Question 1

The merger of two firms producing goods that are complements:

Accepted Answer

A) is usually not encouraged by the competition authority. 
B) the quantity produced by each firm will go down. 
C) the consumer's surplus decreases. 
D) each firm's profit will rise. 
A) is usually not encouraged by the competition authority. 
B) the quantity produced by each firm will go down. 
C) the consumer's surplus decreases. 
D) each firm's profit will rise.

Question 2

A particular market is served by two firms. The market demand curve is given by p = 200 - y. Each firm incurs a constant cost per unit of $50. The Cournot reaction function for firm 1 is given by:

Accepted Answer

A) p * = (200 - y * )- y1. 
B) y * = 75 - y * /2. 1 2 1 2 
C) y * = 30 - y * /2. 
D) p * = 150 - y * /2. 1 2 1 2 
A) p * = (200 - y * )- y1. 
B) y * = 75 - y * /2. 1 2 1 2 
C) y * = 30 - y * /2. 
D) p * = 150 - y * /2. 1 2 1 2

Question 3

An important weakness of the Bertrand, Collusion, and Cournot models is that they assume the game is:

Accepted Answer

A) played repeatedly. 
B) fair. 
C) supervised by government. 
D) played once only. 
A) played repeatedly. 
B) fair. 
C) supervised by government. 
D) played once only.

Question 4

Suppose the market has two firms, and market demand is p = 200 - 4y. The cost functions for all firms are C(yi)= 600 + 30yi. The limit output for this market is:

Accepted Answer

A) 18. 
B) 30. 
C) 22. 
D) 26. 
A) 18. 
B) 30. 
C) 22. 
D) 26.

Question 5

The inducement to entry is:

Accepted Answer

A) the excess of revenue over fixed cost. 
B) the excess of revenue over marginal cost. 
C) the excess of revenue over total cost. 
D) the excess of revenue over variable cost. 
A) the excess of revenue over fixed cost. 
B) the excess of revenue over marginal cost. 
C) the excess of revenue over total cost. 
D) the excess of revenue over variable cost.

Question 6

Suppose two firms, A and B, compete as duopolists. Each firm has a marginal cost of $5 and a fixed cost of zero. Market demand for the duopolists' homogeneous product is given by Q = 100 - 2P.
i)Suppose that the duopolists behave according to Cournot's model. Find Firm A's reaction function given the output of Firm B, and Firm B's reaction function given the output of Firm A.
ii)Compute the Cournot equilibrium quantities for firms A and B.
iii)Now suppose that the two firms work together and form a successful cartel. Find the equilibrium price and quantity in the market.

Accepted Answer

i)First, write the demand curve as a fun

Question 7

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 market price is:

Accepted Answer

A) 16. 
B) 8. 
C) 12. 
D) 10. 
A) 16. 
B) 8. 
C) 12. 
D) 10.

Question 8

True/False. Cournot duopolists necessarily produce the same quantity in equilibrium.

Accepted Answer

Cournot duopolists sell their products f

Question 9

Suppose the demand function in the industry is p = 100 - y and each firm has a constant marginal cost of $40. Suppose there is a monopoly firm and a potential entrant. The output that maximizes the entrant's profit is:

Accepted Answer

A) 20. 
B) 10. 
C) 30. 
D) 15. 
A) 20. 
B) 10. 
C) 30. 
D) 15.

Question 10

Suppose the market has two firms, and market demand is p = 200 - 4y. The cost functions for all firms are C(yi)= 600 + 30yi. The Cournot duopoly price is:

Accepted Answer

A) 46.67. 
B) 86.67. 
C) 34.67. 
D) 92.67. 
A) 46.67. 
B) 86.67. 
C) 34.67. 
D) 92.67.

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 quantity supplied in the market?

Accepted Answer

A) 60 
B) 90 
C) 45 
D) 75 
A) 60 
B) 90 
C) 45 
D) 75

Question 12

Consider a two- firm industry producing two differentiated products. For simplicity assume that production is costless. Suppose the demand functions for firm 1 and 2's products are given by
q1 = a - bp1 + cp2 q2 = a - bp2 + cp1
where pi is the price charged by firm i, i = 1, 2 and b > c. Assume that firms are profit maximizers and simultaneously choose prices. Find the equilibrium level of prices,
i)Assuming that the firms cannot collude (they choose prices independently).
ii)Assuming that the firms can collude(they can choose prices jointly).

Accepted Answer

i)p₁= p₂= a/

Question 13

In the Cournot model:

Accepted Answer

A) firms choose quantities. 
B) firms minimize costs. 
C) firms produce what the government tells them to. 
D) firms choose prices. 
A) firms choose quantities. 
B) firms minimize costs. 
C) firms produce what the government tells them to. 
D) firms choose prices.

Question 14

The level of output per firm under Nash and Bertrand equilibriums are:

Accepted Answer

A) often the same. 
B) seldom the same. 
C) never the same. 
D) always the same. 
A) often the same. 
B) seldom the same. 
C) never the same. 
D) always the same.

Question 15

Suppose the demand function in the industry is p = 100 - y and each firm has a constant marginal cost of $40. Suppose there is a monopoly firm and a potential entrant. The monopoly output is:

Accepted Answer

A) 50. 
B) 30. 
C) 40. 
D) 60. 
A) 50. 
B) 30. 
C) 40. 
D) 60.

