Question 1

In the Stackelberg model of oligopoly:

Accepted Answer

A) each firm takes the other firm's output as constant in deciding its own output level. 
B) the leader firm's output is determined at the point where demand equals price. 
C) the leader firm selects its output first,taking the reactions of follower firms into account. 
D) each firm decides its output based on the interaction of demand and supply. 
A) each firm takes the other firm's output as constant in deciding its own output level. 
B) the leader firm's output is determined at the point where demand equals price. 
C) the leader firm selects its output first,taking the reactions of follower firms into account. 
D) each firm decides its output based on the interaction of demand and supply.

Question 2

Which of the following is a defining characteristic of an oligopoly?

Accepted Answer

A) A large number of sellers 
B) Mutual interdependence between firms 
C) Economies of scale in production 
D) A large number of buyers 
A) A large number of sellers 
B) Mutual interdependence between firms 
C) Economies of scale in production 
D) A large number of buyers

Question 3

Amazon.com,Starbucks,and eBay are all examples of firms that were the first to establish their presence in their respective markets.Would you consider any of these firms to be dominant in that they set the market price and other firms act as perfectly competitive firms using this market price?

Accepted Answer

Amazon.com was not only the first major

Question 4

Which of the following is true of the Cournot duopoly model?

Accepted Answer

A) It shows how the interaction of uncoordinated output decisions of rival firms leads to equilibrium in the oligopoly market. 
B) It explains how prices are determined in a market that has a large number of firms and a homogeneous product. 
C) It shows how equilibrium is attained in a market where two firms collude to set output and price equal to the monopoly output and price. 
D) It explains how prices are determined in a market with a single dominant firm and a large number of competitive fringe firms. 
A) It shows how the interaction of uncoordinated output decisions of rival firms leads to equilibrium in the oligopoly market. 
B) It explains how prices are determined in a market that has a large number of firms and a homogeneous product. 
C) It shows how equilibrium is attained in a market where two firms collude to set output and price equal to the monopoly output and price. 
D) It explains how prices are determined in a market with a single dominant firm and a large number of competitive fringe firms.

Question 5

How does the Stackelberg model of oligopoly differ from the dominant firm model?

Accepted Answer

A) The Stackelberg model assumes a single leader firm unlike the dominant firm model where all firms share output equally. 
B) In the dominant firm model,the fringe firms are competitive while in the Stackelberg model,the follower firms display Cournot behavior. 
C) The dominant firm model is only applicable to a duopoly while the Stackelberg model can be applied to all oligopolistic markets. 
D) The Stackelberg leader produces along the market demand curve while the dominant firm produces along the residual demand curve. 
A) The Stackelberg model assumes a single leader firm unlike the dominant firm model where all firms share output equally. 
B) In the dominant firm model,the fringe firms are competitive while in the Stackelberg model,the follower firms display Cournot behavior. 
C) The dominant firm model is only applicable to a duopoly while the Stackelberg model can be applied to all oligopolistic markets. 
D) The Stackelberg leader produces along the market demand curve while the dominant firm produces along the residual demand curve.

Question 6

Figure 13-1 shows the Stackelberg model of a duopoly.Both firms face constant marginal costs equal to OJ and the market demand curve is AD.The Stackelberg firm produces an output of OF and OF is equal to FL.  
-Refer to Figure 13-1.The difference between the total industry output produced under a perfect competition model and a Stackelberg model is represented by the distance _____.

Accepted Answer

A) KF 
B) KL 
C) LE 
D) FL 
A) KF 
B) KL 
C) LE 
D) FL

Question 7

Using a graph,show the equilibrium price and output for a perfectly competitive firm.If all the firms in the industry colluded to increase their profits,how would the equilibrium change for each firm? Assume that each firm produces an equal share of the industry output.

Accepted Answer

In a perfectly competitive industry with

Question 8

If,in the Cournot model of a duopoly,the firms colluded instead of behaving independently:

Accepted Answer

A) the outcome would be closer to the competitive equilibrium. 
B) the outcome would be indeterminate. 
C) firms could increase their combined profit. 
D) the price will be below average cost. 
A) the outcome would be closer to the competitive equilibrium. 
B) the outcome would be indeterminate. 
C) firms could increase their combined profit. 
D) the price will be below average cost.

Question 9

Which of the following would weaken the argument that monopolistically competitive firms should be regulated by the government?

