Question 1

Perfect competition and monopolistic competition are similar in that firms in both types of market structure will

Accepted Answer

A) act as price takers. 
B) produce a level of output where price equals marginal cost. 
C) earn zero profit in the long run. 
D) act as price setters. 
A) act as price takers. 
B) produce a level of output where price equals marginal cost. 
C) earn zero profit in the long run. 
D) act as price setters.

Question 2

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 3

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 4

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 5

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 6

Mergers are closely scrutinized by the government because

Accepted Answer

A) they might allow the firms involved to dominate the market and act as a legalized cartel (monopoly). 
B) they always result in a more efficient market. 
C) they always result in lower joint profits of the firms involved. 
D) all mergers are undesirable. 
A) they might allow the firms involved to dominate the market and act as a legalized cartel (monopoly). 
B) they always result in a more efficient market. 
C) they always result in lower joint profits of the firms involved. 
D) all mergers are undesirable.

Question 7

A group of firms are selling undifferentiated products if

Accepted Answer

A) consumers perceive the products identical between the firms. 
B) production costs are the same for all firms. 
C) the firms are selling goods that are identical,though consumers view them as different. 
D) the firms are part of a single cartel. 
A) consumers perceive the products identical between the firms. 
B) production costs are the same for all firms. 
C) the firms are selling goods that are identical,though consumers view them as different. 
D) the firms are part of a single cartel.

Question 8

Minimum efficient scale refers to the lowest level of output at which

Accepted Answer

A) the firm can earn a profit. 
B) average cost is minimized. 
C) the firm will operate. 
D) the average cost curve is downward sloping. 
A) the firm can earn a profit. 
B) average cost is minimized. 
C) the firm will operate. 
D) the average cost curve is downward sloping.

Question 9

The outcome of the Stackelberg model is

Accepted Answer

A) a Nash equilibrium. 
B) the same as the Cournot outcome. 
C) that the follower earns zero profit. 
D) that the follower cannot be on its best-response curve. 
A) a Nash equilibrium. 
B) the same as the Cournot outcome. 
C) that the follower earns zero profit. 
D) that the follower cannot be on its best-response curve.

Question 10

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 11

Consider a market with just one firm.The demand in the market is p = 18 - Q and the firm has a linear cost function C(Q)= 2Q.
a.How much output will this firm produce.What will be the profit and consumers surplus?
b.Suppose a second firm with the same cost function enters the market and the two firms compete in a Cournot style (simultaneous output choice).What will be the equilibrium price and quantity in the market? What is the total market profit and CS?

Accepted Answer

a.A monopolist will produce to maximize

Question 12

The market power for a firm in the Cournot model will be greater

Accepted Answer

A) if the market demand is more elastic. 
B) if there are fewer firms in the industry. 
C) if market demand is higher. 
D) the more output this firm produces. 
A) if the market demand is more elastic. 
B) if there are fewer firms in the industry. 
C) if market demand is higher. 
D) the more output this firm produces.

Question 13

If a Cournot duopolist announced that it will double its output,

Accepted Answer

A) it becomes the leader. 
B) the other firm does not view the announcement as credible. 
C) the other firm will shut down. 
D) the other firm will double output also. 
A) it becomes the leader. 
B) the other firm does not view the announcement as credible. 
C) the other firm will shut down. 
D) the other firm will double output also.

Question 14

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 15

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

Accepted Answer

A) the total output of other firms increases. 
B) the number of firms in the market increases. 
C) the number of firms in the market decreases. 
D) its marginal cost increases. 
A) the total output of other firms increases. 
B) the number of firms in the market increases. 
C) the number of firms in the market decreases. 
D) its marginal cost increases.

Question 16

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 17

In the Cournot model,if a firm's marginal cost increases,its best-response function will

Accepted Answer

A) shift inward. 
B) not change. 
C) shift outward. 
D) The shift is ambiguous. 
A) shift inward. 
B) not change. 
C) shift outward. 
D) The shift is ambiguous.

Question 18

The organization of petroleum exporting countries (OPEC)is an example of a(n)

Accepted Answer

A) oil monopoly. 
B) cartel. 
C) competitive arrangement. 
D) prisoners' dilemma. 
A) oil monopoly. 
B) cartel. 
C) competitive arrangement. 
D) prisoners' dilemma.

Question 19

Product differentiation

Accepted Answer

A) may allow firms to price above a competitive level. 
B) generates value as consumers value more choices. 
C) depends on perceived differences between products. 
D) All of the above. 
A) may allow firms to price above a competitive level. 
B) generates value as consumers value more choices. 
C) depends on perceived differences between products. 
D) All of the above.

Question 20

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.

Accepted Answer

First,the Cournot equilibrium.Firm A's p

Perfect competition and monopolistic competition are similar in that firms in both types of market structure will

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

In the long run,a monopolistic competitor

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

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.

Mergers are closely scrutinized by the government because

A group of firms are selling undifferentiated products if

Minimum efficient scale refers to the lowest level of output at which

The outcome of the Stackelberg model is

In the long run,a monopolistically competitive firm

The market power for a firm in the Cournot model will be greater

If a Cournot duopolist announced that it will double its output,

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

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

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.

In the Cournot model,if a firm's marginal cost increases,its best-response function will

The organization of petroleum exporting countries (OPEC)is an example of a(n)

Product differentiation

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.

Introduction

Supply and Demand

A Consumers Constrained Choice

Demand

Consumer Welfare and Policy Analysis

Firms and Production

Costs

Competitive Firms and Markets

Properties and Applications of the Competitive Model

General Equilibrium and Economic Welfare

Monopoly and Monopsony

Pricing and Advertising

Game Theory

Factor Markets

Uncertainty

Property Rights, Externalities, Rivalry, and Exclusion

Asymmetric Information

Contracts and Moral Hazards

Filters

Exam 14: Oligopoly and Monopolistic Competition

Perfect competition and monopolistic competition are similar in that firms in both types of market structure will

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

In the long run,a monopolistic competitor

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

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.

Mergers are closely scrutinized by the government because

A group of firms are selling undifferentiated products if

Minimum efficient scale refers to the lowest level of output at which

The outcome of the Stackelberg model is

In the long run,a monopolistically competitive firm

The market power for a firm in the Cournot model will be greater

If a Cournot duopolist announced that it will double its output,

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

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

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.

In the Cournot model,if a firm's marginal cost increases,its best-response function will

The organization of petroleum exporting countries (OPEC)is an example of a(n)

Product differentiation

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.

Introduction

Supply and Demand

A Consumers Constrained Choice

Demand

Consumer Welfare and Policy Analysis

Firms and Production

Costs

Competitive Firms and Markets

Properties and Applications of the Competitive Model

General Equilibrium and Economic Welfare

Monopoly and Monopsony

Pricing and Advertising

Game Theory

Factor Markets

Uncertainty

Property Rights, Externalities, Rivalry, and Exclusion

Asymmetric Information

Contracts and Moral Hazards

Filters