Question 1

In the Cournot model, a firm maximizes profit by selecting

Accepted Answer

A) its output, assuming that other firms keep their output constant. 
B) its price, assuming that other firms keep their price constant. 
C) its output, assuming that other firms will retaliate. 
D) its price, assuming that other firms will retaliate. 
A) its output, assuming that other firms keep their output constant. 
B) its price, assuming that other firms keep their price constant. 
C) its output, assuming that other firms will retaliate. 
D) its price, assuming that other firms will retaliate.

Question 2

One criticism of the Bertrand pricing model is that

Accepted Answer

A) the model is implausible when there is product differentiation. 
B) when there is an oligopoly with no product differentiation, the model's prediction is inconsistent with reality. 
C) the model's predicted price is solely a function of demand conditions. 
D) the model's predicted price is dependent on the number of firms. 
A) the model is implausible when there is product differentiation. 
B) when there is an oligopoly with no product differentiation, the model's prediction is inconsistent with reality. 
C) the model's predicted price is solely a function of demand conditions. 
D) the model's predicted price is dependent on the number of firms.

Question 3

Which of the following conditions can help prolong the life of a cartel?

Accepted Answer

A) There are only a few firms in the market, and they all belong to the cartel. 
B) There are many firms in the market that are not members of the cartel. 
C) It is difficult to know what price any cartel member is actually charging. 
D) The cartel has no ability to punish members who cheat on the cartel. 
A) There are only a few firms in the market, and they all belong to the cartel. 
B) There are many firms in the market that are not members of the cartel. 
C) It is difficult to know what price any cartel member is actually charging. 
D) The cartel has no ability to punish members who cheat on the cartel.

Question 4

An example of a market where a Bertrand model would be plausible is the market for

Accepted Answer

A) oil. 
B) wheat. 
C) beer. 
D) sugar. 
A) oil. 
B) wheat. 
C) beer. 
D) sugar.

Question 5

Mergers may result in

Accepted Answer

A) anticompetitive behavior. 
B) more efficient production. 
C) fewer firms in a market. 
D) All of the above. 
A) anticompetitive behavior. 
B) more efficient production. 
C) fewer firms in a market. 
D) All of the above.

Question 6

The specific oligopolistic model used in a market

Accepted Answer

A) depends on the pricing structure of the good or service sold. 
B) depends on the characteristics of the market, such as time horizon for competition. 
C) is usually a Cournot model, unless cartels are illegal. 
D) All of the above. 
A) depends on the pricing structure of the good or service sold. 
B) depends on the characteristics of the market, such as time horizon for competition. 
C) is usually a Cournot model, unless cartels are illegal. 
D) All of the above.

Question 7

Minimum efficient scale refers to the lowest level of output at which

Accepted Answer

A) the firm can earn a profit. 
B) average cost is minimized. 
C) the firm will operate. 
D) the average cost curve is downward sloping. 
A) the firm can earn a profit. 
B) average cost is minimized. 
C) the firm will operate. 
D) the average cost curve is downward sloping.

Question 8

A monopolistically competitive firm has the free entry characteristics of ________ and the price setting characteristics of ________.

Accepted Answer

A) an oligopolistic market; perfect competition 
B) perfect competition; a monopoly 
C) a monopolistic market; a cartel 
D) perfect competition; perfect competition 
A) an oligopolistic market; perfect competition 
B) perfect competition; a monopoly 
C) a monopolistic market; a cartel 
D) perfect competition; perfect competition

Question 9

Firms in a monopolistically competitive market face ________ demand curves and earn ________ economic profits in the long run.

Accepted Answer

A) downward-sloping; zero 
B) downward-sloping; positive 
C) horizontal; zero 
D) horizontal; negative 
A) downward-sloping; zero 
B) downward-sloping; positive 
C) horizontal; zero 
D) horizontal; negative

Question 10

The Cournot model assumes that firm A maximizes its profit, holding firm B's output constant.

