Question 1

In a monopolistically competitive market,the lower the firms' fixed costs,

Accepted Answer

A)  the higher the deadweight loss. 
B)  the less firms are active in equilibrium. 
C)  the more firms are active in the equilibrium. 
D)  the higher the prices charged. 
A)  the higher the deadweight loss. 
B)  the less firms are active in equilibrium. 
C)  the more firms are active in the equilibrium. 
D)  the higher the prices charged.

Question 2

Two identical firms that share a market and produce a homogenous 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 3

Which of the following is a necessary condition for government subsidies to influence a firm to choose an output level as if it were a Stackelberg leader?

Accepted Answer

A)  The subsidy must be announced before the firms choose output levels. 
B)  The subsidy must be equal to the firm's marginal cost. 
C)  The subsidy must be equal to the firm's rival's marginal cost. 
D)  The firm does not have any fixed costs. 
A)  The subsidy must be announced before the firms choose output levels. 
B)  The subsidy must be equal to the firm's marginal cost. 
C)  The subsidy must be equal to the firm's rival's marginal cost. 
D)  The firm does not have any fixed costs.

Question 4

-The above figure shows the reaction functions for two pizza shops in a small isolated town.The perfect competitive outcome is that

Accepted Answer

A)  each firm produces 40 pizzas. 
B)  each firm produces 50 pizzas. 
C)  the firms split the production of 200 pizzas. 
D)  each firm produces 200 pizzas. 
A)  each firm produces 40 pizzas. 
B)  each firm produces 50 pizzas. 
C)  the firms split the production of 200 pizzas. 
D)  each firm produces 200 pizzas.

Question 5

If only two identical firms operate in a market,consumers prefer

Accepted Answer

A)  a Cournot equilibrium. 
B)  a Stackelberg equilibrium. 
C)  a collusive equilibrium. 
D)  any equilibrium since they all result in the same consumer surplus. 
A)  a Cournot equilibrium. 
B)  a Stackelberg equilibrium. 
C)  a collusive equilibrium. 
D)  any equilibrium since they all result in the same consumer surplus.

Question 6

Monopolistically competitive firms face downward-sloping residual demand curves because these firms

Accepted Answer

A)  have relatively few rivals (compared to competition). 
B)  sell differentiated products. 
C)  A and/or B. 
D)  None of the above. 
A)  have relatively few rivals (compared to competition). 
B)  sell differentiated products. 
C)  A and/or B. 
D)  None of the above.

Question 7

In monopolistically competitive markets,

Accepted Answer

A)  price is greater than it would be in perfect competition. 
B)  price is less than it would be in perfect monopoly. 
C)  quantity is greater than it would be in perfect monopoly. 
D)  All of the above. 
A)  price is greater than it would be in perfect competition. 
B)  price is less than it would be in perfect monopoly. 
C)  quantity is greater than it would be in perfect monopoly. 
D)  All of the above.

Question 8

In the long run,a monopolistic competitor

Accepted Answer

A)  sets MR = MC. 
B)  produces where P = AC. 
C)  sets P > MC. 
D)  All of the above. 
A)  sets MR = MC. 
B)  produces where P = AC. 
C)  sets P > MC. 
D)  All of the above.

Question 9

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 profit-maximizing quantity produced by each firm is

Accepted Answer

A)  5. 
B)  10. 
C)  15. 
D)  20. 
A)  5. 
B)  10. 
C)  15. 
D)  20.

Question 10

Suppose the demand for pizza in a small isolated town is p = 10 - Q.The only two firms,A and B,behave as Cournot duopolists.Each has a cost function TC = 2 + Q.If the government wants to subsidize firm A to raise its output to that of a Stackelberg leader,how large should the subsidy be?

Accepted Answer

Firm B's profit is π = [10 - (q_A + q_B)]q_B -

Question 11

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.Suppose the two firms form a cartel.While firm 1 produces one-half of the profit-maximizing cartel output,firm 2 cheats and produces 5 units more.What would happen to the two firms' economic profits?

Accepted Answer

A)  Firm 1's profits remain the same, but firm 2's profits increase by 10.5 
B)  Firm 1's profits decrease by 5.5, but firm 2's profits increase by 11. 
C)  Firm 1's profits decrease by 25, but firm 2's profits increase by 12.5. 
D)  Firm 1's profits decrease by 12.5, but firm 2's profits increase by 25. 
A)  Firm 1's profits remain the same, but firm 2's profits increase by 10.5 
B)  Firm 1's profits decrease by 5.5, but firm 2's profits increase by 11. 
C)  Firm 1's profits decrease by 25, but firm 2's profits increase by 12.5. 
D)  Firm 1's profits decrease by 12.5, but firm 2's profits increase by 25.

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

Suppose the demand for Pepsi-Cola is qp = 50 - 2pp + 1pc.The firm faces a constant marginal cost of m,and pc denotes the price of Coca-Cola.Assuming Bertrand behavior,derive Pepsi-Cola's best-response function and explain how the firm changes price in response to changes in its own marginal cost and changes in Coca-Cola's price.

Accepted Answer

For Pepsi-Cola,profit maximization means

Question 14

As compared to the basic Nash-Cournot equilibrium for duopolists where the firms face the same market demand curve and have identical costs,in the situation where the firms produce products which are viewed by consumers as not being identical,

Accepted Answer

A)  there will generally be different prices charged by the two firms. 
B)  there will generally be different quantities produced by the two firms. 
C)  one or both of the firms may practice spurious differentiation. 
D)  All of the above. 
A)  there will generally be different prices charged by the two firms. 
B)  there will generally be different quantities produced by the two firms. 
C)  one or both of the firms may practice spurious differentiation. 
D)  All of the above.