Accepted Answer

A) Monopolistically competitive firms and perfectly competitive firms are similar in that their equilibrium prices and quantities are efficient. 
B) Monopolistically competitive firms earn zero economic profits in the short run just as perfectly competitive firms do. 
C) The benefits of increased product variety produced by monopolistic competition offsets the relatively small welfare costs. 
D) The cost of regulating a monopolistically competitive firm could possibly be lower than the deadweight loss from monopolistic competition. 
A) Monopolistically competitive firms and perfectly competitive firms are similar in that their equilibrium prices and quantities are efficient. 
B) Monopolistically competitive firms earn zero economic profits in the short run just as perfectly competitive firms do. 
C) The benefits of increased product variety produced by monopolistic competition offsets the relatively small welfare costs. 
D) The cost of regulating a monopolistically competitive firm could possibly be lower than the deadweight loss from monopolistic competition.

Question 10

The main assumption of the Cournot model:

Accepted Answer

A) is more plausible the larger the number of firms in the industry. 
B) is that each firm takes the other firm's price as given. 
C) is not valid once equilibrium is established in the market. 
D) takes into account the reactions of other firms. 
A) is more plausible the larger the number of firms in the industry. 
B) is that each firm takes the other firm's price as given. 
C) is not valid once equilibrium is established in the market. 
D) takes into account the reactions of other firms.

Question 11

Suppose that most consumers who buy portable camping stoves buy the ones produced by Marshall and Blatt (M&B).Besides M&B,the portable stove market has a large number of smaller suppliers.The market demand curve for portable stoves is given by QD = 100 - 0.5P.The supply curve for all the other firms taken together is QS = 0.5P.M&B's total cost function has been estimated to be C = 5QM.Given that M&B sets output first,calculate how the total quantity supplied in the market is divided between M&B and the other firms.What is the price in the market?

Accepted Answer

From the information given,we can conclu

Question 12

Which of the following is a key element of the Cournot model?

Accepted Answer

A) The price in an oligopoly market increases proportionally for both firms. 
B) The output of one firm is determined keeping the output of other firms fixed. 
C) The output of both firms in an oligopoly market is kept fixed. 
D) The price in an oligopoly market will not increase above a certain level. 
A) The price in an oligopoly market increases proportionally for both firms. 
B) The output of one firm is determined keeping the output of other firms fixed. 
C) The output of both firms in an oligopoly market is kept fixed. 
D) The price in an oligopoly market will not increase above a certain level.

Question 13

A monopolistically competitive firm is considered to have excess capacity because it:

Accepted Answer

A) does not operate at the minimum point on its long-run average cost curve. 
B) does not operate at the minimum point on its marginal cost curve. 
C) operates at the point where average cost is greater than average revenue. 
D) operates at the point where marginal cost is above average revenue. 
A) does not operate at the minimum point on its long-run average cost curve. 
B) does not operate at the minimum point on its marginal cost curve. 
C) operates at the point where average cost is greater than average revenue. 
D) operates at the point where marginal cost is above average revenue.

Question 14

A monopolistically competitive industry is characterized by:

Accepted Answer

A) excess capacity. 
B) an efficient level of output. 
C) inelastic demand for its products. 
D) positive economic profits in the long run. 
A) excess capacity. 
B) an efficient level of output. 
C) inelastic demand for its products. 
D) positive economic profits in the long run.

Question 15

Unlike a monopolistically competitive market,firms in a perfectly competitive market:

Accepted Answer

A) equate marginal cost and marginal revenue. 
B) set price at a level that is greater than marginal cost. 
C) do not have any entry or exit barriers. 
D) produce homogeneous goods. 
A) equate marginal cost and marginal revenue. 
B) set price at a level that is greater than marginal cost. 
C) do not have any entry or exit barriers. 
D) produce homogeneous goods.

Question 16

In the Stackelberg model of oligopoly,the leader firm:

Accepted Answer

A) sets the price in the market which the follower firms take as given. 
B) produces a larger quantity than follower firms and enhances its profits. 
C) chooses output and prices irrespective of the other firms in the market. 
D) produces a level of output which is equal to that of the follower firms. 
A) sets the price in the market which the follower firms take as given. 
B) produces a larger quantity than follower firms and enhances its profits. 
C) chooses output and prices irrespective of the other firms in the market. 
D) produces a level of output which is equal to that of the follower firms.

