Question 1

The Cournot Model of Oligopoly assumes that

Accepted Answer

A)  firms decide what quantity to produce. 
B)  firms make their decisions simultaneously. 
C)  firms do not cooperate. 
D)  All of the above. 
A)  firms decide what quantity to produce. 
B)  firms make their decisions simultaneously. 
C)  firms do not cooperate. 
D)  All of the above.

Question 2

Assuming Cournot behavior,what happens to the market output,the price of the output,and each firm's output as the number of firms in a market increases?

Accepted Answer

As the number of firms increas

Question 3

In a Bertrand model with identical firms and a non-differentiated product,price will increase in response to

Accepted Answer

A)  an increase in the number of firms. 
B)  a decrease in the number of firms. 
C)  an increase in marginal cost. 
D)  a decrease in marginal cost. 
A)  an increase in the number of firms. 
B)  a decrease in the number of firms. 
C)  an increase in marginal cost. 
D)  a decrease in marginal cost.

Question 4

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 the prices the two firms charge are

Accepted Answer

A)  P1 = 40, P2 = 40. 
B)  P1 = 30, P2 = 30. 
C)  P1 = 30, P2 = 40. 
D)  P1 = 40, P2 = 30. 
A)  P1 = 40, P2 = 40. 
B)  P1 = 30, P2 = 30. 
C)  P1 = 30, P2 = 40. 
D)  P1 = 40, P2 = 30.

Question 5

In a sense,a cartel is self-destructive because

Accepted Answer

A)  it reduces consumer surplus. 
B)  it sets price above marginal cost. 
C)  each cartel member has the incentive to cheat on the cartel. 
D)  each cartel member earns economic profit. 
A)  it reduces consumer surplus. 
B)  it sets price above marginal cost. 
C)  each cartel member has the incentive to cheat on the cartel. 
D)  each cartel member earns economic profit.

Question 6

The outcome of the Stackelberg model is

Accepted Answer

A)  a Nash equilibrium. 
B)  the same as the Cournot outcome. 
C)  that the follower earns zero profit. 
D)  that the follower cannot be on its best-response curve. 
A)  a Nash equilibrium. 
B)  the same as the Cournot outcome. 
C)  that the follower earns zero profit. 
D)  that the follower cannot be on its best-response curve.

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

Which of the following models results in the greatest deadweight loss assuming a fixed number of firms with identical costs and a given demand curve?

Accepted Answer

A)  Cournot 
B)  Stackelberg 
C)  Monopoly 
D)  Perfect competition 
A)  Cournot 
B)  Stackelberg 
C)  Monopoly 
D)  Perfect competition

Question 9

Television stations have seemingly synchronized their commercial breaks.This is likely an example of

Accepted Answer

A)  tacit collusion. 
B)  explicit collusion. 
C)  mixed strategies. 
D)  pure strategies. 
A)  tacit collusion. 
B)  explicit collusion. 
C)  mixed strategies. 
D)  pure strategies.

Question 10

-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 11

Draw a graph that shows the effect on the equilibrium quantities if the government subsidizes one firm in a Cournot duopoly with a per-unit subsidy.Assume that the best-response functions are linear.Explain the new equilibrium quantities.

Accepted Answer

@#IMG-DLM& See the above figure.The subsidized fir

Question 12

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 13

Because firms selling a homogeneous product set price in response to the (perceived)pricing decision of other firms in the Bertrand Model of oligopoly in equilibrium price exceeds marginal cost.

Accepted Answer

A) True 
 B)False

Question 14

Suppose two duopolists operate at zero marginal cost.The market demand is p = a - bQ.If firm 1 is the Stackelberg leader,what level of output will it choose?

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 15

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 16

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 17

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 18

If two firms playing Cournot are identical with decreasing average costs,how should the firms divide production to maximize joint profits?

Accepted Answer

One firm should produce the mo

Question 19

Suppose that market demand can be represented as p = 100 - 2Q.There are 10 identical firms producing an undifferentiated product,each with the total cost function TC = 50 + q2.Compare the competitive outcome with the cartel outcome.What is the individual firm's incentive to cheat on the cartel?