Question 15

What happens in a duopoly if both firms try to act as the Stackelberg leader?

Accepted Answer

If both firms think they are the leader,

Question 16

Suppose the demand for pizza in a small isolated town is p = 10 - Q.There are only two firms,A and B.Each has a cost function TC = 2 + Q.Determine the equilibrium quantities of each if firm A is the Stackelberg leader.

Accepted Answer

Firm B's profit is π = [10 - (q_A + q_B)]q_B -

Question 17

Product differentiation

Accepted Answer

A)  can be actual or perceived. 
B)  is only legal if it is perceived. 
C)  is only important if it is perceived. 
D)  is only important if it is actual. 
A)  can be actual or perceived. 
B)  is only legal if it is perceived. 
C)  is only important if it is perceived. 
D)  is only important if it is actual.

Question 18

Suppose Cournot duopolists firms (A and B) face the same market demand curve, and initially have identical costs. Firm A figures out a way of reducing its marginal cost. At the new Nash-Cournot equilibrium,

Accepted Answer

A)  firm A's price falls. 
B)  firm A's output expands and firm B's output contracts. 
C)  firm B's profits expand. 
D)  the price charged by both firms increases. 
A)  firm A's price falls. 
B)  firm A's output expands and firm B's output contracts. 
C)  firm B's profits expand. 
D)  the price charged by both firms increases.

Question 19

-The above figure shows the reaction functions for two pizza shops in a small isolated town.The Cournot equilibrium is at point

Accepted Answer

A)  a. 
B)  b. 
C)  c. 
D)  d. 
A)  a. 
B)  b. 
C)  c. 
D)  d.

Question 20

Suppose that government used to requires airline companies to have at least 30 airplanes and serve at least 20 different airports.Now,this requirement changed to a minimum of 10 airplanes and 4 different airports.Such change in regulation will lead to

Accepted Answer

A)  lower profits due to increased competition. 
B)  higher profits due to decreased competition. 
C)  higher profits due to weaker labor unions. 
D)  lower profits due to larger regulatory burden. 
A)  lower profits due to increased competition. 
B)  higher profits due to decreased competition. 
C)  higher profits due to weaker labor unions. 
D)  lower profits due to larger regulatory burden.

In a monopolistically competitive market,the lower the firms' fixed costs,

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

Which of the following is a necessary condition for government subsidies to influence a firm to choose an output level as if it were a Stackelberg leader?

-The above figure shows the reaction functions for two pizza shops in a small isolated town.The perfect competitive outcome is that

If only two identical firms operate in a market,consumers prefer

Monopolistically competitive firms face downward-sloping residual demand curves because these firms

In monopolistically competitive markets,

In the long run,a monopolistic competitor

Suppose the demand for pizza in a small isolated town is p = 10 - Q.The only two firms,A and B,behave as Cournot duopolists.Each has a cost function TC = 2 + Q.If the government wants to subsidize firm A to raise its output to that of a Stackelberg leader,how large should the subsidy be?

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

As compared to the basic Nash-Cournot equilibrium for duopolists where the firms face the same market demand curve and have identical costs,in the situation where the firms produce products which are viewed by consumers as not being identical,

What happens in a duopoly if both firms try to act as the Stackelberg leader?

Suppose the demand for pizza in a small isolated town is p = 10 - Q.There are only two firms,A and B.Each has a cost function TC = 2 + Q.Determine the equilibrium quantities of each if firm A is the Stackelberg leader.

Product differentiation

Suppose Cournot duopolists firms (A and B) face the same market demand curve, and initially have identical costs. Firm A figures out a way of reducing its marginal cost. At the new Nash-Cournot equilibrium,

-The above figure shows the reaction functions for two pizza shops in a small isolated town.The Cournot equilibrium is at point

Suppose that government used to requires airline companies to have at least 30 airplanes and serve at least 20 different airports.Now,this requirement changed to a minimum of 10 airplanes and 4 different airports.Such change in regulation will lead to

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

In a monopolistically competitive market,the lower the firms' fixed costs,

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

Which of the following is a necessary condition for government subsidies to influence a firm to choose an output level as if it were a Stackelberg leader?

-The above figure shows the reaction functions for two pizza shops in a small isolated town.The perfect competitive outcome is that

If only two identical firms operate in a market,consumers prefer

Monopolistically competitive firms face downward-sloping residual demand curves because these firms

In monopolistically competitive markets,

In the long run,a monopolistic competitor

Suppose the demand for pizza in a small isolated town is p = 10 - Q.The only two firms,A and B,behave as Cournot duopolists.Each has a cost function TC = 2 + Q.If the government wants to subsidize firm A to raise its output to that of a Stackelberg leader,how large should the subsidy be?

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

As compared to the basic Nash-Cournot equilibrium for duopolists where the firms face the same market demand curve and have identical costs,in the situation where the firms produce products which are viewed by consumers as not being identical,

What happens in a duopoly if both firms try to act as the Stackelberg leader?

Suppose the demand for pizza in a small isolated town is p = 10 - Q.There are only two firms,A and B.Each has a cost function TC = 2 + Q.Determine the equilibrium quantities of each if firm A is the Stackelberg leader.

Product differentiation

Suppose Cournot duopolists firms (A and B) face the same market demand curve, and initially have identical costs. Firm A figures out a way of reducing its marginal cost. At the new Nash-Cournot equilibrium,

-The above figure shows the reaction functions for two pizza shops in a small isolated town.The Cournot equilibrium is at point

Suppose that government used to requires airline companies to have at least 30 airplanes and serve at least 20 different airports.Now,this requirement changed to a minimum of 10 airplanes and 4 different airports.Such change in regulation will lead to

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