Question 16

Suppose that a particular market is served by two firms. The market demand curve is given by p = 100 - y. Each firm incurs a constant cost per unit of $20. The Bertrand solution to this duopoly problem is:

Accepted Answer

A) p * = p * = 70. 
B) p * = p * = 50. 
C) p * = p * = 20. 
D) p * = p * = 40. 1 2 1 2 1 2 1 2 
A) p * = p * = 70. 
B) p * = p * = 50. 
C) p * = p * = 20. 
D) p * = p * = 40. 1 2 1 2 1 2 1 2

Question 17

Given an infinitely repeated, collusive oligopoly game, all but which of the following criteria should be met when devising a successful punishment strategy to be used in the event of another player's defection?

Accepted Answer

A) credible threats of punishment 
B) negative pay- offs in the non- cooperative equilibrium 
C) rapid detection of cheating by a rival 
D) severe penalties imposed for cheating 
A) credible threats of punishment 
B) negative pay- offs in the non- cooperative equilibrium 
C) rapid detection of cheating by a rival 
D) severe penalties imposed for cheating

Question 18

The best collusive outcome occurs when the sum of the firms' output is:

Accepted Answer

A) a Nash equilibrium. 
B) equal to the competitive outcome. 
C) equally divided among the firms. 
D) equal to the monopoly outcome. 
A) a Nash equilibrium. 
B) equal to the competitive outcome. 
C) equally divided among the firms. 
D) equal to the monopoly outcome.

Question 19

If two firms that are Cournot competitors merge:

Accepted Answer

A) the consumers' surplus declines. 
B) the industry output will increase. 
C) the market price will decrease. 
D) more jobs will be created. 
A) the consumers' surplus declines. 
B) the industry output will increase. 
C) the market price will decrease. 
D) more jobs will be created.

Question 20

Experimental evidence indicates that:

Accepted Answer

A) the Cournot model best explains oligopolists' behaviour. 
B) the Bertrand model best explains oligopolists' behaviour. 
C) there is no one best explanation of oligopolists' behaviour. 
D) the Collusion model best explains oligopolists' behaviour. 
A) the Cournot model best explains oligopolists' behaviour. 
B) the Bertrand model best explains oligopolists' behaviour. 
C) there is no one best explanation of oligopolists' behaviour. 
D) the Collusion model best explains oligopolists' behaviour.

The merger of two firms producing goods that are complements:

A particular market is served by two firms. The market demand curve is given by p = 200 - y. Each firm incurs a constant cost per unit of $50. The Cournot reaction function for firm 1 is given by:

An important weakness of the Bertrand, Collusion, and Cournot models is that they assume the game is:

Suppose the market has two firms, and market demand is p = 200 - 4y. The cost functions for all firms are C(y_i)= 600 + 30y_i. The limit output for this market is:

The inducement to entry is:

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 market price is:

True/False. Cournot duopolists necessarily produce the same quantity in equilibrium.

Suppose the demand function in the industry is p = 100 - y and each firm has a constant marginal cost of $40. Suppose there is a monopoly firm and a potential entrant. The output that maximizes the entrant's profit is:

Suppose the market has two firms, and market demand is p = 200 - 4y. The cost functions for all firms are C(y_i)= 600 + 30y_i. The Cournot duopoly price 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 quantity supplied in the market?

In the Cournot model:

The level of output per firm under Nash and Bertrand equilibriums are:

Suppose the demand function in the industry is p = 100 - y and each firm has a constant marginal cost of $40. Suppose there is a monopoly firm and a potential entrant. The monopoly output is:

Suppose that a particular market is served by two firms. The market demand curve is given by p = 100 - y. Each firm incurs a constant cost per unit of $20. The Bertrand solution to this duopoly problem is:

Given an infinitely repeated, collusive oligopoly game, all but which of the following criteria should be met when devising a successful punishment strategy to be used in the event of another player's defection?

The best collusive outcome occurs when the sum of the firms' output is:

If two firms that are Cournot competitors merge:

Experimental evidence indicates that:

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

The merger of two firms producing goods that are complements:

A particular market is served by two firms. The market demand curve is given by p = 200 - y. Each firm incurs a constant cost per unit of $50. The Cournot reaction function for firm 1 is given by:

An important weakness of the Bertrand, Collusion, and Cournot models is that they assume the game is:

Suppose the market has two firms, and market demand is p = 200 - 4y. The cost functions for all firms are C(yi)= 600 + 30yi. The limit output for this market is:

The inducement to entry is:

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 market price is:

True/False. Cournot duopolists necessarily produce the same quantity in equilibrium.

Suppose the demand function in the industry is p = 100 - y and each firm has a constant marginal cost of $40. Suppose there is a monopoly firm and a potential entrant. The output that maximizes the entrant's profit is:

Suppose the market has two firms, and market demand is p = 200 - 4y. The cost functions for all firms are C(yi)= 600 + 30yi. The Cournot duopoly price 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 quantity supplied in the market?

In the Cournot model:

The level of output per firm under Nash and Bertrand equilibriums are:

Suppose the demand function in the industry is p = 100 - y and each firm has a constant marginal cost of $40. Suppose there is a monopoly firm and a potential entrant. The monopoly output is:

Suppose that a particular market is served by two firms. The market demand curve is given by p = 100 - y. Each firm incurs a constant cost per unit of $20. The Bertrand solution to this duopoly problem is:

Given an infinitely repeated, collusive oligopoly game, all but which of the following criteria should be met when devising a successful punishment strategy to be used in the event of another player's defection?

The best collusive outcome occurs when the sum of the firms' output is:

If two firms that are Cournot competitors merge:

Experimental evidence indicates that:

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

Suppose the market has two firms, and market demand is p = 200 - 4y. The cost functions for all firms are C(y_i)= 600 + 30y_i. The limit output for this market is:

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 market price is:

Suppose the market has two firms, and market demand is p = 200 - 4y. The cost functions for all firms are C(y_i)= 600 + 30y_i. The Cournot duopoly price 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 quantity supplied in the market?