Exam 13: Monopolistic Competition and Oligopoly

Assume that Ikea® and Pottery Barn® are two new firms that are planning to enter the furniture market.They face the inverse market demand curve P = 60 - Q.Given that both firms have zero marginal costs,show that Ikea's profit is lower in the Cournot model than in the Stackelberg model.

In the dominant firm model of oligopoly,the dominant firm assumes that the other firms in the market:

Which of the following is a characteristic of monopolistic competition?

How is total output determined in the dominant firm model?

In the dominant firm model,if the dominant firm's market share is 3/7,its elasticity of demand is 10 and the elasticity of supply of the competitive fringe firms is 4,then the elasticity of market demand must be _____.

What is a cartel and why are cartels considered to be inherently unstable?

The Organization of the Petroleum Exporting Countries [OPEC] serves the global oil market.Suppose Saudi Arabia,an OPEC member country,produces 50% of the oil supplied to this market.The elasticity of market demand is 0.4 and the elasticity of supply for the other eleven OPEC countries is 1.What is the elasticity of demand for oil produced by Saudi Arabia?

Which of the following will determine the elasticity of a dominant firm's demand curve?

A monopolistically competitive firm that is maximizing profit will choose to produce at the level where:

Which of the following is true of monopolistically competitive markets?

In an industry with a small number of equal-sized firms where none of the firms have superior knowledge,the _____ is most likely to apply.

In the Stackelberg model of oligopoly:

The market demand for personalized key chains is given by P = 150 - Q_D.Suppose that there are only two firms in this market;firm 1's cost function is given by C₁ = 5Q₁² and firm 2's cost function is given by C₂ = 0.3Q₂.Derive the reaction function that shows firm 1's most profitable output as a function of firm 2's output.

For firms with constant and equal long-run marginal cost curves,the Cournot equilibrium occurs at:

Cartels and collusion are more common in oligopolistic industries because:

Monopolistically competitive firms _____.

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

Oligopoly cannot be explained using a single theoretical model because:

For a monopolistically competitive firm,excess capacity is the difference between the equilibrium level of output and the level of output where:

A monopolistically competitive industry is characterized by: