Question 1

Regardless of market structure,all firms

Accepted Answer

A)  consider the actions of rivals. 
B)  maximize profit by setting marginal revenue equal to marginal cost. 
C)  produce a differentiated product. 
D)  have the ability to set price. 
A)  consider the actions of rivals. 
B)  maximize profit by setting marginal revenue equal to marginal cost. 
C)  produce a differentiated product. 
D)  have the ability to set price. B

Question 2

Suppose duopolists face the market inverse demand curve P = 100 - Q,Q = q1 + q2,and both firms have a constant marginal cost of 10.If firm 1 is a Stackelberg leader and firm 2's best response function is q2 = (100 - q1)/2,at the Nash-Stackelberg equilibrium firm 2's output is

Accepted Answer

A)  30. 
B)  40. 
C)  60. 
D)  70. 
A)  30. 
B)  40. 
C)  60. 
D)  70. A

Question 3

Product differentiation allows a firm to charge a higher price because the residual demand curve facing the firm

Accepted Answer

A)  is more elastic than the residual demand curve without product differentiation. 
B)  is less elastic than the residual demand curve without product differentiation. 
C)  is horizontal. 
D)  shifts to the left. 
A)  is more elastic than the residual demand curve without product differentiation. 
B)  is less elastic than the residual demand curve without product differentiation. 
C)  is horizontal. 
D)  shifts to the left. B

Question 4

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 5

-The above figure shows the reaction functions for two pizza shops in a small isolated down.The Stackelberg leader will produce

Accepted Answer

A)  25 pizzas. 
B)  50 pizzas. 
C)  66.7 pizzas. 
D)  100 pizzas. 
A)  25 pizzas. 
B)  50 pizzas. 
C)  66.7 pizzas. 
D)  100 pizzas.

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

As the number of firms increases in a market,the differences between the Cournot,Stackelberg,and price-taking market structures

Accepted Answer

A)  decrease. 
B)  increase. 
C)  remain the same. 
D)  Cannot be determined. 
A)  decrease. 
B)  increase. 
C)  remain the same. 
D)  Cannot be determined.

Question 8

Collusion is more successful in a game that will continue forever or in a game with an uncertain ending time than in a game with a known ending time.

Accepted Answer

A) True 
 B)False

Question 9

If there are 2 identical firms in a market that choose the quantity they produce,total welfare is the highest when there is a cartel.

Accepted Answer

A) True 
 B)False

Question 10

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 11

Two firms sell 100% orange juice in 10 ounce bottles.The juice is only good for one week.The two firms have contracts for all the oranges produced in a large geographic area.Each firm decides how many bottles of juice to produce at the same time.This market is best described with a

Accepted Answer

A)  Bertrand model. 
B)  Stackelberg model. 
C)  monopolistic competition model. 
D)  Cournot model. 
A)  Bertrand model. 
B)  Stackelberg model. 
C)  monopolistic competition model. 
D)  Cournot model.

Question 12

If two firms behave as Cournot duopolists,the level of social welfare is lower than if the same firms act as a cartel.

Accepted Answer

A) True 
 B)False

Question 13

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 14

Suppose the demand for Pepsi-Cola is qp = 54 - 2pp + 1pc.The demand for Coca-Cola is
qc = 54 - 2pc + 1pp.Each firm faces a constant marginal cost of zero.Determine the Bertrand equilibrium prices.What happens to the Bertrand equilibrium prices and profits if increased differentiation causes the demand for Pepsi-Cola to become qp = 104 - 2pp + 1pc while the demand for Coca-Cola remains unchanged?

Accepted Answer

For Pepsi-Cola,profit maximization means

Question 15

In a Bertrand model,graphically,the intersection of all firms' best-response curves determines

Accepted Answer

A)  the Nash equilibrium prices. 
B)  the dominant strategy for each firm. 
C)  the degree of product differentiation. 
D)  the price of the market leader. 
A)  the Nash equilibrium prices. 
B)  the dominant strategy for each firm. 
C)  the degree of product differentiation. 
D)  the price of the market leader.

