Question 1

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.E) A) and C)
F) B) and C)

Question 2

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.E) A) and C)
F) A) and D)

Question 3

The profitability of the second mover in a Stackelberg model is

Accepted Answer

A)   guaranteed to be negative.
B)   smaller than that of the first mover.
C)   greater than that of the first mover.
D)   greater than the Cournot profits.E) B) and C)
F) A) and B)

Question 4

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)   the always result in lower joint profits of the firms involved.
D)   all mergers are undesirable.E) B) and C)
F) A) and B)

Question 5

A cartel is a group of firms that attempts to

Accepted Answer

A)   maximize joint revenue.
B)   maximize joint profit.
C)   behave independently.
D)   increase consumer surplus.E) All of the above
F) B) and D)

Question 6

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.E) A) and B)
F) B) and D)

Question 7

There are only two firms in an industry with demand curves q1 = 30 - P and q2 = 30 - P.Both have no fixed costs and each has a marginal cost of 10 per unit produced.If they behave as profit maximizing price takers,each produces 20 units and sells them at a price of 10 so that each firm makes zero economic profits.Suppose the two firms form a cartel.While firm 1 produces one-half of the profit maximizing cartel output,firm 2 cheats and produces 5 units more.What would happen to the two firms' economic profits?

Accepted Answer

A)   Firm 1's profits remain the same, but firm 2's profits increase by 10.5
B)   Firm 1's profits decrease by 5.5, but firm 2's profits increase by 11.
C)   Firm 1's profits decrease by 25, but firm 2's profits increase by 12.5.
D)   Firm 1's profits decrease by 12.5, but firm 2's profits increase by 25.E) B) and C)
F) B) and D)

Question 8

Suppose Cournot duopolists firms face the same market demand curve,but have differing costs.At the Nash-Cournot equilibrium,the firm with the lower cost will

Accepted Answer

A)   have a lower price for its product than its competitor.
B)   produce a smaller output than its competitor.
C)   have a higher price for its product than its competitor.
D)   produce a larger output than its competitor.E) None of the above
F) A) and D)

Question 9

The evidence on mergers occurring within the hospital industry suggests that

Accepted Answer

A)   efficiency gains that resulted have been passed on to customers through lower prices.
B)   the mergers have tended to not have any significant effect on hospital prices.
C)   prices have risen slightly as some efficiency gains are passed on to customers after mergers.
D)   prices have risen after mergers.E) None of the above
F) B) and C)

Question 10

Firms seek to differentiate their product

Accepted Answer

A)   to avoid state and federal regulation.
B)   to create an illusion of value.
C)   to strengthen their demand and to make it more inelastic.
D)   to strengthen their demand and to make it more elastic.E) B) and D)
F) B) and C)

Question 11

Suppose Cournot duopolist firms operate with each having a cost of 30qi (i = 1,2) so that each firm's marginal cost is 30.The inverse market demand curve is P = 120 - Q where Q = q1 + q2.At the Nash-Cournot equilibrium,the total quantity,Q,is

Accepted Answer

A)   30.
B)   45.
C)   60.
D)   90.E) C) and D)
F) A) and C)

Question 12

The Bertrand model is a more plausible model of firm behavior than the Cournot model

Accepted Answer

A)   when firms set the quantity to be sold.
B)   when firms sell a differentiated product.
C)   because firms that sell a non-differentiated product typically act as price takers.
D)   because the Bertrand model predicts that firms will price at marginal cost.E) None of the above
F) C) and D)

Question 13

Because firms selling a homogeneous product set price in response to the (perceived)pricing decision of other firms in the Bertrand Model of oligopoly in equilibrium price exceeds marginal cost.

Accepted Answer

A) True 
 B)False

Question 14

Explain why the intersection of the best-response functions is the Cournot equilibrium.

Accepted Answer

On a best-response function,a firm selec...

