Question 1

The ability to set a price greater than marginal cost guarantees an economic profit for the monopolistic competitor (assuming P > AC).

Accepted Answer

A) True 
 B)False

Question 2

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 3

Suppose that market demand can be represented as p = 100 - 2Q.There are 10 identical firms producing an undifferentiated product,each with the total cost function TC = 50 + q2.Compare the competitive outcome with the cartel outcome.What is the individual firm's incentive to cheat on the cartel?

Accepted Answer

Each firm has MC = 2q,so that market sup

Question 4

Assuming a homogeneous product,the Bertrand duopoly equilibrium price is

Accepted Answer

A)  the same as the Cournot equilibrium price. 
B)  less than the Cournot equilibrium price. 
C)  greater than the Cournot equilibrium price. 
D)  equal to the monopoly price. 
A)  the same as the Cournot equilibrium price. 
B)  less than the Cournot equilibrium price. 
C)  greater than the Cournot equilibrium price. 
D)  equal to the monopoly price.

Question 5

Suppose the demand for pizza in a small isolated town is p = 10 - Q.The only two firms,A and B,behave as Cournot duopolists.Each has a cost function TC = 2 + Q.If the government wants to subsidize firm A to raise its output to that of a Stackelberg leader,how large should the subsidy be?

Accepted Answer

Firm B's profit is π = [10 - (q_A + q_B)]q_B -

Question 6

In the long run,a monopolistic competitor

Accepted Answer

A)  sets MR = MC. 
B)  produces where P = AC. 
C)  sets P > MC. 
D)  All of the above. 
A)  sets MR = MC. 
B)  produces where P = AC. 
C)  sets P > MC. 
D)  All of the above.

Question 7

In monopolistically competitive markets

Accepted Answer

A)  price is greater than it would be in perfect competition. 
B)  price is less than it would be in perfect monopoly. 
C)  quantity is greater than it would be in perfect monopoly. 
D)  All of the above. 
A)  price is greater than it would be in perfect competition. 
B)  price is less than it would be in perfect monopoly. 
C)  quantity is greater than it would be in perfect monopoly. 
D)  All of the above.

Question 8

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 9

As compared to the basic Nash-Cournot equilibrium for duopolists where the firms face the same market demand curve and have identical costs,in the situation where the firms produce products which are viewed by consumers as not being identical,

Accepted Answer

A)  there will generally be different prices charged by the two firms. 
B)  there will generally be different quantities produced by the two firms. 
C)  one or both of the firms may practice spurious differentiation. 
D)  All of the above. 
A)  there will generally be different prices charged by the two firms. 
B)  there will generally be different quantities produced by the two firms. 
C)  one or both of the firms may practice spurious differentiation. 
D)  All of the above.

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.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 price,P,is

Accepted Answer

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

Question 11

In which of the following market structures with 2 identical firms do both firms produce more than the Cournot outcome?

Accepted Answer

A)  Stackelberg Oligopoly 
B)  Cartel 
C)  Perfect Competition 
D)  None of the above. 
A)  Stackelberg Oligopoly 
B)  Cartel 
C)  Perfect Competition 
D)  None of the above.

Question 12

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.Determine the Cournot equilibrium.

Accepted Answer

Firm A's profit is π = [10 - (q_A + q_B)]q_A -

Question 13

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 14

Mergers may result in

Accepted Answer

A)  anticompetitive behavior. 
B)  more efficient production. 
C)  fewer firms in a market. 
D)  All of the above. 
A)  anticompetitive behavior. 
B)  more efficient production. 
C)  fewer firms in a market. 
D)  All of the above.

Question 15

Monopolistic competition and monopoly have all of the following in common EXCEPT

Accepted Answer

A)  P > MC. 
B)  firms are price setters. 
C)  barriers to entry. 
D)  MR = MC. 
A)  P > MC. 
B)  firms are price setters. 
C)  barriers to entry. 
D)  MR = MC.

Question 16

Which of the following is a necessary condition for government subsidies to influence a firm to choose an output level as if it were a Stackelberg leader?

