1)
Explain the logic underpinning the multi-plant monopoly profit maximization analysis. Also discuss how this may apply to optimization for OPEC, and what the limitations of its applicability may be. Be thorough.

2)
Explain how asset specificity may affect the determination of market structure according to transaction cost economics. Give examples of the six costs that are important to market structure determination according to transactions cost economics.

3)
You are operating in a market for natural gas where you have just one competitor. In this market the demand for natural gas is represented by P = 350 – 2(q1 + q2); you are producer 2. The cost functions for the two participants are C1 = 1.5q12 and C2 = q22; these are quantities squared. Derive the reaction functions for each participant and determine what the profit maximizing output levels will be when the market is in equilibrium. Also, determine the equilibrium market price and your profit; remember, you are producer 2. Discuss the result, that is, why are the relative equilibrium production levels the way they are?

4)
Backstop technologies are:
a. technologies that seek energy from other planets
b. All of the above
c. currently available at a reasonable price
d. technologies that provides energy for free
e. usually environmentally friendly technologies, which are currently more expensive to develop than standard technologies

5)
What caused the formation of OPEC in 1960?
a. Companies reduced prices and thus reduces tax payments. OPEC was trying to keep taxes up.
b. Oil prices have been quite unstable before OPEC took over control of the markets in 1960.
c. The break up of the so called Seven Sisters. The seven sisters were the large Anglo American Dutch companies Standard Oil of New Jersey, Royal Dutch/Shell, Anglo-Persian, Standard of California, Mobil, Texaco, Gulf.
d. Aramco, NIOC, CNPC, Pertamina, Petrobras, Pdvsa, Pemex wanted to form a cartel.

6)
The three factors influencing transaction costs are:
a. Bounded rationality, opportunism and the invisible hand
b. Uncertainty, asset specificity and frequency of transactions
c. Spot market, bilateral governance and the unified governance
d. OPEC, Russia and the World Bank
e. All of the above

1) Explain the logic underpinning the multi-plant monopoly profit...