Question 1

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  False

Question 2

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. D

Question 3

The number of firms in a monopolistically competitive market will be smaller if

Accepted Answer

A)  the market demand curve shifts rightward. 
B)  the minimum efficient scale is lower. 
C)  fixed costs are smaller. 
D)  fixed costs are larger. 
A)  the market demand curve shifts rightward. 
B)  the minimum efficient scale is lower. 
C)  fixed costs are smaller. 
D)  fixed costs are larger. D

Question 4

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 5

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

Accepted Answer

A)  Cournot 
B)  Stackelberg 
C)  Monopoly 
D)  Cartel 
A)  Cournot 
B)  Stackelberg 
C)  Monopoly 
D)  Cartel

Question 6

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 7

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 8

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 9

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 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 market price,P,is

Accepted Answer

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

Question 11

In the short run,a monopolistic competitor

Accepted Answer

A)  produces at minimum efficient scale. 
B)  produces where P = AC. 
C)  sets P = MC. 
D)  sets MR = MC. 
A)  produces at minimum efficient scale. 
B)  produces where P = AC. 
C)  sets P = MC. 
D)  sets MR = MC.

Question 12

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 13

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 14

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 15

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 16

Strategic trade policy requires ALL of the following EXCEPT

Accepted Answer

A)  subsidies set before output levels. 
B)  non-retaliation of the trading partner. 
C)  credible actions on the part of the subsidizing government. 
D)  incomplete information on the part of the government. 
A)  subsidies set before output levels. 
B)  non-retaliation of the trading partner. 
C)  credible actions on the part of the subsidizing government. 
D)  incomplete information on the part of the government.

Question 17

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.

Question 18

Cartels are inherently self-destructive because each member firm has the incentive to cheat on the cartel agreement.

Accepted Answer

A) True 
 B)False

Question 19

-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 20

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.

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

Which of the following market structures have market power?

The number of firms in a monopolistically competitive market will be smaller if

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?

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

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

In a Bertrand model with differentiated products,

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.

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 the short run,a monopolistic competitor

In a Bertrand model,market power is a function of

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

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

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.

Strategic trade policy requires ALL of the following EXCEPT

Regardless of market structure,all firms

Cartels are inherently self-destructive because each member firm has the incentive to cheat on the cartel agreement.

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

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

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

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

Which of the following market structures have market power?

The number of firms in a monopolistically competitive market will be smaller if

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?

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

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

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

In a Bertrand model with differentiated products,

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.

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 the short run,a monopolistic competitor

In a Bertrand model,market power is a function of

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

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

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.

Strategic trade policy requires ALL of the following EXCEPT

Regardless of market structure,all firms

Cartels are inherently self-destructive because each member firm has the incentive to cheat on the cartel agreement.

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

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

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 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