Question 1

Existing firms may seek to inhibit potential entrants by:

Accepted Answer

A) reacting before entry and positioning after. 
B) reducing fixed costs. 
C) positioning before entry and reacting after. 
D) adopting the Cheerios defense. 
A) reacting before entry and positioning after. 
B) reducing fixed costs. 
C) positioning before entry and reacting after. 
D) adopting the Cheerios defense.

Question 2

In the general version of the Cournot model, the Nash equilibrium

Accepted Answer

A) is Pareto optimal 
B) produces too little output to maximize profits 
C) maximizes the profits of the first mover 
D) fails to maximize joint profits 
A) is Pareto optimal 
B) produces too little output to maximize profits 
C) maximizes the profits of the first mover 
D) fails to maximize joint profits

Question 3

Suppose there are n identical firms in an industry. Each firm's variable cost is $1 and fixed cost is $0.04. The firms compete in quantities. The inverse demand function of this industry is p = 2 - (y1 + y2 + ... + yn)
i)Suppose that the number of firms, n, is fixed. What is the output level of each firm in equilibrium? What are the equilibrium price and profits per firm?
ii)If there is free entry into the industry, what will be the long- run equilibrium number of firms?

Accepted Answer

i)y₁= y₂= ... = y_n= 1/(

Question 4

A residual demand function represents the demand for:

Accepted Answer

A) the next firm to enter a market. 
B) the least profitable firm in a market. 
C) the last firm to enter a market. 
D) statistical errors. 
A) the next firm to enter a market. 
B) the least profitable firm in a market. 
C) the last firm to enter a market. 
D) statistical errors.

Question 5

Market demand is given by P = 15 - Q. There are two firms, each with TC = 0.5qi2. If one firm honors the cartel agreement while the other firm defects, the total output produced by both firms is:

Accepted Answer

A) 5. 
B) 9. 
C) 3. 
D) 7. 
A) 5. 
B) 9. 
C) 3. 
D) 7.

Question 6

The duopoly market output is:

Accepted Answer

A) lower than both the monopoly output and the perfectly competitive output. 
B) greater than both the monopoly output and the perfectly competitive output. 
C) greater than the monopoly output but lower than the perfectly competitive output. 
D) lower than the monopoly output but greater than the perfectly competitive output. 
A) lower than both the monopoly output and the perfectly competitive output. 
B) greater than both the monopoly output and the perfectly competitive output. 
C) greater than the monopoly output but lower than the perfectly competitive output. 
D) lower than the monopoly output but greater than the perfectly competitive output.

Question 7

Given an oligopolistic industry characterized by a collusive agreement and constant unit costs of production, which of the following statements is true?

Accepted Answer

A) As the number of firms expands, the incentive to cheat on the collusive agreement increases. 
B) As the number of firms falls, aggregate output falls and aggregate profit rises. 
C) As the aggregate output rises, aggregate profit does not change. 
D) As the number of firms expands, aggregate output rises and aggregate profit falls. 
A) As the number of firms expands, the incentive to cheat on the collusive agreement increases. 
B) As the number of firms falls, aggregate output falls and aggregate profit rises. 
C) As the aggregate output rises, aggregate profit does not change. 
D) As the number of firms expands, aggregate output rises and aggregate profit falls.

Question 8

A supergame is :

Accepted Answer

A) a game played by superfirms. 
B) a one- shot game. 
C) a game providing a lot of excitement to the participants. 
D) a game played an infinite number of times. 
A) a game played by superfirms. 
B) a one- shot game. 
C) a game providing a lot of excitement to the participants. 
D) a game played an infinite number of times.

Question 9

Imperfectly competitive firms may allocate resources inefficiently because they produce at a level of output where:

Accepted Answer

A) average total cost is at its lowest point. 
B) price equals marginal cost. 
C) marginal revenue is greater than marginal cost. 
D) price is greater than marginal cost. 
A) average total cost is at its lowest point. 
B) price equals marginal cost. 
C) marginal revenue is greater than marginal cost. 
D) price is greater than marginal cost.

Question 10

Given constant unit costs of production, which of the following solutions to the duopoly problem generates the greatest benefits to consumers?

Accepted Answer

A) Collusive equilibrium 
B) Nash equilibrium in quantities 
C) Cournot equilibrium 
D) Bertrand equilibrium 
A) Collusive equilibrium 
B) Nash equilibrium in quantities 
C) Cournot equilibrium 
D) Bertrand equilibrium

Question 11

Two firms share a market with demand curve Q=90-0.5P. Each has cost function C(q)=900+q2. Suppose that each firm maximizes its profit taking the other firm's production choice as given. What is the profit of each firm?

