Question 1

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.

Question 2

For the following, please answer "True" or "False" and explain why.
-In comparing monopolistic competition to perfect competition,one can conclude that the lack of free entry is the key to having the ability to set price.

Accepted Answer

A) True 
 B)False

Question 3

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?

Accepted Answer

The answer of Assuming Cournot behavior,what happens to the market...

Question 4

In a Bertrand model,market power is a function of

Accepted Answer

A)  marginal cost. 
B)  the number of firms. 
C)  price elasticity of supply. 
D)  product differentiation.

Question 5

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.

Question 6

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.

Question 7

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

Accepted Answer

The answer of If two firms playing Cournot are identical...

Question 8

Which of the following market models results in the highest price assuming a fixed number of firms with identical costs and a given demand curve?

Accepted Answer

A)  Cournot 
B)  Stackelberg 
C)  Monopoly 
D)  Price is the same in all three markets.

Question 9

Oligopoly differs from monopolistic competition in that an oligopoly includes

Accepted Answer

A)  product differentiation. 
B)  barriers to entry. 
C)  no barriers to entry. 
D)  downward-sloping demand curves facing the firm.

Question 10

In a sense,a cartel is self-destructive because

Accepted Answer

A)  it reduces consumer surplus. 
B)  it sets price above marginal cost. 
C)  each cartel member has the incentive to cheat on the cartel. 
D)  each cartel member earns economic profit.

Question 11

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

Accepted Answer

A)  Market lasts for only one period. 
B)  Firms act simultaneously. 
C)  Firms have same cost functions . 
D)  Firms produce differentiated products.

Question 12

Which of the following models results in the greatest deadweight loss,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

Question 13

In the Stackelberg model,the leader has a first-mover advantage because it

Accepted Answer

A)  has lower costs than the follower. 
B)  commits to producing a larger quantity. 
C)  reacts to the follower's decision. 
D)  differentiates its output.

Question 14

In a Bertrand model with differentiated products,

Accepted Answer

A)  firms can set price above marginal cost. 
B)  firms set price at marginal cost. 
C)  price is independent of marginal cost. 
D)  firms set price independently of one another.

Question 15

The market structure of home video gaming systems is best characterized by monopolistic competition.Quasar Entertainment is one of the producers in this market.The inverse demand for Quasar systems is:
P = 500 - 9.75Q
Quasarʹs cost function is: C(Q)= 0.25Q² + 6.Determine Quasarʹs profit maximizing level of output and the price charged to customers.Is the market in a long-run equilibrium?

Accepted Answer

The answer of The market structure of home video gaming...

Question 16

Two firms sell identical products and compete as Cournot (price-setting)competitors in a market with a demand of p = 150 - Q.Initially,each firm has a constant marginal and average cost of $3 per unit of output.
a.Compute each firm's best response function.Plot each of these functions on a graph with q₁ on the horizontal axis and q₂ on the vertical.
b.Compute the Cournot equilibrium quantities.
c.Suppose that firm 1's cost rises to $4 per unit and firm 2's decreases to $2.On a graph,show how this will change the best response functions.How will the equilibrium change according to the changes you made on the graph?

Accepted Answer

The answer of Two firms sell identical products and compete...

Question 17

If a cartel is unable to monitor its members and punish those firms that violate the agreement,then

Accepted Answer

A)  the member firms will each act as price setters. 
B)  the cartel will prosper in the long run. 
C)  the market will become a monopoly. 
D)  the cartel will fail.

Question 18

In which of the following market structures with two 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

Question 19

The Cournot model assumes that firm A maximizes its profit,holding firm B's output constant.

Accepted Answer