Exam 12: Monopolistic Competition and Oligopoly

Quasar Corporation is set to release its latest video game system which utilizes the newest game technology.In fact,the release date is sooner than that of its only rival Orion.This gives Quasar Corporation "first-move" ability.The demand for video game systems is: Orion's marginal revenue curve is: The marginal cost functions are: Determine Orion's reaction function.Given that Quasar Corporation has this information and moves first,Quasar's marginal revenue function is: Calculate Quasar Corporation's optimal output level.Does the "first-move" ability of Quasar Corporation allow it to capture a larger market share?

Which of the following is true for both perfect and monopolistic competition?

The Grand River Brick Corporation uses Business-to-Business internet technology to set output before Bernard's Bricks.This gives the Grand River Brick Corporation "first-move" ability.The market demand for bricks is: Bernard Brick's marginal revenue curve is: The marginal cost of producing an additional unit of bricks is constant at $2.00 for each firm.Determine Bernard's reaction function.Given that the Grand River Brick Corporation has this information and moves first,Grand River's marginal revenue curve is: Calculate Grand River Brick Corporations optimal output level.Does the "first-move" ability of the Grand River Brick Corporation allow them to capture a larger market share (note that the marginal revenue curves would be symmetric if Grand River did not have first-move ability)?

Lambert-Rogers Company is a manufacturer of petrochemical products.The firm's research efforts have resulted in the development of a new auto fuel injector cleaner that is considerably more effective than other products on the market.Another firm,G.H.Squires Company,independently developed a very similar product that is as effective as the Lambert-Rogers formula.To avoid a lengthy court battle over conflicting patent claims,the two firms have decided to cross-license each other's patents and proceed with production.It is unlikely that other petrochemical companies will be able to duplicate the product,making the market a duopoly for the foreseeable future.Lambert-Rogers estimates the demand curve given below for the new cleaner.Marginal cost is estimated to be a constant $2 per bottle. Q = 300,000 - 25,000P. where P = dollars per bottle and Q = monthly sales in bottles. a.Lambert-Rogers and G.H.Squires have very similar operating strategies.Consequently,the management of Lambert-Rogers believes that the Cournot model is appropriate for analyzing the market,provided that both firms enter at the same time.Calculate Lambert-Rogers' profit-maximizing output and price according to this model. b.Lambert-Rogers' productive capacity and technical expertise could allow them to enter the market several months before Squires.Choose an appropriate model and analyze the impact of Lambert Rogers being first into the market.Should Lambert-Rogers hurry to enter first?

For which of the following market structures is it assumed that there are barriers to entry?

A monopolistically competitive firm in short-run equilibrium:

In the Stackelberg model,suppose the first-mover has MR = 15 - Q₁,the second firm has reaction function Q2 = 15 - Q₁/2,and production occurs at zero marginal cost.Why doesn't the first-mover announce that its production is Q₁ = 30 in order to exclude the second firm from the market (i.e.,Q₂ = 0 in this case)?

Which of the following is true for both perfectly competitive and monopolistically competitive firms in the long run?

In the Stackelberg model,there is an advantage

Under the kinked demand curve model,an increase in marginal cost will lead to

In the kinked demand curve model,if one firm reduces its price

Consider the following payoff matrix for a game in which two firms attempt to collude under the Bertrand model: Here,the possible options are to retain the collusive price (collude)or to lower the price in attempt to increase the firm's market share (cut).The payoffs are stated in terms of millions of dollars of profits earned per year.What is the Nash equilibrium for this game?

The oligopoly model that predicts that oligopoly prices will tend to be very rigid is the __________ model.

Hale's One Stop Gas and Auto Service competes with Murray's Gas and Service Mart.The local demand is given by: P = 2.50 - 0.01Q.Hale's marginal cost function is: MC_H(qH) = 0.35_qH.Murray's marginal cost function is: MC_M(qM) = 0.30_qM. Given the demand relationship above,Hale's marginal revenue function is: Determine Hale's reaction function.Murray's marginal revenue function is: Determine Murray's reaction function.What is the Cournot solution?

A monopolistically competitive firm in long-run equilibrium:

Which of the following is NOT conducive to the successful operation of a cartel?

Which of the following is true in the Stackelberg model?

The two leading U.S.manufacturers of high performance radial tires must set their advertising strategies for the coming year.Each firm has two strategies available: maintain current advertising or increase advertising by 15%.The strategies available to the two firms,G and B,are presented in the payoff matrix below. The entries in the individual cells are profits measured in millions of dollars.Firm G's outcome is listed before the comma,and Firm B's outcome is listed after the comma. a.Which oligopoly model is best suited for analyzing this decision? Why? (Remember it is illegal to collude in the United States.) b.Carefully explain the strategy that should be used by each firm.Support your choice by including numbers.

Which of the following is true about the demand curve facing the dominant firm?

Hale's One Stop and Auto Service competes with Murray's Gas Mart.The local demand is: Q^D = 25 - 10P $\Longleftrightarrow$ P = 2.50 - 0.01Q^D. Both firms sell exactly the same quality of gasoline.Thus,if the firms charge a different price,the lower price firm will capture the entire market share.If the firms charge the same price,they will split the market share.The marginal cost functions are both constant at $1.25.If the firms compete by setting price,what is the market output level? What is the market price level?