Question 1

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 2

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 3

Which of the following models results in the greatest deadweight loss 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 4

As the number of firms increases in a market,the differences between the Cournot,Stackelberg,and price-taking market structures

Accepted Answer

A)  decreases. 
B)  increases. 
C)  remains the same. 
D)  cannot be determined. 
A)  decreases. 
B)  increases. 
C)  remains the same. 
D)  cannot be determined.

Question 5

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 economic profit of each firm would be

Accepted Answer

A)  0. 
B)  50. 
C)  100. 
D)  200. 
A)  0. 
B)  50. 
C)  100. 
D)  200.

Question 6

Which of the following conditions can help prolong the life of a cartel?

Accepted Answer

A)  There are only a few firms in the market and they all belong to the cartel. 
B)  There are many firms in the market that are not members of the cartel. 
C)  It is difficult to know what price any cartel member is actually charging. 
D)  The cartel has no ability to punish members who cheat on the cartel. 
A)  There are only a few firms in the market and they all belong to the cartel. 
B)  There are many firms in the market that are not members of the cartel. 
C)  It is difficult to know what price any cartel member is actually charging. 
D)  The cartel has no ability to punish members who cheat on the cartel.

Question 7

Compared to a cartel,firms in a Cournot Oligopoly

Accepted Answer

A)  make more joint profit. 
B)  sell less output. 
C)  make less joint profit. 
D)  act independently. 
A)  make more joint profit. 
B)  sell less output. 
C)  make less joint profit. 
D)  act independently.

Question 8

If a cartel is unable to monitor its members and punish those firms that violate the agreement,then

Accepted Answer

A)  the member firms will each act as price setters. 
B)  the cartel will prosper in the long run. 
C)  the market will become a monopoly. 
D)  the cartel will fail. 
A)  the member firms will each act as price setters. 
B)  the cartel will prosper in the long run. 
C)  the market will become a monopoly. 
D)  the cartel will fail.

Question 9

Collusion is more successful in a game that will continue forever or in a game with an uncertain ending time than in a game with a known ending time.

Accepted Answer

A) True 
 B)False

Question 10

-The above figure shows the reaction functions for two pizza shops in a small isolated town.Collusion would result in

Accepted Answer

A)  each firm producing 25 pizzas. 
B)  each firm producing 40 pizzas. 
C)  the firms splitting the production of 100 making 50 pizzas each. 
D)  firm A monopolizing the market by selling 50 pizzas. 
A)  each firm producing 25 pizzas. 
B)  each firm producing 40 pizzas. 
C)  the firms splitting the production of 100 making 50 pizzas each. 
D)  firm A monopolizing the market by selling 50 pizzas.

Question 11

Strategic trade policy might work if

Accepted Answer

A)  trade decisions are made simultaneously by two countries. 
B)  trade decisions are made sequentially by two countries. 
C)  trade decisions entail response by a trading partner. 
D)  trade decisions are made in a random fashion. 
A)  trade decisions are made simultaneously by two countries. 
B)  trade decisions are made sequentially by two countries. 
C)  trade decisions entail response by a trading partner. 
D)  trade decisions are made in a random fashion.

Question 12

Which of the following models results in the highest level of output 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 13

Oligopoly differs from monopolistic competition in that an oligopoly includes

Accepted Answer

A)  product differentiation. 
B)  barriers to entry. 
C)  no barriers to entry. 
D)  downward-sloping demand curves facing the firm. 
A)  product differentiation. 
B)  barriers to entry. 
C)  no barriers to entry. 
D)  downward-sloping demand curves facing the firm.

Question 14

In the Cournot model,a firm maximizes profit by selecting

Accepted Answer

A)  its output, assuming that other firms keep their output constant. 
B)  its price, assuming that other firms keep their price constant. 
C)  its output, assuming that other firms will retaliate. 
D)  its price, assuming that other firms will retaliate. 
A)  its output, assuming that other firms keep their output constant. 
B)  its price, assuming that other firms keep their price constant. 
C)  its output, assuming that other firms will retaliate. 
D)  its price, assuming that other firms will retaliate.

Question 15

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 16

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 17

In the Cournot model,if the products are differentiated,

Accepted Answer

A)  this reduces the pressure of one firm's decisions on the other. 
B)  this increases the pressure of one firm's decisions on the other. 
C)  there is no difference between this model and one with homogeneous goods. 
D)  marginal costs are necessarily different. 
A)  this reduces the pressure of one firm's decisions on the other. 
B)  this increases the pressure of one firm's decisions on the other. 
C)  there is no difference between this model and one with homogeneous goods. 
D)  marginal costs are necessarily different.

Question 18

In comparing monopolistic competition to perfect competition,one can conclude that the lack of free entry is the key to having the ability to set price.

Accepted Answer

A) True 
 B)False

Question 19

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 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.

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

Product differentiation

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

As the number of firms increases in a market,the differences between the Cournot,Stackelberg,and price-taking market structures

Which of the following conditions can help prolong the life of a cartel?

Compared to a cartel,firms in a Cournot Oligopoly

If a cartel is unable to monitor its members and punish those firms that violate the agreement,then

Collusion is more successful in a game that will continue forever or in a game with an uncertain ending time than in a game with a known ending time.

-The above figure shows the reaction functions for two pizza shops in a small isolated town.Collusion would result in

Strategic trade policy might work if

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

Oligopoly differs from monopolistic competition in that an oligopoly includes

In the Cournot model,a firm maximizes profit by selecting

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

In the Cournot model,if the products are differentiated,

In comparing monopolistic competition to perfect competition,one can conclude that the lack of free entry is the key to having the ability to set price.

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

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

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

Product differentiation

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

As the number of firms increases in a market,the differences between the Cournot,Stackelberg,and price-taking market structures

Which of the following conditions can help prolong the life of a cartel?

Compared to a cartel,firms in a Cournot Oligopoly

If a cartel is unable to monitor its members and punish those firms that violate the agreement,then

Collusion is more successful in a game that will continue forever or in a game with an uncertain ending time than in a game with a known ending time.

-The above figure shows the reaction functions for two pizza shops in a small isolated town.Collusion would result in

Strategic trade policy might work if

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

Oligopoly differs from monopolistic competition in that an oligopoly includes

In the Cournot model,a firm maximizes profit by selecting

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

In the Cournot model,if the products are differentiated,

In comparing monopolistic competition to perfect competition,one can conclude that the lack of free entry is the key to having the ability to set price.

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

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