Question 1

Price and quantity in Bertrand and Cournot models

Accepted Answer

A) are the same. 
B) are different. 
C) might be the same depending on whether the products are identical or differentiated. 
D) are the same as in a duopoly. 
A) are the same. 
B) are different. 
C) might be the same depending on whether the products are identical or differentiated. 
D) are the same as in a duopoly.

Question 2

Cartels are inherently self-destructive because each member firm has the incentive to cheat on the cartel agreement.

Accepted Answer

A) True 
 B)False

Question 3

Is it true that in the long run, a monopolistically competitive firm has market power but earns no profit? Explain.

Accepted Answer

As strange as it sounds, yes. The firm e

Question 4

Assuming a homogeneous product, the Bertrand duopoly equilibrium price is

Accepted Answer

A) the same as the Cournot equilibrium price. 
B) less than the Cournot equilibrium price. 
C) greater than the Cournot equilibrium price. 
D) equal to the monopoly price. 
A) the same as the Cournot equilibrium price. 
B) less than the Cournot equilibrium price. 
C) greater than the Cournot equilibrium price. 
D) equal to the monopoly price.

Question 5

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 6

The ability to set a price greater than marginal cost guarantees an economic profit for the monopolistic competitor (assuming P > AC).

Accepted Answer

A) True 
 B)False

Question 7

In the Cournot model, if the products are differentiated

Accepted Answer

A) this reduces the pressure of one firm's decisions on the other. 
B) this increases the pressure of one firm's decisions on the other. 
C) there is no difference between this model and one with homogeneous goods. 
D) marginal costs are necessarily different. 
A) this reduces the pressure of one firm's decisions on the other. 
B) this increases the pressure of one firm's decisions on the other. 
C) there is no difference between this model and one with homogeneous goods. 
D) marginal costs are necessarily different.

Question 8

An example of a market where a Bertrand model would be NOT be plausible is the market for

Accepted Answer

A) pizza. 
B) sweaters. 
C) motorcycles. 
D) toothpicks. 
A) pizza. 
B) sweaters. 
C) motorcycles. 
D) toothpicks.

Question 9

Which of the following does NOT influence the type of oligopoly that forms?

Accepted Answer

A) Whether firms act sequentially or simultaneously. 
B) Whether firms set price or quantity. 
C) The type of demand curve the firms face. 
D) The time horizon over which firms will be in competition. 
A) Whether firms act sequentially or simultaneously. 
B) Whether firms set price or quantity. 
C) The type of demand curve the firms face. 
D) The time horizon over which firms will be in competition.

Question 10

In the Cournot model, if one firm increases its output

Accepted Answer

A) the market will not clear because now there is a surplus. 
B) the market price drops, reducing the revenues received by the other firms. 
C) the others will kick it out of the oligopoly. 
D) the other firms are unaffected. 
A) the market will not clear because now there is a surplus. 
B) the market price drops, reducing the revenues received by the other firms. 
C) the others will kick it out of the oligopoly. 
D) the other firms are unaffected.

Question 11

Product differentiation

Accepted Answer

A) may allow firms to price above a competitive level. 
B) generates value as consumers value more choices. 
C) depends on perceived differences between products. 
D) All of the above. 
A) may allow firms to price above a competitive level. 
B) generates value as consumers value more choices. 
C) depends on perceived differences between products. 
D) All of the above.

Question 12

Monopolistically competitive firms

Accepted Answer

A) have market power because they face downward sloping demand curves. 
B) have no market power because they earn zero economic profit. 
C) have no market power because of free entry. 
D) have no market power because price equals marginal cost. 
A) have market power because they face downward sloping demand curves. 
B) have no market power because they earn zero economic profit. 
C) have no market power because of free entry. 
D) have no market power because price equals marginal cost.

Question 13

When deciding on output levels, members of a cartel

Accepted Answer

A) set their output where MR = MC. 
B) produce the same level of output as if they were in a competitive market. 
C) take into account the impact of changes on members' profits. 
D) act as if they were monopolies. 
A) set their output where MR = MC. 
B) produce the same level of output as if they were in a competitive market. 
C) take into account the impact of changes on members' profits. 
D) act as if they were monopolies.

Question 14

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 15

Suppose the demand for pizza in a small isolated town is p = 10 - Q. There are only two firms, A and B, and each has a cost function TC = 2 + q. Determine the Cournot equilibrium.

Accepted Answer

Firm A's profit is π = [10 - (qA + qB)]q

Question 16

The Bertrand model of price setting assumes that a firm chooses its price

Accepted Answer

A) independently of what price other firms charge. 
B) subject to what price rival firms are charging. 
C) so that joint profits are maximized. 
D) without considering the shape of the demand curve. 
A) independently of what price other firms charge. 
B) subject to what price rival firms are charging. 
C) so that joint profits are maximized. 
D) without considering the shape of the demand curve.

Question 17

In the Cournot model, if the products are differentiated

Accepted Answer

A) the firm can shift its demand curve to the right and make it less elastic. 
B) the firms' demand curve shifts to the left and becomes less elastic. 
C) the firms' demand curve shifts to the right and becomes more elastic. 
D) None of the above. 
A) the firm can shift its demand curve to the right and make it less elastic. 
B) the firms' demand curve shifts to the left and becomes less elastic. 
C) the firms' demand curve shifts to the right and becomes more elastic. 
D) None of the above.

Question 18

In the Cournot model

Accepted Answer

A) market price is unaffected by the actions of any individual firm. 
B) firms do not have to worry about the strategies of the other firms. 
C) firms' profits are independent. 
D) firms' profits are interdependent. 
A) market price is unaffected by the actions of any individual firm. 
B) firms do not have to worry about the strategies of the other firms. 
C) firms' profits are independent. 
D) firms' profits are interdependent.

Question 19

In a Bertrand model with differentiated products

Accepted Answer

A) firms can set price above marginal cost. 
B) firms set price at marginal cost. 
C) price is independent of marginal cost. 
D) firms set price independently of one another. 
A) firms can set price above marginal cost. 
B) firms set price at marginal cost. 
C) price is independent of marginal cost. 
D) firms set price independently of one another.

Question 20

In the long run, firms in markets that are ________ earn zero economic profits.

Accepted Answer

A) perfectly competitive 
B) monopolistically competitive 
C) monopolies 
D) Both A and B 
A) perfectly competitive 
B) monopolistically competitive 
C) monopolies 
D) Both A and B

Price and quantity in Bertrand and Cournot models

Cartels are inherently self-destructive because each member firm has the incentive to cheat on the cartel agreement.

Is it true that in the long run, a monopolistically competitive firm has market power but earns no profit? Explain.

Assuming a homogeneous product, the Bertrand duopoly equilibrium price is

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

The ability to set a price greater than marginal cost guarantees an economic profit for the monopolistic competitor (assuming P > AC).

In the Cournot model, if the products are differentiated

An example of a market where a Bertrand model would be NOT be plausible is the market for

Which of the following does NOT influence the type of oligopoly that forms?

In the Cournot model, if one firm increases its output

Product differentiation

Monopolistically competitive firms

When deciding on output levels, members of a cartel

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

Suppose the demand for pizza in a small isolated town is p = 10 - Q. There are only two firms, A and B, and each has a cost function TC = 2 + q. Determine the Cournot equilibrium.

The Bertrand model of price setting assumes that a firm chooses its price

In the Cournot model, if the products are differentiated

In the Cournot model

In a Bertrand model with differentiated products

In the long run, firms in markets that are ________ earn zero economic profits.

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

Price and quantity in Bertrand and Cournot models

Cartels are inherently self-destructive because each member firm has the incentive to cheat on the cartel agreement.

Is it true that in the long run, a monopolistically competitive firm has market power but earns no profit? Explain.

Assuming a homogeneous product, the Bertrand duopoly equilibrium price is

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

The ability to set a price greater than marginal cost guarantees an economic profit for the monopolistic competitor (assuming P > AC).

In the Cournot model, if the products are differentiated

An example of a market where a Bertrand model would be NOT be plausible is the market for

Which of the following does NOT influence the type of oligopoly that forms?

In the Cournot model, if one firm increases its output

Product differentiation

Monopolistically competitive firms

When deciding on output levels, members of a cartel

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

Suppose the demand for pizza in a small isolated town is p = 10 - Q. There are only two firms, A and B, and each has a cost function TC = 2 + q. Determine the Cournot equilibrium.

The Bertrand model of price setting assumes that a firm chooses its price

In the Cournot model, if the products are differentiated

In the Cournot model

In a Bertrand model with differentiated products

In the long run, firms in markets that are ________ earn zero economic profits.

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