Question 1

Suppose that the duopolists competing in Cournot fashion agree to produce the collusive output.Given that firm two commits to this collusive output, it pays firm one to

Accepted Answer

A) cheat by producing a higher level of output. 
B) cheat by producing a lower level of output. 
C) cheat by raising prices. 
D) none of the statements associated with this question are correct. 
A) cheat by producing a higher level of output. 
B) cheat by producing a lower level of output. 
C) cheat by raising prices. 
D) none of the statements associated with this question are correct. A

Question 2

When MCI announced a price discount plan designed to induce small firms to use its services, the price of its stock immediately declined.Why do you think the stock market reacted negatively to MCI's plan to attract new customers?

Accepted Answer

The most likely reason the market did not respond favorably to MCI's plan is that investors recognized the market for long-distance services is oligopolistic; competitors like AT&T would likely react to MCI's plan by changing their own pricing structure.In fact, this is precisely what did happen; 6 days after the MCI announcement, AT&T followed with a similar plan.Effectively, MCI's action initiated a "price war" that parallels our analysis of Bertrand competition.

Question 3

With a linear inverse demand function and the same constant marginal costs for both firms in a homogeneous product Stackelberg duopoly, which of the following will result?

Accepted Answer

A) Profits of leader > Profits of follower. 
B) QL = 2QF. 
C) PL > PF. 
D) Profits of leader > Profits of follower and QL = 2QF. 
A) Profits of leader > Profits of follower. 
B) QL = 2QF. 
C) PL > PF. 
D) Profits of leader > Profits of follower and QL = 2QF. D

Question 4

The inverse demand in a Cournot duopoly is P = a - b (Q1 + Q2), and costs are C1(Q1) = c1Q1 and C2(Q2) = c2Q2.The Government has imposed a per unit tax of $t on each unit sold by each firm.The tax revenue is:

Accepted Answer

A) t times the total output of the two firms should there be no sales tax. 
B) less than t times the total output of the two firms should there be no sales tax. 
C) greater than t times the total output of the two firms should there be no sales tax. 
D) none of the statements associated with this question are correct. 
A) t times the total output of the two firms should there be no sales tax. 
B) less than t times the total output of the two firms should there be no sales tax. 
C) greater than t times the total output of the two firms should there be no sales tax. 
D) none of the statements associated with this question are correct.

Question 5

Consider a market consisting of two firms where the inverse demand curve is given by P = 500 - 2Q1 - 2Q2.Each firm has a marginal cost of $50.Based on this information we can conclude that aggregate profits in the different equilibrium oligopoly models will follow which of the following orderings.

Accepted Answer

A) $\pi$Bertand > $\pi$Collusion > $\pi$Stackelberg > $\pi$Cournot. 
B) $\pi$Collusion > $\pi$Cournot > $\pi$Stackelberg > $\pi$Bertand. 
C) $\pi$Collusion > $\pi$Stackelberg > $\pi$Cournot > $\pi$Bertand. 
D) None of the statements associated with question are correct. 
A) $\pi$Bertand > $\pi$Collusion > $\pi$Stackelberg > $\pi$Cournot. 
B) $\pi$Collusion > $\pi$Cournot > $\pi$Stackelberg > $\pi$Bertand. 
C) $\pi$Collusion > $\pi$Stackelberg > $\pi$Cournot > $\pi$Bertand. 
D) None of the statements associated with question are correct.

Question 6

Firm A has a higher marginal cost than firm B's.They compete in a homogeneous product Cournot duopoly.Which of the following results will not occur?

Accepted Answer

A) QA B 
B) ProfitA B 
C) Revenue of firm A A B 
A) QA B 
B) ProfitA B 
C) Revenue of firm A A B

Question 7

Which of the following are not price setting oligopoly models?

Accepted Answer

A) Stackelberg. 
B) Cournot. 
C) Bertrand. 
D) Stackelberg and Cournot. 
A) Stackelberg. 
B) Cournot. 
C) Bertrand. 
D) Stackelberg and Cournot.

Question 8

Consider a Stackelberg duopoly with the following inverse demand function: P = 100 - 2Q1 - 2Q2.The firms' marginal cost are identical and given by MCi(Qi) = 2Qi.Based on this information the Stackelberg follower's reaction function is

Accepted Answer

A) QF = 24.5 - 0.25QL. 
B) QF = 49 - 0.25QF. 
C) QF = 24.5 - 0.5QL. 
D) QF = 24.5 - QL. 
A) QF = 24.5 - 0.25QL. 
B) QF = 49 - 0.25QF. 
C) QF = 24.5 - 0.5QL. 
D) QF = 24.5 - QL.

Question 9

An important condition for a contestable market is:

Accepted Answer

A) all producers have different technologies. 
B) there are high transaction costs. 
C) existing firms cannot respond quickly to entry by lowering their price. 
D) there are sunk costs. 
A) all producers have different technologies. 
B) there are high transaction costs. 
C) existing firms cannot respond quickly to entry by lowering their price. 
D) there are sunk costs.

Question 10

MCI announced a price discount plan for small firms.Their stock immediately fell in price.This shows that:

Accepted Answer

A) MCI is probably competing in a Bertrand oligopolistic industry. 
B) stockholders are sometimes not rational. 
C) there is increased demand for MCI's stock. 
D) AT&T sold out its stock of MCI just after the announcement. 
A) MCI is probably competing in a Bertrand oligopolistic industry. 
B) stockholders are sometimes not rational. 
C) there is increased demand for MCI's stock. 
D) AT&T sold out its stock of MCI just after the announcement.

