Exam 13: Oligopoly and Monopolistic Competition

Suppose the demand for pizza in a small isolated town is p = 10 - Q.There are only two firms,A and B,and each has a cost function TC = 2 + Q.Compare the firms' profits if they behave as Cournot duopolists with their profits if they form a cartel and share the market.

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

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

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 10 units and sells them at a price of 10 so that each firm makes zero economic profits.If they form a cartel,their inverse demand curve is

Monopolistic competition and perfect competition differ because

The outcome of the Stackelberg model is

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

Brand loyalty in monopolistically competitive markets manifests itself as

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?

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

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.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

Monopolistically competitive firms

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

Firms A and B are identical,produce identical products,and are the only firms in a market.Firm A's output is higher than Firm B's.This means that Firm B is the

-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.

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

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

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 firm 1's output is

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

In a sense,a cartel is self-destructive because