(c)(3%) What's the firm's producer surplus under the two-block tariff in part b?

(a) \( (4\%) \) What are the Cournot equilibrium quantities and price in this market?

(b)(3%) What would be the equilibrium price in this market if the two firms acted as a profit-maximizing cartel?

(c) \( (6\%) \) What's the Stackelberg equilibrium quantity for each firm? What's the market price?

(d)(4%) What's the profit for each firm?

(a) \( (3\%) \) What is the size of the surplus created by the price floor?

(b)(3%) Assuming the most efficient producers are active, what's the deadweight loss due to the price floor?

(c)(6%) Assuming the least efficient producers are active, what's the producer surplus (PS) under the price floor? What's the deadweight loss due to the price floor?

8. Consider a market of risk-averse decision makers, each with a utility function U = √I. Each decision maker has an income of $90,000, but faces the possibility of a catastrophic loss of $50,000 in income. Each decision maker can purchase an insurance policy that fully compensates her loss. This insurance policy has a cost of $11,600. Suppose each decision maker potentially has a different probability q of experiencing the loss.(6%) What is the smallest value of q so that a decision maker purchases insurance?

(a)(5%) What is the compensating variation when \( P_{x} \) increases from \( \frac{1}{3} \) to \( \frac{1}{2} \)?

(b)(5%) What is the equivalent variation when \( P_{x} \) increases from \( \frac{1}{3} \) to \( \frac{1}{2} \)?

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