Question 1

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 2

Two firms sell 100% orange juice in 10 ounce bottles.The juice is only good for one week.The two firms have contracts for all the oranges produced in a large geographic area.Each firm decides how many bottles of juice to produce at the same time.This market is best described with a

Accepted Answer

A)  Bertrand model. 
B)  Stackelberg model. 
C)  monopolistic competition model. 
D)  Cournot model. 
A)  Bertrand model. 
B)  Stackelberg model. 
C)  monopolistic competition model. 
D)  Cournot model.

Question 3

Two identical firms that share a market and produce a homogeneous good will find which of the following market outcomes LEAST desirable?

Accepted Answer

A)  Bertrand Oligopoly 
B)  Cournot Oligopoly 
C)  Cartel 
D)  All are equally preferable. 
A)  Bertrand Oligopoly 
B)  Cournot Oligopoly 
C)  Cartel 
D)  All are equally preferable.

Question 4

A firm with a flat demand curve

Accepted Answer

A)  has no brand loyalty. 
B)  has weak brand loyalty. 
C)  has strong brand loyalty. 
D)  isn't really worried about brand loyalty; flat demand curves guarantee zero profit. 
A)  has no brand loyalty. 
B)  has weak brand loyalty. 
C)  has strong brand loyalty. 
D)  isn't really worried about brand loyalty; flat demand curves guarantee zero profit.

Question 5

The Bertrand model of price setting assumes that a firm chooses its price

Accepted Answer

A)  independently of what price other firms charge. 
B)  subject to what price rival firms are charging. 
C)  so that joint profits are maximized. 
D)  without considering the shape of the demand curve. 
A)  independently of what price other firms charge. 
B)  subject to what price rival firms are charging. 
C)  so that joint profits are maximized. 
D)  without considering the shape of the demand curve.

Question 6

In the long run,a monopolistically competitive firm

Accepted Answer

A)  earns zero economic profit. 
B)  produces at minimum average cost. 
C)  operates at full capacity. 
D)  All of the above. 
A)  earns zero economic profit. 
B)  produces at minimum average cost. 
C)  operates at full capacity. 
D)  All of the above.

Question 7

Assuming Cournot behavior,what happens to the market output,the price of the output,and each firm's output as the number of firms in a market increases?

Accepted Answer

As the number of firms increas

Question 8

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 9

-The above figure shows the reaction functions for two pizza shops in a small isolated town.Firm B producing 100 pizzas and firm A producing 50 pizzas is not a Cournot equilibrium because

Accepted Answer

A)  Cournot duopolists agree to share the market equally. 
B)  firm B is not on its best-response function. 
C)  firm A is not on its best-response function. 
D)  neither firm is on its best-response function. 
A)  Cournot duopolists agree to share the market equally. 
B)  firm B is not on its best-response function. 
C)  firm A is not on its best-response function. 
D)  neither firm is on its best-response function.

Question 10

Draw a graph that shows the effect on the equilibrium quantities if the government subsidizes one firm in a Cournot duopoly with a per-unit subsidy.Assume that the best-response functions are linear.Explain the new equilibrium quantities.

Accepted Answer

@#IMG-DLM& See the above figure.The subsidized fir

Question 11

If there are 2 identical firms in a market that choose the quantity they produce,total welfare is the highest when there is a cartel.

Accepted Answer

A) True 
 B)False

Question 12

Explain why a monopoly or a perfectly competitive firm does not consider a rival firm's behavior,but an oligopoly and a monopolistically competitive firm do.

Accepted Answer

A monopoly has no rivals.The market pric

Question 13

One criticism of the Bertrand pricing model is that

Accepted Answer

A)  the model is implausible when there is product differentiation. 
B)  when there is an oligopoly with no product differentiation, the model's prediction is inconsistent with reality. 
C)  the model's predicted price is solely a function of demand conditions. 
D)  the model's predicted price is dependent on the number of firms. 
A)  the model is implausible when there is product differentiation. 
B)  when there is an oligopoly with no product differentiation, the model's prediction is inconsistent with reality. 
C)  the model's predicted price is solely a function of demand conditions. 
D)  the model's predicted price is dependent on the number of firms.

Question 14

Suppose a monopolistically competitive industry evolved into a perfectly competitive industry.Which of the following statements is correct?

Accepted Answer

A)  The industry would produce more output and charge a lower price after the change. 
B)  The industry would produce at decreasing returns to scale. 
C)  Elasticity of demand for the firm's product would remain the same after this change occurred. 
D)  This industry would produce the same level of output at lower prices in the long run than before the change. 
A)  The industry would produce more output and charge a lower price after the change. 
B)  The industry would produce at decreasing returns to scale. 
C)  Elasticity of demand for the firm's product would remain the same after this change occurred. 
D)  This industry would produce the same level of output at lower prices in the long run than before the change.

Question 15

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 16

Product differentiation allows a firm to charge a higher price because the residual demand curve facing the firm

Accepted Answer

A)  is more elastic than the residual demand curve without product differentiation. 
B)  is less elastic than the residual demand curve without product differentiation. 
C)  is horizontal. 
D)  shifts to the left. 
A)  is more elastic than the residual demand curve without product differentiation. 
B)  is less elastic than the residual demand curve without product differentiation. 
C)  is horizontal. 
D)  shifts to the left.

Question 17

-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 18

In a Bertrand model,graphically,the intersection of all firms' best-response curves determines

Accepted Answer

A)  the Nash equilibrium prices. 
B)  the dominant strategy for each firm. 
C)  the degree of product differentiation. 
D)  the price of the market leader. 
A)  the Nash equilibrium prices. 
B)  the dominant strategy for each firm. 
C)  the degree of product differentiation. 
D)  the price of the market leader.

Question 19

Explain why gasoline stations across the street from each other with large signs displaying their prices may "legally" jointly set monopoly prices.

Accepted Answer

A gasoline station posts its prices on a

Question 20

Suppose the demand for Pepsi-Cola is qp = 54 - 2pp + 1pc.The demand for Coca-Cola is
qc = 54 - 2pc + 1pp.Each firm faces a constant marginal cost of zero.Determine the Bertrand equilibrium prices.What happens to the Bertrand equilibrium prices and profits if increased differentiation causes the demand for Pepsi-Cola to become qp = 104 - 2pp + 1pc while the demand for Coca-Cola remains unchanged?

Accepted Answer

For Pepsi-Cola,profit maximization means

Assuming a homogeneous product,the Bertrand equilibrium price is

Two firms sell 100% orange juice in 10 ounce bottles.The juice is only good for one week.The two firms have contracts for all the oranges produced in a large geographic area.Each firm decides how many bottles of juice to produce at the same time.This market is best described with a

Two identical firms that share a market and produce a homogeneous good will find which of the following market outcomes LEAST desirable?

A firm with a flat demand curve

The Bertrand model of price setting assumes that a firm chooses its price

In the long run,a monopolistically competitive firm

Assuming Cournot behavior,what happens to the market output,the price of the output,and each firm's output as the number of firms in a market increases?

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

-The above figure shows the reaction functions for two pizza shops in a small isolated town.Firm B producing 100 pizzas and firm A producing 50 pizzas is not a Cournot equilibrium because

Draw a graph that shows the effect on the equilibrium quantities if the government subsidizes one firm in a Cournot duopoly with a per-unit subsidy.Assume that the best-response functions are linear.Explain the new equilibrium quantities.

If there are 2 identical firms in a market that choose the quantity they produce,total welfare is the highest when there is a cartel.

Explain why a monopoly or a perfectly competitive firm does not consider a rival firm's behavior,but an oligopoly and a monopolistically competitive firm do.

One criticism of the Bertrand pricing model is that

Suppose a monopolistically competitive industry evolved into a perfectly competitive industry.Which of the following statements is correct?

Product differentiation allows a firm to charge a higher price because the residual demand curve facing the firm

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

In a Bertrand model,graphically,the intersection of all firms' best-response curves determines

Explain why gasoline stations across the street from each other with large signs displaying their prices may "legally" jointly set monopoly prices.

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

Assuming a homogeneous product,the Bertrand equilibrium price is

Two firms sell 100% orange juice in 10 ounce bottles.The juice is only good for one week.The two firms have contracts for all the oranges produced in a large geographic area.Each firm decides how many bottles of juice to produce at the same time.This market is best described with a

Two identical firms that share a market and produce a homogeneous good will find which of the following market outcomes LEAST desirable?

A firm with a flat demand curve

The Bertrand model of price setting assumes that a firm chooses its price

In the long run,a monopolistically competitive firm

Assuming Cournot behavior,what happens to the market output,the price of the output,and each firm's output as the number of firms in a market increases?

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

-The above figure shows the reaction functions for two pizza shops in a small isolated town.Firm B producing 100 pizzas and firm A producing 50 pizzas is not a Cournot equilibrium because

Draw a graph that shows the effect on the equilibrium quantities if the government subsidizes one firm in a Cournot duopoly with a per-unit subsidy.Assume that the best-response functions are linear.Explain the new equilibrium quantities.

If there are 2 identical firms in a market that choose the quantity they produce,total welfare is the highest when there is a cartel.

Explain why a monopoly or a perfectly competitive firm does not consider a rival firm's behavior,but an oligopoly and a monopolistically competitive firm do.

One criticism of the Bertrand pricing model is that

Suppose a monopolistically competitive industry evolved into a perfectly competitive industry.Which of the following statements is correct?

Product differentiation allows a firm to charge a higher price because the residual demand curve facing the firm

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

In a Bertrand model,graphically,the intersection of all firms' best-response curves determines

Explain why gasoline stations across the street from each other with large signs displaying their prices may "legally" jointly set monopoly prices.

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