Accepted Answer

A) True 
 B)False

Question 11

Firms seek to differentiate their product

Accepted Answer

A) to avoid state and federal regulation. 
B) to create an illusion of value. 
C) to strengthen their demand and to make it more inelastic. 
D) to strengthen their demand and to make it more elastic. 
A) to avoid state and federal regulation. 
B) to create an illusion of value. 
C) to strengthen their demand and to make it more inelastic. 
D) to strengthen their demand and to make it more elastic.

Question 12

-The above figure shows the reaction functions for two pizza shops in a small isolated town. Collusion would result in

Accepted Answer

A) each firm producing 25 pizzas. 
B) each firm producing 40 pizzas. 
C) the firms splitting the production of 100 making 50 pizzas each. 
D) firm A monopolizing the market by selling 50 pizzas. 
A) each firm producing 25 pizzas. 
B) each firm producing 40 pizzas. 
C) the firms splitting the production of 100 making 50 pizzas each. 
D) firm A monopolizing the market by selling 50 pizzas.

Question 13

Two identical firms that share a market and produce a homogeneous good will find the Bertrand Oligopoly LEAST attractive because

Accepted Answer

A) Cartels generate the highest joint profit. 
B) a Cournot Oligopoly will generate more profit than a Bertrand Oligopoly. 
C) they want to avoid a price war that leads to profit erosion and P = MC. 
D) All of the above. 
A) Cartels generate the highest joint profit. 
B) a Cournot Oligopoly will generate more profit than a Bertrand Oligopoly. 
C) they want to avoid a price war that leads to profit erosion and P = MC. 
D) All of the above.

Question 14

A merger between a firm and one of its suppliers would be called

Accepted Answer

A) a horizontal merger. 
B) a vertical merger. 
C) an anti-trust violation. 
D) a Cournot merger. 
A) a horizontal merger. 
B) a vertical merger. 
C) an anti-trust violation. 
D) a Cournot merger.

Question 15

If differentiation makes the market demand curve less elastic, then

Accepted Answer

A) consumer surplus increases. 
B) the market structure changes into a monopoly. 
C) price markup over marginal cost is lower than when products are identical. 
D) price markup over marginal cost is higher than when products are identical. 
A) consumer surplus increases. 
B) the market structure changes into a monopoly. 
C) price markup over marginal cost is lower than when products are identical. 
D) price markup over marginal cost is higher than when products are identical.

Question 16

If a firm's marginal costs ________, then ________.

Accepted Answer

A) fall; its best-response curve shifts 
B) rise; it is forced out of the oligopoly 
C) rise; its output increases 
D) fall; its price falls 
A) fall; its best-response curve shifts 
B) rise; it is forced out of the oligopoly 
C) rise; its output increases 
D) fall; its price falls

Question 17

Monopolistically competitive firms face downward sloping residual demand curves because these firms

Accepted Answer

A) have relatively few rivals (compared to competition). 
B) sell differentiated products. 
C) A and/or B. 
D) None of the above. 
A) have relatively few rivals (compared to competition). 
B) sell differentiated products. 
C) A and/or B. 
D) None of the above.

Question 18

Suppose two Cournot duopolist firms operate at zero marginal cost. The market demand is p = a - bQ. Firm 1's best-response function is

Accepted Answer

A) q1 = (a - bq2)/2b. 
B) q1 = (a - 2bq2)/2b. 
C) q1 = a/b. 
D) q1 = a/2b. 
A) q1 = (a - bq2)/2b. 
B) q1 = (a - 2bq2)/2b. 
C) q1 = a/b. 
D) q1 = a/2b.

Question 19

-The above figure shows the reaction functions for two pizza shops in a small isolated town. Firm B producing 100 pizzas and firm A producing 50 pizzas is NOT a Cournot equilibrium because

Accepted Answer

A) Cournot duopolists agree to share the market equally. 
B) firm B is not on its best-response function. 
C) firm A is not on its best-response function. 
D) neither firm is on its best-response function. 
A) Cournot duopolists agree to share the market equally. 
B) firm B is not on its best-response function. 
C) firm A is not on its best-response function. 
D) neither firm is on its best-response function.