Accepted Answer

A) 618.75 
B) 675.50 
C) 600 
D) 900 
A) 618.75 
B) 675.50 
C) 600 
D) 900

Question 12

When all firms in the industry charge the same price, this is evidence of collusion. Explain.

Accepted Answer

A) True 
 B)False

Question 13

In a Bertrand equilibrium, each firm earns:

Accepted Answer

A) positive or zero economic profit. 
B) zero economic profit. 
C) positive economic profit. 
D) negative economic profit. 
A) positive or zero economic profit. 
B) zero economic profit. 
C) positive economic profit. 
D) negative economic profit.

Question 14

Market demand is given by P = 15 - Q. There are two firms, each with TC = 0.5qi2. If the firms form a cartel the profits for a firm is:

Accepted Answer

A) 20.5. 
B) 24.5. 
C) 22.5. 
D) 26.5. 
A) 20.5. 
B) 24.5. 
C) 22.5. 
D) 26.5.

Question 15

Two firms share a market with demand curve Q=120-0.5P. Each has cost function C(q)=1000+q2. Suppose that each firm maximizes its profit taking the other firm's production choice as given.

Accepted Answer

a)P=$120
b

Question 16

Oligopolists have clear incentives to:

Accepted Answer

A) merge with their competitors. 
B) collude and cheat on collusive agreements. 
C) collude. 
D) cheat on collusive agreements. 
A) merge with their competitors. 
B) collude and cheat on collusive agreements. 
C) collude. 
D) cheat on collusive agreements.

Question 17

In a prisoner's dilemma game:

Accepted Answer

A) the outcome most preferred by one player is also preferred by the other player. 
B) the outcome that makes sense collectively is also most preferred by the players. 
C) the outcome that makes sense collectively can be achieved if each player makes a self- interested decision. 
D) the outcome most preferred by one player cannot be preferred by the other player. 
A) the outcome most preferred by one player is also preferred by the other player. 
B) the outcome that makes sense collectively is also most preferred by the players. 
C) the outcome that makes sense collectively can be achieved if each player makes a self- interested decision. 
D) the outcome most preferred by one player cannot be preferred by the other player.

Question 18

In a Shopping Mall there are two tobacco stores. They each set a high price for their cigars, they each earn $50,000 a month. If they each set a low price, they each earn $25,000 a month. If one store sets a low price while the other sets a high price, the low- price store earns $70,000 while the high- price store earns $10. In this game:

Accepted Answer

A) there is no Nash equilibrium. 
B) there are two Nash equilibria. 
C) there is only one Nash equilibrium. 
D) any combination is a Nash equilibrium. 
A) there is no Nash equilibrium. 
B) there are two Nash equilibria. 
C) there is only one Nash equilibrium. 
D) any combination is a Nash equilibrium.

Question 19

The Cournot model is attractive for all of the following reasons except:

Accepted Answer

A) quantity per firm and price are constant for all markets with two or more firms. 
B) it applies to all possible market structures. 
C) quantity per firm increases and price decreases with the number of firms. 
D) the monopoly and perfect competition models are special cases. 
A) quantity per firm and price are constant for all markets with two or more firms. 
B) it applies to all possible market structures. 
C) quantity per firm increases and price decreases with the number of firms. 
D) the monopoly and perfect competition models are special cases.

Question 20

In a Shopping Mall there are two tobacco stores. They each set a high price for their cigars, they each earn $50,000 a month. If they each set a low price, they each earn $25,000 a month. If one store sets a low price while the other sets a high price, the low- price store earns $70,000 while the
High- price store earns $10. Which of the following is a Nash equilibrium?

Accepted Answer

A) Both set a high price. 
B) One firm sets a low price; the other high. 
C) Both set a low price. 
D) A mixed- strategy equilibrium. 
A) Both set a high price. 
B) One firm sets a low price; the other high. 
C) Both set a low price. 
D) A mixed- strategy equilibrium.

Existing firms may seek to inhibit potential entrants by:

In the general version of the Cournot model, the Nash equilibrium

A residual demand function represents the demand for:

Market demand is given by P = 15 - Q. There are two firms, each with TC = 0.5q_i². If one firm honors the cartel agreement while the other firm defects, the total output produced by both firms is:

The duopoly market output is:

Given an oligopolistic industry characterized by a collusive agreement and constant unit costs of production, which of the following statements is true?

