Question 1

In a Bertrand model with identical products

Accepted Answer

A) price is the same as in a competitive market equilibrium. 
B) price and quantity are the same as in a monopoly. 
C) price and quantity are the same as in a duopoly. 
D) None of the above. 
A) price is the same as in a competitive market equilibrium. 
B) price and quantity are the same as in a monopoly. 
C) price and quantity are the same as in a duopoly. 
D) None of the above.

Question 2

If a cartel is unable to monitor its members and punish those firms that violate their agreement, then

Accepted Answer

A) the member firms will each act as price setters. 
B) the cartel will prosper in the long run. 
C) the market will become a monopoly. 
D) the cartel will fail. 
A) the member firms will each act as price setters. 
B) the cartel will prosper in the long run. 
C) the market will become a monopoly. 
D) the cartel will fail.

Question 3

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 4

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 5

A Nash equilibrium occurs when

Accepted Answer

A) players choose their best strategy given the strategies chosen by others. 
B) the efficient allocation of resources is achieved by setting marginal revenue equal to marginal cost. 
C) a monopolist is forced to produce the efficient level of output. 
D) oligopolists cooperate with each other. 
A) players choose their best strategy given the strategies chosen by others. 
B) the efficient allocation of resources is achieved by setting marginal revenue equal to marginal cost. 
C) a monopolist is forced to produce the efficient level of output. 
D) oligopolists cooperate with each other.

Question 6

Cartels can detect cheating by

Accepted Answer

A) reporting each other to government authorities. 
B) keeping two sets of accounting books, one for internal use and one for sharing with the cartel. 
C) dividing the market by region so that each cartel member is the only seller in a particular region. 
D) All of the above. 
A) reporting each other to government authorities. 
B) keeping two sets of accounting books, one for internal use and one for sharing with the cartel. 
C) dividing the market by region so that each cartel member is the only seller in a particular region. 
D) All of the above.

Question 7

-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 8

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 9

Which of the following statements is FALSE?

Accepted Answer

A) Cartels only form among members of an oligopoly. 
B) A cartel might form if members believe they can increase profits by coordinating activity. 
C) Members of a cartel produce less output than that produced in a competitive market. 
D) Cartel members often have an incentive to cheat. 
A) Cartels only form among members of an oligopoly. 
B) A cartel might form if members believe they can increase profits by coordinating activity. 
C) Members of a cartel produce less output than that produced in a competitive market. 
D) Cartel members often have an incentive to cheat.

Question 10

Each member of a cartel

Accepted Answer

A) agrees to reduce output lower than it would if it were acting independently. 
B) is operating illegally in every country in which it is doing business. 
C) sets output independently of the impact on other members. 
D) makes less money than it otherwise would. 
A) agrees to reduce output lower than it would if it were acting independently. 
B) is operating illegally in every country in which it is doing business. 
C) sets output independently of the impact on other members. 
D) makes less money than it otherwise would.

Question 11

Which of the following is a current example of a government-granted cartel?

Accepted Answer

A) the "Big Three" accounting firms 
B) the U.S. automobile industry 
C) U.S. professional baseball 
D) the U.S. airline industry 
A) the "Big Three" accounting firms 
B) the U.S. automobile industry 
C) U.S. professional baseball 
D) the U.S. airline industry

Question 12

The Bertrand model is a more plausible model of firm behavior than the Cournot model

Accepted Answer

A) when firms set the quantity to be sold. 
B) when firms sell a differentiated product. 
C) because firms that sell a non-differentiated product typically act as price takers. 
D) because the Bertrand model predicts that firms will price at marginal cost. 
A) when firms set the quantity to be sold. 
B) when firms sell a differentiated product. 
C) because firms that sell a non-differentiated product typically act as price takers. 
D) because the Bertrand model predicts that firms will price at marginal cost.

Question 13

A merger between two firms that produce identical goods would be called

Accepted Answer

A) a horizontal merger. 
B) a vertical merger. 
C) a Lerner merger. 
D) a duopoly. 
A) a horizontal merger. 
B) a vertical merger. 
C) a Lerner merger. 
D) a duopoly.

Question 14

In the long run, a monopolistically competitive firm

Accepted Answer

A) earns zero economic profit. 
B) produces at minimum average cost. 
C) operates at full capacity. 
D) All of the above. 
A) earns zero economic profit. 
B) produces at minimum average cost. 
C) operates at full capacity. 
D) All of the above.

Question 15

If AC < p where MR = MC

Accepted Answer

A) firms earn positive profits and new firms will enter. 
B) firms earn negative profits and existing firms will leave. 
C) firms earn zero profits and new firms will not enter and no existing firms will leave. 
D) None of the above. 
A) firms earn positive profits and new firms will enter. 
B) firms earn negative profits and existing firms will leave. 
C) firms earn zero profits and new firms will not enter and no existing firms will leave. 
D) None of the above.

Question 16

If, holding the strategies of all other firms constant, no firm can obtain a higher profit by choosing a different strategy, then

Accepted Answer

A) the firms are using the Cournot model. 
B) the firms' strategies are a Nash equilibrium. 
C) the firms must have formed a cartel. 
D) the firms are using the Bertrand model. 
A) the firms are using the Cournot model. 
B) the firms' strategies are a Nash equilibrium. 
C) the firms must have formed a cartel. 
D) the firms are using the Bertrand model.

Question 17

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 18

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 19

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 20

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.

In a Bertrand model with identical products

If a cartel is unable to monitor its members and punish those firms that violate their agreement, then

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

Mergers may result in

A Nash equilibrium occurs when

Cartels can detect cheating by

-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

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

Which of the following statements is FALSE?

Each member of a cartel

Which of the following is a current example of a government-granted cartel?

The Bertrand model is a more plausible model of firm behavior than the Cournot model

A merger between two firms that produce identical goods would be called

In the long run, a monopolistically competitive firm

If AC < p where MR = MC

If, holding the strategies of all other firms constant, no firm can obtain a higher profit by choosing a different strategy, then

Firms seek to differentiate their product

In the Cournot model, a firm maximizes profit by selecting

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

The specific oligopolistic model used in a market

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 a Bertrand model with identical products

If a cartel is unable to monitor its members and punish those firms that violate their agreement, then

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

Mergers may result in

A Nash equilibrium occurs when

Cartels can detect cheating by

-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

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

Which of the following statements is FALSE?

Each member of a cartel

Which of the following is a current example of a government-granted cartel?

The Bertrand model is a more plausible model of firm behavior than the Cournot model

A merger between two firms that produce identical goods would be called

In the long run, a monopolistically competitive firm

If AC < p where MR = MC

If, holding the strategies of all other firms constant, no firm can obtain a higher profit by choosing a different strategy, then

Firms seek to differentiate their product

In the Cournot model, a firm maximizes profit by selecting

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

The specific oligopolistic model used in a market

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.