Question 20

Mergers often increase profit by

Accepted Answer

A) producing economies of scale. 
B) producing economies of scope. 
C) increasing efficiency of the firm. 
D) All of the above. 
A) producing economies of scale. 
B) producing economies of scope. 
C) increasing efficiency of the firm. 
D) All of the above.

In the Cournot model, a firm maximizes profit by selecting

One criticism of the Bertrand pricing model is that

Which of the following conditions can help prolong the life of a cartel?

An example of a market where a Bertrand model would be plausible is the market for

Mergers may result in

The specific oligopolistic model used in a market

Minimum efficient scale refers to the lowest level of output at which

A monopolistically competitive firm has the free entry characteristics of and the price setting characteristics of .

Firms in a monopolistically competitive market face demand curves and earn economic profits in the long run.

The Cournot model assumes that firm A maximizes its profit, holding firm B's output constant.

Firms seek to differentiate their product

-The above figure shows the reaction functions for two pizza shops in a small isolated town. Collusion would result in

Two identical firms that share a market and produce a homogeneous good will find the Bertrand Oligopoly LEAST attractive because

A merger between a firm and one of its suppliers would be called

If differentiation makes the market demand curve less elastic, then

If a firm's marginal costs , then .

Monopolistically competitive firms face downward sloping residual demand curves because these firms

Suppose two Cournot duopolist firms operate at zero marginal cost. The market demand is p = a - bQ. Firm 1's best-response function is

-The above figure shows the reaction functions for two pizza shops in a small isolated town. Firm B producing 100 pizzas and firm A producing 50 pizzas is NOT a Cournot equilibrium because

Mergers often increase profit by

Introduction

Supply and Demand

Empirical Methods for Demand Analysis

Consumer Choice

Production

Costs

Firm Organization and Market Structure

Competitive Firms and Markets

Monopoly

Pricing With Market Power

Game Theory and Business Strategy

Strategies Over Time

Managerial Decision-Making Under Uncertainty

Asymmetric Information

Government and Business

Global Business

Filters

Exam 11: Oligopoly and Monopolistic Competition

In the Cournot model, a firm maximizes profit by selecting

One criticism of the Bertrand pricing model is that

Which of the following conditions can help prolong the life of a cartel?

An example of a market where a Bertrand model would be plausible is the market for

Mergers may result in

The specific oligopolistic model used in a market

Minimum efficient scale refers to the lowest level of output at which

A monopolistically competitive firm has the free entry characteristics of ________ and the price setting characteristics of ________.

Firms in a monopolistically competitive market face ________ demand curves and earn ________ economic profits in the long run.

The Cournot model assumes that firm A maximizes its profit, holding firm B's output constant.

Firms seek to differentiate their product

-The above figure shows the reaction functions for two pizza shops in a small isolated town. Collusion would result in

Two identical firms that share a market and produce a homogeneous good will find the Bertrand Oligopoly LEAST attractive because

A merger between a firm and one of its suppliers would be called

If differentiation makes the market demand curve less elastic, then

If a firm's marginal costs ________, then ________.

Monopolistically competitive firms face downward sloping residual demand curves because these firms

Suppose two Cournot duopolist firms operate at zero marginal cost. The market demand is p = a - bQ. Firm 1's best-response function is

-The above figure shows the reaction functions for two pizza shops in a small isolated town. Firm B producing 100 pizzas and firm A producing 50 pizzas is NOT a Cournot equilibrium because

Mergers often increase profit by

Introduction

Supply and Demand

Empirical Methods for Demand Analysis

Consumer Choice

Production

Costs

Firm Organization and Market Structure

Competitive Firms and Markets

Monopoly

Pricing With Market Power

Game Theory and Business Strategy

Strategies Over Time

Managerial Decision-Making Under Uncertainty

Asymmetric Information

Government and Business

Global Business

Filters

A monopolistically competitive firm has the free entry characteristics of and the price setting characteristics of .

Firms in a monopolistically competitive market face demand curves and earn economic profits in the long run.

If a firm's marginal costs , then .