A supergame is :

Imperfectly competitive firms may allocate resources inefficiently because they produce at a level of output where:

Given constant unit costs of production, which of the following solutions to the duopoly problem generates the greatest benefits to consumers?

Two firms share a market with demand curve Q=90-0.5P. Each has cost function C(q)=900+q². Suppose that each firm maximizes its profit taking the other firm's production choice as given. What is the profit of each firm?

When all firms in the industry charge the same price, this is evidence of collusion. Explain.

In a Bertrand equilibrium, each firm earns:

Market demand is given by P = 15 - Q. There are two firms, each with TC = 0.5q_i². If the firms form a cartel the profits for a firm is:

Two firms share a market with demand curve Q=120-0.5P. Each has cost function C(q)=1000+q². Suppose that each firm maximizes its profit taking the other firm's production choice as given.

Oligopolists have clear incentives to:

In a prisoner's dilemma game:

The Cournot model is attractive for all of the following reasons except:

Microeconomics: a Working Methodology

A Theory of Preferences

Demand Theory

More Demand Theory

Intertemporal Decision Making and Capital Values

Production Cost: One Variable Input

Production Cost: Many Variable Inputs

The Theory of Perfect Competition

Applications of the Competitive Model

Monopoly

Input Markets and the Allocation of Resources

Labour Market Applications

Competitive General Equilibrium

Price Discrimination Monopoly Practices

Introduction to Game Theory

Choice Making Under Uncertainty

Assymmetric Information, the Rules of the Game, and Externalities

The Theory of the Firm

Assymetric Information and Market Behaviour

Filters

Exam 16: Game Theory and Oligopoly

Existing firms may seek to inhibit potential entrants by:

In the general version of the Cournot model, the Nash equilibrium

A residual demand function represents the demand for:

Market demand is given by P = 15 - Q. There are two firms, each with TC = 0.5qi2. If one firm honors the cartel agreement while the other firm defects, the total output produced by both firms is:

The duopoly market output is:

Given an oligopolistic industry characterized by a collusive agreement and constant unit costs of production, which of the following statements is true?

A supergame is :

Imperfectly competitive firms may allocate resources inefficiently because they produce at a level of output where:

Given constant unit costs of production, which of the following solutions to the duopoly problem generates the greatest benefits to consumers?

Two firms share a market with demand curve Q=90-0.5P. Each has cost function C(q)=900+q2. Suppose that each firm maximizes its profit taking the other firm's production choice as given. What is the profit of each firm?

When all firms in the industry charge the same price, this is evidence of collusion. Explain.

In a Bertrand equilibrium, each firm earns:

Market demand is given by P = 15 - Q. There are two firms, each with TC = 0.5qi2. If the firms form a cartel the profits for a firm is:

Two firms share a market with demand curve Q=120-0.5P. Each has cost function C(q)=1000+q2. Suppose that each firm maximizes its profit taking the other firm's production choice as given.

Oligopolists have clear incentives to:

In a prisoner's dilemma game:

The Cournot model is attractive for all of the following reasons except:

Microeconomics: a Working Methodology

A Theory of Preferences

Demand Theory

More Demand Theory

Intertemporal Decision Making and Capital Values

Production Cost: One Variable Input

Production Cost: Many Variable Inputs

The Theory of Perfect Competition

Applications of the Competitive Model

Monopoly

Input Markets and the Allocation of Resources

Labour Market Applications

Competitive General Equilibrium

Price Discrimination Monopoly Practices

Introduction to Game Theory

Choice Making Under Uncertainty

Assymmetric Information, the Rules of the Game, and Externalities

The Theory of the Firm

Assymetric Information and Market Behaviour

Filters

Market demand is given by P = 15 - Q. There are two firms, each with TC = 0.5q_i². If one firm honors the cartel agreement while the other firm defects, the total output produced by both firms is:

Two firms share a market with demand curve Q=90-0.5P. Each has cost function C(q)=900+q². Suppose that each firm maximizes its profit taking the other firm's production choice as given. What is the profit of each firm?

Market demand is given by P = 15 - Q. There are two firms, each with TC = 0.5q_i². If the firms form a cartel the profits for a firm is:

Two firms share a market with demand curve Q=120-0.5P. Each has cost function C(q)=1000+q². Suppose that each firm maximizes its profit taking the other firm's production choice as given.