Accepted Answer

A)  The subsidy must be announced before the firms choose output levels. 
B)  The subsidy must be equal to the firm's marginal cost. 
C)  The subsidy must be equal to the firm's rival's marginal cost. 
D)  The firm does not have any fixed costs. 
A)  The subsidy must be announced before the firms choose output levels. 
B)  The subsidy must be equal to the firm's marginal cost. 
C)  The subsidy must be equal to the firm's rival's marginal cost. 
D)  The firm does not have any fixed costs.

Question 17

The Cournot Model of Oligopoly assumes that

Accepted Answer

A)  firms decide what quantity to produce. 
B)  firms make their decisions simultaneously. 
C)  firms do not cooperate. 
D)  All of the above. 
A)  firms decide what quantity to produce. 
B)  firms make their decisions simultaneously. 
C)  firms do not cooperate. 
D)  All of the above.

Question 18

If two firms playing Cournot are identical with decreasing average costs,how should the firms divide production to maximize joint profits?

Accepted Answer

One firm should produce the mo

The ability to set a price greater than marginal cost guarantees an economic profit for the monopolistic competitor (assuming P > AC).

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

Suppose that market demand can be represented as p = 100 - 2Q.There are 10 identical firms producing an undifferentiated product,each with the total cost function TC = 50 + q².Compare the competitive outcome with the cartel outcome.What is the individual firm's incentive to cheat on the cartel?

Assuming a homogeneous product,the Bertrand duopoly equilibrium price is

Suppose the demand for pizza in a small isolated town is p = 10 - Q.The only two firms,A and B,behave as Cournot duopolists.Each has a cost function TC = 2 + Q.If the government wants to subsidize firm A to raise its output to that of a Stackelberg leader,how large should the subsidy be?

In the long run,a monopolistic competitor

In monopolistically competitive markets

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?

As compared to the basic Nash-Cournot equilibrium for duopolists where the firms face the same market demand curve and have identical costs,in the situation where the firms produce products which are viewed by consumers as not being identical,

In which of the following market structures with 2 identical firms do both firms produce more than the Cournot outcome?

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.Determine the Cournot equilibrium.

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

Mergers may result in

Monopolistic competition and monopoly have all of the following in common EXCEPT

Which of the following is a necessary condition for government subsidies to influence a firm to choose an output level as if it were a Stackelberg leader?

The Cournot Model of Oligopoly assumes that

If two firms playing Cournot are identical with decreasing average costs,how should the firms divide production to maximize joint profits?

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 ability to set a price greater than marginal cost guarantees an economic profit for the monopolistic competitor (assuming P > AC).

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

Suppose that market demand can be represented as p = 100 - 2Q.There are 10 identical firms producing an undifferentiated product,each with the total cost function TC = 50 + q2.Compare the competitive outcome with the cartel outcome.What is the individual firm's incentive to cheat on the cartel?

Assuming a homogeneous product,the Bertrand duopoly equilibrium price is

Suppose the demand for pizza in a small isolated town is p = 10 - Q.The only two firms,A and B,behave as Cournot duopolists.Each has a cost function TC = 2 + Q.If the government wants to subsidize firm A to raise its output to that of a Stackelberg leader,how large should the subsidy be?

In the long run,a monopolistic competitor

In monopolistically competitive markets

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?

As compared to the basic Nash-Cournot equilibrium for duopolists where the firms face the same market demand curve and have identical costs,in the situation where the firms produce products which are viewed by consumers as not being identical,

In which of the following market structures with 2 identical firms do both firms produce more than the Cournot outcome?

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.Determine the Cournot equilibrium.

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

Mergers may result in

Monopolistic competition and monopoly have all of the following in common EXCEPT

Which of the following is a necessary condition for government subsidies to influence a firm to choose an output level as if it were a Stackelberg leader?

The Cournot Model of Oligopoly assumes that

If two firms playing Cournot are identical with decreasing average costs,how should the firms divide production to maximize joint profits?

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 that market demand can be represented as p = 100 - 2Q.There are 10 identical firms producing an undifferentiated product,each with the total cost function TC = 50 + q².Compare the competitive outcome with the cartel outcome.What is the individual firm's incentive to cheat on the cartel?