out of business.D. is operating in a duopoly.14. In a Bertrand model with identical productsA. price and quantity are the same as in a duopoly.B. price and quantity are the same as in a monopoly.C. price is the same as in a competitive market equilibrium.D. pirce is between the monopoly price and the duopoly price.20. Suppose a monopolistically competitive industry evolved into a perfectly competitiveindustry. Which of the following statements is correct? A. The industry would produce at decreasing returns to scale.B. This industry would produce the same level of output at lower prices in the long run thanbefore the change.C. Elasticity of demand for the firm’s product would remain the same after this change occurred.D. The industry would produce more output and charge a lower price after the change.