Question 1

Monopolistic competition and perfect competition differ because

Accepted Answer

A)  only monopolistically competitive firms will set MR = MC. 
B)  only perfectly competitive firms will set MR = MC. 
C)  only monopolistic competition allows for entry of other firms in the long run. 
D)  only competitive firms take the price as given. 
A)  only monopolistically competitive firms will set MR = MC. 
B)  only perfectly competitive firms will set MR = MC. 
C)  only monopolistic competition allows for entry of other firms in the long run. 
D)  only competitive firms take the price as given.

Question 2

Explain how long-run economic profits are linked to entry in monopolistic competition and perfect competition.

Accepted Answer

In the short run,all market structures a

Question 3

Compared to a cartel,firms in a Cournot Oligopoly

Accepted Answer

A)  make more joint profit. 
B)  sell less output. 
C)  make less joint profit. 
D)  act independently. 
A)  make more joint profit. 
B)  sell less output. 
C)  make less joint profit. 
D)  act independently.

Question 4

Which of the following market structures have market power?

Accepted Answer

A)  oligopoly 
B)  monopolistic competition 
C)  perfect competition 
D)  Both A and B. 
A)  oligopoly 
B)  monopolistic competition 
C)  perfect competition 
D)  Both A and B.

Question 5

Oligopoly differs from monopolistic competition in that an oligopoly includes

Accepted Answer

A)  product differentiation. 
B)  barriers to entry. 
C)  no barriers to entry. 
D)  downward-sloping demand curves facing the firm. 
A)  product differentiation. 
B)  barriers to entry. 
C)  no barriers to entry. 
D)  downward-sloping demand curves facing the firm.

Question 6

The profitability of the second mover in a Stackelberg model is

Accepted Answer

A)  guaranteed to be negative. 
B)  smaller than that of the first mover. 
C)  greater than that of the first mover. 
D)  greater than the Cournot profits. 
A)  guaranteed to be negative. 
B)  smaller than that of the first mover. 
C)  greater than that of the first mover. 
D)  greater than the Cournot profits.

Question 7

In the Cournot model,the output that a firm chooses to produce increases as

Accepted Answer

A)  the total output of other firms increases. 
B)  the number of firms in the market increases. 
C)  the number of firms in the market decreases. 
D)  its marginal cost increases. 
A)  the total output of other firms increases. 
B)  the number of firms in the market increases. 
C)  the number of firms in the market decreases. 
D)  its marginal cost increases.

Question 8

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.Suppose there were no barriers to entry and firms continued to enter so long as there were positive economic profits.At the Nash-Cournot equilibrium,the price,P,is

Accepted Answer

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

Question 9

-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 10

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 11

In a Bertrand duopoly with product differentiation,explain how a change in one firm's marginal cost can have an effect on the price charged by the other firm.

Accepted Answer

Each firm's price is a functio

Question 12

-The above figure shows the reaction functions for two pizza shops in a small isolated town.Compare the Cournot,Stackelberg,cartel,and competitive equilibria in terms of total output and welfare.

Accepted Answer

If both firms are competitive price take

Question 13

Brand loyalty in monopolistically competitive markets manifests itself as

Accepted Answer

A)  upward-sloping marginal cost curves. 
B)  downward-sloping demand curves. 
C)  downward-sloping marginal cost curves. 
D)  upward-sloping demand curves. 
A)  upward-sloping marginal cost curves. 
B)  downward-sloping demand curves. 
C)  downward-sloping marginal cost curves. 
D)  upward-sloping demand curves.

Question 14

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.Suppose there were no barriers to entry and firms continued to enter so long as there were positive economic profits.At the Nash-Cournot equilibrium,the total output,Q,is

Accepted Answer

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

Question 15

Suppose a market with a Cournot structure has five firms and a market price elasticity of demand equal to -2.What is a Cournot firm's Lerner Index?

Accepted Answer

A)  .1 
B)  .2 
C)  .5 
D)  1 
A)  .1 
B)  .2 
C)  .5 
D)  1

Question 16

Requiring government agencies to report which company had the lowest bid for a government contract and the level of the bid,

Accepted Answer

A)  can help a cartel enforce its agreement. 
B)  can speed up the end of a cartel. 
C)  may foster competition. 
D)  may help a cartel to lower its price. 
A)  can help a cartel enforce its agreement. 
B)  can speed up the end of a cartel. 
C)  may foster competition. 
D)  may help a cartel to lower its price.

Question 17

There are only two firms in an industry with demand curves q1 = 30 - P and q2 = 30 - P.Both have no fixed costs and each has a marginal cost of 10 per unit produced.If they behave as profit-maximizing price takers,each produces 20 units and sells them at a price of 10 so that each firm makes zero economic profits.If they formed a cartel and split the production of the output evenly,the economic profit of each firm would be

Accepted Answer

A)  0. 
B)  50. 
C)  100. 
D)  200. 
A)  0. 
B)  50. 
C)  100. 
D)  200.

Question 18

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 ear

Question 19

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

Accepted Answer

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

Question 20

Firms in all types of market structures pay attention to current rival firms' behavior.

Accepted Answer

A) True 
 B)False

Monopolistic competition and perfect competition differ because

Explain how long-run economic profits are linked to entry in monopolistic competition and perfect competition.

Compared to a cartel,firms in a Cournot Oligopoly

Which of the following market structures have market power?

Oligopoly differs from monopolistic competition in that an oligopoly includes

The profitability of the second mover in a Stackelberg model is

In the Cournot model,the output that a firm chooses to produce increases as

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

Firms seek to differentiate their product

In a Bertrand duopoly with product differentiation,explain how a change in one firm's marginal cost can have an effect on the price charged by the other firm.

-The above figure shows the reaction functions for two pizza shops in a small isolated town.Compare the Cournot,Stackelberg,cartel,and competitive equilibria in terms of total output and welfare.

Brand loyalty in monopolistically competitive markets manifests itself as

Suppose a market with a Cournot structure has five firms and a market price elasticity of demand equal to -2.What is a Cournot firm's Lerner Index?

Requiring government agencies to report which company had the lowest bid for a government contract and the level of the bid,

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

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

Firms in all types of market structures pay attention to current rival firms' behavior.

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

Monopolistic competition and perfect competition differ because

Explain how long-run economic profits are linked to entry in monopolistic competition and perfect competition.

Compared to a cartel,firms in a Cournot Oligopoly

Which of the following market structures have market power?

Oligopoly differs from monopolistic competition in that an oligopoly includes

The profitability of the second mover in a Stackelberg model is

In the Cournot model,the output that a firm chooses to produce increases as

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

Firms seek to differentiate their product

In a Bertrand duopoly with product differentiation,explain how a change in one firm's marginal cost can have an effect on the price charged by the other firm.

-The above figure shows the reaction functions for two pizza shops in a small isolated town.Compare the Cournot,Stackelberg,cartel,and competitive equilibria in terms of total output and welfare.

Brand loyalty in monopolistically competitive markets manifests itself as

Suppose a market with a Cournot structure has five firms and a market price elasticity of demand equal to -2.What is a Cournot firm's Lerner Index?

Requiring government agencies to report which company had the lowest bid for a government contract and the level of the bid,

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

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

Firms in all types of market structures pay attention to current rival firms' behavior.

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