Accepted Answer

Each firm has MC = 2q,so that market sup

Question 20

Explain why gasoline stations across the street from each other with large signs displaying their prices may "legally" jointly set monopoly prices.

Accepted Answer

A gasoline station posts its prices on a

The Cournot Model of Oligopoly assumes that

Assuming Cournot behavior,what happens to the market output,the price of the output,and each firm's output as the number of firms in a market increases?

In a Bertrand model with identical firms and a non-differentiated product,price will increase in response to

In a sense,a cartel is self-destructive because

The outcome of the Stackelberg model is

In the Cournot model,if the products are differentiated,

Which of the following models results in the greatest deadweight loss assuming a fixed number of firms with identical costs and a given demand curve?

Television stations have seemingly synchronized their commercial breaks.This is likely an example of

-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

Draw a graph that shows the effect on the equilibrium quantities if the government subsidizes one firm in a Cournot duopoly with a per-unit subsidy.Assume that the best-response functions are linear.Explain the new equilibrium quantities.

In the Cournot model,a firm maximizes profit by selecting

Because firms selling a homogeneous product set price in response to the (perceived)pricing decision of other firms in the Bertrand Model of oligopoly in equilibrium price exceeds marginal cost.

Suppose two duopolists operate at zero marginal cost.The market demand is p = a - bQ.If firm 1 is the Stackelberg leader,what level of output will it choose?

Assuming a homogeneous product,the Bertrand duopoly equilibrium price is

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

Product differentiation

If two firms playing Cournot are identical with decreasing average costs,how should the firms divide production to maximize joint profits?

Suppose that market demand can be represented as p = 100 - 2Q.There are 10 identical firms producing an undifferentiated product,each with the total cost function TC = 50 + q².Compare the competitive outcome with the cartel outcome.What is the individual firm's incentive to cheat on the cartel?

Explain why gasoline stations across the street from each other with large signs displaying their prices may "legally" jointly set monopoly prices.

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

The Cournot Model of Oligopoly assumes that

Assuming Cournot behavior,what happens to the market output,the price of the output,and each firm's output as the number of firms in a market increases?

In a Bertrand model with identical firms and a non-differentiated product,price will increase in response to

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 the prices the two firms charge are

In a sense,a cartel is self-destructive because

The outcome of the Stackelberg model is

In the Cournot model,if the products are differentiated,

Which of the following models results in the greatest deadweight loss assuming a fixed number of firms with identical costs and a given demand curve?

Television stations have seemingly synchronized their commercial breaks.This is likely an example of

-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

Draw a graph that shows the effect on the equilibrium quantities if the government subsidizes one firm in a Cournot duopoly with a per-unit subsidy.Assume that the best-response functions are linear.Explain the new equilibrium quantities.

In the Cournot model,a firm maximizes profit by selecting

Because firms selling a homogeneous product set price in response to the (perceived)pricing decision of other firms in the Bertrand Model of oligopoly in equilibrium price exceeds marginal cost.

Suppose two duopolists operate at zero marginal cost.The market demand is p = a - bQ.If firm 1 is the Stackelberg leader,what level of output will it choose?

Assuming a homogeneous product,the Bertrand duopoly equilibrium price is

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

Product differentiation

If two firms playing Cournot are identical with decreasing average costs,how should the firms divide production to maximize joint profits?

Suppose that market demand can be represented as p = 100 - 2Q.There are 10 identical firms producing an undifferentiated product,each with the total cost function TC = 50 + q2.Compare the competitive outcome with the cartel outcome.What is the individual firm's incentive to cheat on the cartel?

Explain why gasoline stations across the street from each other with large signs displaying their prices may "legally" jointly set monopoly prices.

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 that market demand can be represented as p = 100 - 2Q.There are 10 identical firms producing an undifferentiated product,each with the total cost function TC = 50 + q².Compare the competitive outcome with the cartel outcome.What is the individual firm's incentive to cheat on the cartel?