Question 15

Product differentiation

Accepted Answer

A)   is possibly welfare enhancing if new products match consumer preferences better.
B)   is welfare reducing even if new products match consumer preferences better.
C)   is welfare enhancing even if new products do not match consumer preferences better.
D)   is welfare reducing even if new products do not match consumer preferences better.E) A) and B)
F) B) and D)

Question 16

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

Accepted Answer

A)   q1 = (a - bq2) /2b.
B)   q1 = (a - 2bq2) /2b.
C)   q1 = a/b.
D)   q1 = a/2b.E) A) and B)
F) A) and C)

Question 17

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.E) All of the above
F) B) and C)

Question 18

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

Accepted Answer

A)   the ability to move first
B)   the ability to set price
C)   the ability to set quantity
D)   the ability to make independent decisions by the Stackelberg leaderE) A) and B)
F) None of the above

Question 19

-The above figure shows the reaction functions for two pizza shops in a small isolated town.The Cournot equilibrium is at point

Accepted Answer

A)   a.
B)   b.
C)   c.
D)   d.E) C) and D)
F) B) and D)

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 13: Oligopoly and Monopolistic Competition

A cartel is a group of firms that attempts to

Correct Answer
verified

Suppose Cournot duopolist firms operate with each having a cost of 30q_i (i = 1,2) so that each firm's marginal cost is 30.The inverse market demand curve is P = 120 - Q where Q = q₁ + q₂.At the Nash-Cournot equilibrium,the total quantity,Q,is

Correct Answer
verified

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

Correct Answer
verified

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?

Correct Answer
verified

Product differentiation

Correct Answer
verified

Firms seek to differentiate their product

Correct Answer
verified

Explain why the intersection of the best-response functions is the Cournot equilibrium.

Correct Answer
verified
On a best-response function,a firm selec...
View Answer

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

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Mergers are closely scrutinized by the government because

Correct Answer
verified

Suppose Cournot duopolists firms face the same market demand curve,but have differing costs.At the Nash-Cournot equilibrium,the firm with the lower cost will

Correct Answer
verified

The evidence on mergers occurring within the hospital industry suggests that

Correct Answer
verified

-The above figure shows the reaction functions for two pizza shops in a small isolated town.The Cournot equilibrium is at point

Correct Answer
verified

Because firms selling a homogeneous product set price in response to the (perceived)pricing decision of other firms in the Bertrand Model of oligopoly in equilibrium price exceeds marginal cost.

Correct Answer
verified

The Bertrand model is a more plausible model of firm behavior than the Cournot model

Correct Answer
verified

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

Correct Answer
verified

The profitability of the second mover in a Stackelberg model is

Correct Answer
verified

Product differentiation

Correct Answer
verified

Correct Answer
verified

Exam 13: Oligopoly and Monopolistic Competition

A cartel is a group of firms that attempts to

Correct AnswerverifiedShow Answer

Suppose Cournot duopolist firms operate with each having a cost of 30qi (i = 1,2) so that each firm's marginal cost is 30.The inverse market demand curve is P = 120 - Q where Q = q1 + q2.At the Nash-Cournot equilibrium,the total quantity,Q,is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

Product differentiation

Correct AnswerverifiedShow Answer

Firms seek to differentiate their product

Correct AnswerverifiedShow Answer

Explain why the intersection of the best-response functions is the Cournot equilibrium.

Correct AnswerverifiedOn a best-response function,a firm selec...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Mergers are closely scrutinized by the government because

Correct AnswerverifiedShow Answer

Suppose Cournot duopolists firms face the same market demand curve,but have differing costs.At the Nash-Cournot equilibrium,the firm with the lower cost will

Correct AnswerverifiedShow Answer

The evidence on mergers occurring within the hospital industry suggests that

Correct AnswerverifiedShow Answer

-The above figure shows the reaction functions for two pizza shops in a small isolated town.The Cournot equilibrium is at point

Correct AnswerverifiedShow Answer

Because firms selling a homogeneous product set price in response to the (perceived)pricing decision of other firms in the Bertrand Model of oligopoly in equilibrium price exceeds marginal cost.

Correct AnswerverifiedShow Answer

The Bertrand model is a more plausible model of firm behavior than the Cournot model

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The profitability of the second mover in a Stackelberg model is

Correct AnswerverifiedShow Answer

Product differentiation

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified

Suppose Cournot duopolist firms operate with each having a cost of 30q_i (i = 1,2) so that each firm's marginal cost is 30.The inverse market demand curve is P = 120 - Q where Q = q₁ + q₂.At the Nash-Cournot equilibrium,the total quantity,Q,is

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
On a best-response function,a firm selec...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified