Question 1

The Cournot model assumes that firm A maximizes its profit,holding firm B's output constant.

Accepted Answer

A) True 
 B)False

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 and no fixed costs.If firm 1 is a Stackelberg leader and firm 2's best response function is   ,at the Nash-Stackelberg equilibrium firm 2's profit is

Accepted Answer

A)  400. 
B)  650. 
C)  800. 
D)  1200. 
A)  400. 
B)  650. 
C)  800. 
D)  1200.

Question 3

A competitive market structure differs from the monopoly,oligopoly,and monopolistic competition structures in the

Accepted Answer

A)  producers' ability to set price. 
B)  profit maximization condition. 
C)  amount of long-run profit. 
D)  entry conditions. 
A)  producers' ability to set price. 
B)  profit maximization condition. 
C)  amount of long-run profit. 
D)  entry conditions.

Question 4

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,the profit-maximizing price is

Accepted Answer

A)  10. 
B)  15. 
C)  20. 
D)  25. 
A)  10. 
B)  15. 
C)  20. 
D)  25.

Question 5

Suppose duopolists face the market inverse demand curve P = 100 - Q,Q = q1 + q2,and both firms have a constant marginal cost of 10 and no fixed costs.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 1's profit is

Accepted Answer

A)  400. 
B)  650. 
C)  800. 
D)  1200. 
A)  400. 
B)  650. 
C)  800. 
D)  1200.

Question 6

Which of the following market structures is (are)capable of earning positive economic profits in the long run?

Accepted Answer

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

Question 7

Which of the following market models results in the highest price assuming a fixed number of firms with identical costs and a given demand curve?

Accepted Answer

A)  Cournot 
B)  Stackelberg 
C)  Monopoly 
D)  Price is the same in all three markets. 
A)  Cournot 
B)  Stackelberg 
C)  Monopoly 
D)  Price is the same in all three markets.

Question 8

Mergers are closely scrutinized by the government because

Accepted Answer

A)  they might allow the firms involved to dominate the market and act as a legalized cartel (monopoly). 
B)  they always result in a more efficient market. 
C)  they always result in lower joint profits of the firms involved. 
D)  all mergers are undesirable. 
A)  they might allow the firms involved to dominate the market and act as a legalized cartel (monopoly). 
B)  they always result in a more efficient market. 
C)  they always result in lower joint profits of the firms involved. 
D)  all mergers are undesirable.

Question 9

Which of the following models results in the greatest total profit,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 10

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 total quantity,Q,is

Accepted Answer

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

Question 11

Perfect competition and monopolistic competition are similar in that both market structures include

Accepted Answer

A)  price-taking behavior by firms. 
B)  a homogeneous product. 
C)  no barriers to entry. 
D)  very few firms. 
A)  price-taking behavior by firms. 
B)  a homogeneous product. 
C)  no barriers to entry. 
D)  very few firms.

Question 12

The Stackelberg model is more appropriate than the Cournot model in situations where

Accepted Answer

A)  there are more than two firms. 
B)  all firms enter the market simultaneously. 
C)  one firm makes its output decision before the other. 
D)  firms will be likely to collude. 
A)  there are more than two firms. 
B)  all firms enter the market simultaneously. 
C)  one firm makes its output decision before the other. 
D)  firms will be likely to collude.

Question 13

In a Bertrand model,market power is a function of

Accepted Answer

A)  marginal cost. 
B)  the number of firms. 
C)  price elasticity of supply. 
D)  product differentiation. 
A)  marginal cost. 
B)  the number of firms. 
C)  price elasticity of supply. 
D)  product differentiation.

Question 14

Assuming a homogeneous product,the Bertrand equilibrium price is

Accepted Answer

A)  independent of the number of firms. 
B)  independent of the firm's marginal costs. 
C)  equal to the Cournot equilibrium price. 
D)  equal to the monopoly price. 
A)  independent of the number of firms. 
B)  independent of the firm's marginal costs. 
C)  equal to the Cournot equilibrium price. 
D)  equal to the monopoly price.

Question 15

What is the aspect of imperfect competition that is most distinct from perfect competition?

Accepted Answer

A)  free entry/exit 
B)  perfect information 
C)  differentiated products 
D)  zero profits 
A)  free entry/exit 
B)  perfect information 
C)  differentiated products 
D)  zero profits

Question 16

A typical firm in a cartel will hold which of the following attitudes?

Accepted Answer

A)  If everyone cheats, I'm better off, and so is everyone in the cartel. 
B)  If I alone cheat, I'm better off; if everyone cheats, I'm worse off. 
C)  I can never do better for myself than following agreed-upon cartel rules. 
D)  If I suspect others are planning to cheat, I'll do best for myself by deciding not to cheat. 
A)  If everyone cheats, I'm better off, and so is everyone in the cartel. 
B)  If I alone cheat, I'm better off; if everyone cheats, I'm worse off. 
C)  I can never do better for myself than following agreed-upon cartel rules. 
D)  If I suspect others are planning to cheat, I'll do best for myself by deciding not to cheat.

Question 17

Suppose that government requires airline companies to have at least 30 airplanes and serve at least 20 different airports.This is an example of

Accepted Answer

A)  safety concerns. 
B)  perfect information. 
C)  barriers to entry. 
D)  labor union power. 
A)  safety concerns. 
B)  perfect information. 
C)  barriers to entry. 
D)  labor union power.

Question 18

In a Bertrand model with differentiated products,

Accepted Answer

A)  firms can set price above marginal cost. 
B)  firms set price at marginal cost. 
C)  price is independent of marginal cost. 
D)  firms set price independently of one another. 
A)  firms can set price above marginal cost. 
B)  firms set price at marginal cost. 
C)  price is independent of marginal cost. 
D)  firms set price independently of one another.

Question 19

Suppose two Cournot duopolist firms operate at zero marginal cost.The market demand is p = a - bQ.Each firm will produce

Accepted Answer

A)  a/b. 
B)  a/2b. 
C)  a/3b. 
D)  a/4b. 
A)  a/b. 
B)  a/2b. 
C)  a/3b. 
D)  a/4b.

Question 20

The Organization of Petroleum Exporting Countries (OPEC)is an example of a(n)

Accepted Answer

A)  oil monopoly. 
B)  cartel. 
C)  competitive arrangement. 
D)  monopolistically competitive arrangement. 
A)  oil monopoly. 
B)  cartel. 
C)  competitive arrangement. 
D)  monopolistically competitive arrangement.

The Cournot model assumes that firm A maximizes its profit,holding firm B's output constant.

Suppose duopolists face the market inverse demand curve P = 100 - Q,Q = q₁ + q₂,and both firms have a constant marginal cost of 10 and no fixed costs.If firm 1 is a Stackelberg leader and firm 2's best response function is ,at the Nash-Stackelberg equilibrium firm 2's profit is

A competitive market structure differs from the monopoly,oligopoly,and monopolistic competition structures in the

Which of the following market structures is (are)capable of earning positive economic profits in the long run?

Which of the following market models results in the highest price assuming a fixed number of firms with identical costs and a given demand curve?

Mergers are closely scrutinized by the government because

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

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 total quantity,Q,is

Perfect competition and monopolistic competition are similar in that both market structures include

The Stackelberg model is more appropriate than the Cournot model in situations where

In a Bertrand model,market power is a function of

Assuming a homogeneous product,the Bertrand equilibrium price is

What is the aspect of imperfect competition that is most distinct from perfect competition?

A typical firm in a cartel will hold which of the following attitudes?

Suppose that government requires airline companies to have at least 30 airplanes and serve at least 20 different airports.This is an example of

In a Bertrand model with differentiated products,

Suppose two Cournot duopolist firms operate at zero marginal cost.The market demand is p = a - bQ.Each firm will produce

The Organization of Petroleum Exporting Countries (OPEC)is an example of a(n)

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 assumes that firm A maximizes its profit,holding firm B's output constant.

Suppose duopolists face the market inverse demand curve P = 100 - Q,Q = q1 + q2,and both firms have a constant marginal cost of 10 and no fixed costs.If firm 1 is a Stackelberg leader and firm 2's best response function is ,at the Nash-Stackelberg equilibrium firm 2's profit is

A competitive market structure differs from the monopoly,oligopoly,and monopolistic competition structures in the

Suppose duopolists face the market inverse demand curve P = 100 - Q,Q = q1 + q2,and both firms have a constant marginal cost of 10 and no fixed costs.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 1's profit is

Which of the following market structures is (are)capable of earning positive economic profits in the long run?

Which of the following market models results in the highest price assuming a fixed number of firms with identical costs and a given demand curve?

Mergers are closely scrutinized by the government because

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

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 total quantity,Q,is

Perfect competition and monopolistic competition are similar in that both market structures include

The Stackelberg model is more appropriate than the Cournot model in situations where

In a Bertrand model,market power is a function of

Assuming a homogeneous product,the Bertrand equilibrium price is

What is the aspect of imperfect competition that is most distinct from perfect competition?

A typical firm in a cartel will hold which of the following attitudes?

Suppose that government requires airline companies to have at least 30 airplanes and serve at least 20 different airports.This is an example of

In a Bertrand model with differentiated products,

Suppose two Cournot duopolist firms operate at zero marginal cost.The market demand is p = a - bQ.Each firm will produce

The Organization of Petroleum Exporting Countries (OPEC)is an example of a(n)

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 and no fixed costs.If firm 1 is a Stackelberg leader and firm 2's best response function is ,at the Nash-Stackelberg equilibrium firm 2's profit 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 total quantity,Q,is