Question 17

The residual demand curve shows:

Accepted Answer

A) the quantity that the dominant firm sells at each price after accounting for the fringe firms' output. 
B) the quantity that fringe firms sell at each price based on the output of the dominant firm. 
C) the quantity that the dominant firm supplies at each price irrespective of the market output. 
D) the combined quantity that is sold at each price in the market by the dominant and fringe firms. 
A) the quantity that the dominant firm sells at each price after accounting for the fringe firms' output. 
B) the quantity that fringe firms sell at each price based on the output of the dominant firm. 
C) the quantity that the dominant firm supplies at each price irrespective of the market output. 
D) the combined quantity that is sold at each price in the market by the dominant and fringe firms.

Question 18

(
A)Assume two firms face a market demand curve of P = a - bQ,where a and b are positive constants,and marginal cost equals c for both firms.Fill in the following table,identify the respective points of equilibrium on the graph below,and explain the relevant characteristics of each model as you work through them.

Accepted Answer

As seen from the table and the graph of

In the Stackelberg model of oligopoly:

Which of the following is a defining characteristic of an oligopoly?

Amazon.com,Starbucks,and eBay are all examples of firms that were the first to establish their presence in their respective markets.Would you consider any of these firms to be dominant in that they set the market price and other firms act as perfectly competitive firms using this market price?

Which of the following is true of the Cournot duopoly model?

How does the Stackelberg model of oligopoly differ from the dominant firm model?

Using a graph,show the equilibrium price and output for a perfectly competitive firm.If all the firms in the industry colluded to increase their profits,how would the equilibrium change for each firm? Assume that each firm produces an equal share of the industry output.

If,in the Cournot model of a duopoly,the firms colluded instead of behaving independently:

Which of the following would weaken the argument that monopolistically competitive firms should be regulated by the government?

The main assumption of the Cournot model:

Which of the following is a key element of the Cournot model?

A monopolistically competitive firm is considered to have excess capacity because it:

A monopolistically competitive industry is characterized by:

Unlike a monopolistically competitive market,firms in a perfectly competitive market:

In the Stackelberg model of oligopoly,the leader firm:

The residual demand curve shows:

An Introduction to Microeconomics

Supply and Demand

The Theory of Consumer Choice

Individual and Market Demand

Using Consumer Choice Theory

Exchange, Efficiency, and Prices

Production

The Cost of Production

Profit Maximization in Perfectly Competitive Markets

Using the Competitive Model

Monopoly

Product Pricing With Monopoly Power

Game Theory and the Economics of Information

Using Noncompetitive Market Models

Employment and Pricing of Inputs

Wages, Rent, Interest, and Profit

Using Input Market Analysis

General Equilibrium Analysis and Economic Efficiency

Public Goods and Externalities

Filters

Exam 13: Monopolistic Competition and Oligopoly

In the Stackelberg model of oligopoly:

Which of the following is a defining characteristic of an oligopoly?

Amazon.com,Starbucks,and eBay are all examples of firms that were the first to establish their presence in their respective markets.Would you consider any of these firms to be dominant in that they set the market price and other firms act as perfectly competitive firms using this market price?

Which of the following is true of the Cournot duopoly model?

How does the Stackelberg model of oligopoly differ from the dominant firm model?

Using a graph,show the equilibrium price and output for a perfectly competitive firm.If all the firms in the industry colluded to increase their profits,how would the equilibrium change for each firm? Assume that each firm produces an equal share of the industry output.

If,in the Cournot model of a duopoly,the firms colluded instead of behaving independently:

Which of the following would weaken the argument that monopolistically competitive firms should be regulated by the government?

The main assumption of the Cournot model:

Which of the following is a key element of the Cournot model?

A monopolistically competitive firm is considered to have excess capacity because it:

A monopolistically competitive industry is characterized by:

Unlike a monopolistically competitive market,firms in a perfectly competitive market:

In the Stackelberg model of oligopoly,the leader firm:

The residual demand curve shows:

An Introduction to Microeconomics

Supply and Demand

The Theory of Consumer Choice

Individual and Market Demand

Using Consumer Choice Theory

Exchange, Efficiency, and Prices

Production

The Cost of Production

Profit Maximization in Perfectly Competitive Markets

Using the Competitive Model

Monopoly

Product Pricing With Monopoly Power

Game Theory and the Economics of Information

Using Noncompetitive Market Models

Employment and Pricing of Inputs

Wages, Rent, Interest, and Profit

Using Input Market Analysis

General Equilibrium Analysis and Economic Efficiency

Public Goods and Externalities

Filters