Question 16

Strategic trade policy might work if

Accepted Answer

A)  trade decisions are made simultaneously by two countries. 
B)  trade decisions are made sequentially by two countries. 
C)  trade decisions entail response by a trading partner. 
D)  trade decisions are made in a random fashion. 
A)  trade decisions are made simultaneously by two countries. 
B)  trade decisions are made sequentially by two countries. 
C)  trade decisions entail response by a trading partner. 
D)  trade decisions are made in a random fashion.

Question 17

Firms A and B are identical,produce identical products,and are the only firms in a market.Firm A's output is higher than Firm B's.This means that Firm B is the

Accepted Answer

A)  Cartel leader. 
B)  Stackelberg leader. 
C)  Stackelberg follower. 
D)  Cournot leader. 
A)  Cartel leader. 
B)  Stackelberg leader. 
C)  Stackelberg follower. 
D)  Cournot leader.

Question 18

Suppose Cournot duopolist firms operate with each having a cost of 30qi (i = 1,2)so that each firm's marginal cost is 30.The inverse market demand curve is P = 120 - Q where Q = q1 + q2.At the Nash-Cournot equilibrium,the market price,P,is

Accepted Answer

A)  30. 
B)  45. 
C)  60. 
D)  90. 
A)  30. 
B)  45. 
C)  60. 
D)  90.

Question 19

In a monopolistically competitive market,the equilibrium price is $21,and each identical firm has a fixed cost of $40 and a constant marginal cost of $1.What is the output level of each producer?

Accepted Answer

A)  q = 1 
B)  q = 2 
C)  q = 2.9 
D)  q = 21 
A)  q = 1 
B)  q = 2 
C)  q = 2.9 
D)  q = 21

Question 20

Suppose Cournot duopolists firms face the same market demand curve,but have differing costs.At the Nash-Cournot equilibrium,the firm with the higher cost will

Accepted Answer

A)  have a lower price for its product than its competitor. 
B)  have a smaller profit than its competitor. 
C)  have a higher price for its product than its competitor. 
D)  have a higher profit than its competitor. 
A)  have a lower price for its product than its competitor. 
B)  have a smaller profit than its competitor. 
C)  have a higher price for its product than its competitor. 
D)  have a higher profit than its competitor.

Regardless of market structure,all firms

Suppose duopolists face the market inverse demand curve P = 100 - Q,Q = q₁ + q₂,and both firms have a constant marginal cost of 10.If firm 1 is a Stackelberg leader and firm 2's best response function is q₂ = (100 - q₁)/2,at the Nash-Stackelberg equilibrium firm 2's output is

Product differentiation allows a firm to charge a higher price because the residual demand curve facing the firm

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 down.The Stackelberg leader will produce

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

As the number of firms increases in a market,the differences between the Cournot,Stackelberg,and price-taking market structures

Collusion is more successful in a game that will continue forever or in a game with an uncertain ending time than in a game with a known ending time.

If there are 2 identical firms in a market that choose the quantity they produce,total welfare is the highest when there is a cartel.

Mergers may result in

Two firms sell 100% orange juice in 10 ounce bottles.The juice is only good for one week.The two firms have contracts for all the oranges produced in a large geographic area.Each firm decides how many bottles of juice to produce at the same time.This market is best described with a

If two firms behave as Cournot duopolists,the level of social welfare is lower than if the same firms act as a cartel.

One criticism of the Bertrand pricing model is that

In a Bertrand model,graphically,the intersection of all firms' best-response curves determines

Strategic trade policy might work if

Firms A and B are identical,produce identical products,and are the only firms in a market.Firm A's output is higher than Firm B's.This means that Firm B is the

Suppose Cournot duopolist firms operate with each having a cost of 30q_i (i = 1,2)so that each firm's marginal cost is 30.The inverse market demand curve is P = 120 - Q where Q = q₁ + q₂.At the Nash-Cournot equilibrium,the market price,P,is

In a monopolistically competitive market,the equilibrium price is $21,and each identical firm has a fixed cost of $40 and a constant marginal cost of $1.What is the output level of each producer?

