Exam 14: Oligopoly and Monopolistic Competition

If an incumbent cannot commit and faces an identical potential entrant with relatively high fixed costs that are below the level where entry is blockaded,the incumbent will

Suppose two Cournot duopolist firms operate at zero marginal cost.The market demand is p = a - bQ.Firm 1's best-response function is

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

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

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?

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

The number of firms in a monopolistically competitive market will be smaller if

What strategic advantage compared to a Cournot Oligopoly results in the Stackelberg outcome?

Suppose the demand for pizza in a small isolated town is p = 10 - Q.There are only two firms,A and B.Each has a cost function TC = 2 + Q.Determine the equilibrium quantities of each if firm A is the Stackelberg leader.

Which of the following is NOT an assumption of the initial Cournot Oligopoly Model?

Suppose Ralph sells bento lunches,which have the following demand: p_R = 100 - q_R - 0.5q_D where p_R is the price of Ralph's bentos and q_R is the number of bentos Ralph sells.q_D is the number of bentos Ralph's rival,Dave,sells.Dave's demand is given by: p_R = 100 - q_D - 0.5q_R where p_D is the price Dave can sell his bentos for.Suppose each seller has a cost per unit (average and marginal)of $1. a.How does this game differ from the Cournot model with identical products? Why do the demand curves indicate that the goods are differentiated - not perfect substitutes for one another? b.Compute the best response functions for each seller and the Nash Equilibrium outputs and prices.

In a Bertrand model with differentiated products,

Regardless of market structure,all firms

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

In a Nash-Cournot equilibrium where firms produce identical products with unequal costs,

In a Duopoly Nash-Cournot equilibrium,

Suppose the demand for Pepsi is q_p = 54 - 2p_p + 1p.The demand for Coke is q_c = 54 - 2p_c + 1p_p.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 to become q_p = 104 - 2p_p + 1p_c while the demand for Coke remains unchanged?

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.

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

Consider two Cournot competitors selling complementary goods with demand curves given by: p₁ = 100 - q₁ + .5q₂ p₂ = 100 - q₂ + .5q₁ Suppose each firm has a marginal and average cost of $10. a.What about the demand equations indicate that these goods are complements? How do they differ from the standard Cournot model? b.Find the equilibrium prices and quantities. c.Suppose the two firms merge.By doing so,the newly merged firm will act to maximize the joint profits ((q₁,q₂)= ₁(q₁,q₂)+ ₂(q₁,q₂)).Find the joint-profit maximizing price and quantities. d.Are the combined profits greater or smaller from merging? That is,is merging profitable for the firms? e.Are consumers better or worse off with the firms merging? How does this compare to the mergers of Cournot competitors selling substitutes? What does this imply about antitrust policy towards mergers of firms selling complementary goods (such as airplanes and engines,computers and processors,cars and tire companies,etc).