Suppose Cournot duopolists firms face the same market demand curve,but have differing costs.At the Nash-Cournot equilibrium,the firm with the higher cost will

Introduction

Supply and Demand

Applying the Supply-And-Demand Model

Consumer Choice

Applying Consumer Theory

Firms and Production

Costs

Competitive Firms and Markets

Applying the Competitive Model

General Equilibrium and Economic Welfare

Monopoly

Pricing and Advertising

Game Theory

Factor Markets

Interest Rates, Investments, and Capital Markets

Uncertainty

Externalities, Open-Access, and Public Goods

Asymmetric Information

Contracts and Moral Hazards

Filters

Exam 13: Oligopoly and Monopolistic Competition

Regardless of market structure,all firms

Suppose duopolists face the market inverse demand curve P = 100 - Q,Q = q1 + q2,and both firms have a constant marginal cost of 10.If firm 1 is a Stackelberg leader and firm 2's best response function is q2 = (100 - q1)/2,at the Nash-Stackelberg equilibrium firm 2's output is

Product differentiation allows a firm to charge a higher price because the residual demand curve facing the firm

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 down.The Stackelberg leader will produce

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

As the number of firms increases in a market,the differences between the Cournot,Stackelberg,and price-taking market structures

Collusion is more successful in a game that will continue forever or in a game with an uncertain ending time than in a game with a known ending time.

If there are 2 identical firms in a market that choose the quantity they produce,total welfare is the highest when there is a cartel.

Mergers may result in

Two firms sell 100% orange juice in 10 ounce bottles.The juice is only good for one week.The two firms have contracts for all the oranges produced in a large geographic area.Each firm decides how many bottles of juice to produce at the same time.This market is best described with a

If two firms behave as Cournot duopolists,the level of social welfare is lower than if the same firms act as a cartel.

One criticism of the Bertrand pricing model is that

In a Bertrand model,graphically,the intersection of all firms' best-response curves determines

Strategic trade policy might work if

Firms A and B are identical,produce identical products,and are the only firms in a market.Firm A's output is higher than Firm B's.This means that Firm B is the

Suppose Cournot duopolist firms operate with each having a cost of 30qi (i = 1,2)so that each firm's marginal cost is 30.The inverse market demand curve is P = 120 - Q where Q = q1 + q2.At the Nash-Cournot equilibrium,the market price,P,is

In a monopolistically competitive market,the equilibrium price is $21,and each identical firm has a fixed cost of $40 and a constant marginal cost of $1.What is the output level of each producer?

Suppose Cournot duopolists firms face the same market demand curve,but have differing costs.At the Nash-Cournot equilibrium,the firm with the higher cost will

Introduction

Supply and Demand

Applying the Supply-And-Demand Model

Consumer Choice

Applying Consumer Theory

Firms and Production

Costs

Competitive Firms and Markets

Applying the Competitive Model

General Equilibrium and Economic Welfare

Monopoly

Pricing and Advertising

Game Theory

Factor Markets

Interest Rates, Investments, and Capital Markets

Uncertainty

Externalities, Open-Access, and Public Goods

Asymmetric Information

Contracts and Moral Hazards

Filters

Suppose duopolists face the market inverse demand curve P = 100 - Q,Q = q₁ + q₂,and both firms have a constant marginal cost of 10.If firm 1 is a Stackelberg leader and firm 2's best response function is q₂ = (100 - q₁)/2,at the Nash-Stackelberg equilibrium firm 2's output is

Suppose Cournot duopolist firms operate with each having a cost of 30q_i (i = 1,2)so that each firm's marginal cost is 30.The inverse market demand curve is P = 120 - Q where Q = q₁ + q₂.At the Nash-Cournot equilibrium,the market price,P,is