Question 11

Collusion in oligopoly is difficult to achieve because:

Accepted Answer

A) it is prohibited by law. 
B) every firm has an incentive to cheat given that others follow the agreement. 
C) firms usually take care of consumers' interests as a decision priority. 
D) it is prohibited by law and every firm has an incentive to cheat given that others follow the agreement. 
A) it is prohibited by law. 
B) every firm has an incentive to cheat given that others follow the agreement. 
C) firms usually take care of consumers' interests as a decision priority. 
D) it is prohibited by law and every firm has an incentive to cheat given that others follow the agreement.

Question 12

Which of the following is not a feature of Sweezy oligopoly?

Accepted Answer

A) There are two firms in the market serving many consumers. 
B) The firms produce homogenous products. 
C) Each firm believes that rivals will cut their prices in response to a price reduction, but will not raise their prices in response to a price increase. 
D) Barriers to entry exist. 
A) There are two firms in the market serving many consumers. 
B) The firms produce homogenous products. 
C) Each firm believes that rivals will cut their prices in response to a price reduction, but will not raise their prices in response to a price increase. 
D) Barriers to entry exist.

Question 13

The profits of the follower in a Stackelberg duopoly

Accepted Answer

A) are greater than those of the leader. 
B) equal those of the leader. 
C) are less than those of the leader. 
D) all the statements associated with this question are correct. 
A) are greater than those of the leader. 
B) equal those of the leader. 
C) are less than those of the leader. 
D) all the statements associated with this question are correct.

Question 14

Firm A has a higher marginal cost than firm B's.They compete in a homogeneous product Bertrand duopoly.Which of the following results will not occur?

Accepted Answer

A) QA B 
B) ProfitA B. 
C) Revenue of firm A A B. 
A) QA B 
B) ProfitA B. 
C) Revenue of firm A A B.

Question 15

In the above graph, industry profits are maximized

Accepted Answer

A) only at point QM1. 
B) only at point QM2. 
C) on the line segment joining points QM1 and QM2. 
D) at the point where r1 = r2. 
A) only at point QM1. 
B) only at point QM2. 
C) on the line segment joining points QM1 and QM2. 
D) at the point where r1 = r2.

Question 16

A slight increase in the marginal cost of a firm definitely leads to a reduction in its output if the firm competes in the:

Accepted Answer

A) Sweezy fashion. 
B) Cournot fashion. 
C) Bertrand fashion. 
D) Cournot fashion and Bertrand fashion. 
A) Sweezy fashion. 
B) Cournot fashion. 
C) Bertrand fashion. 
D) Cournot fashion and Bertrand fashion.

Question 17

Since the end of the war in the Persian Gulf, the world price of oil has fallen.But in some areas, consumers have seen little relief at the pump.This phenomenon can be explained by the theory of:

Accepted Answer

A) perfect competition. 
B) monopolistic competition. 
C) oligopoly. 
D) monopoly. 
A) perfect competition. 
B) monopolistic competition. 
C) oligopoly. 
D) monopoly.

Question 18

A firm's isoprofit curve is defined as the combinations of outputs produced by:

Accepted Answer

A) a firm that earns it the same level of profits. 
B) all firms that yield the firm the same level of profit. 
C) all firms that makes total industry profits constant. 
D) none of the statements associated with this question are correct. 
A) a firm that earns it the same level of profits. 
B) all firms that yield the firm the same level of profit. 
C) all firms that makes total industry profits constant. 
D) none of the statements associated with this question are correct.

Question 19

One of the characteristics of a contestable market is that

Accepted Answer

A) all firms have different productive technology. 
B) consumers react quickly to a price change. 
C) existing firms respond quickly to entry by lowering their price. 
D) there are sunk costs. 
A) all firms have different productive technology. 
B) consumers react quickly to a price change. 
C) existing firms respond quickly to entry by lowering their price. 
D) there are sunk costs.

Question 20

Consider a Stackelberg duopoly with the following inverse demand function: P = 100 - 2Q1 - 2Q2.The firms' marginal cost are identical and given by MCi(Qi) = 2Qi.Based on this information the Stackelberg leader's reaction function is

Accepted Answer

A) QL = 24.5 - 0.5QF. 
B) QL = 50 - 0.5QF. 
C) QL = 49 - 0.5QF. 
D) none of the statements associated with this question are correct. 
A) QL = 24.5 - 0.5QF. 
B) QL = 50 - 0.5QF. 
C) QL = 49 - 0.5QF. 
D) none of the statements associated with this question are correct.

Suppose that the duopolists competing in Cournot fashion agree to produce the collusive output.Given that firm two commits to this collusive output, it pays firm one to

When MCI announced a price discount plan designed to induce small firms to use its services, the price of its stock immediately declined.Why do you think the stock market reacted negatively to MCI's plan to attract new customers?

With a linear inverse demand function and the same constant marginal costs for both firms in a homogeneous product Stackelberg duopoly, which of the following will result?

The inverse demand in a Cournot duopoly is P = a - b (Q₁ + Q₂), and costs are C₁(Q₁) = c₁Q₁ and C₂(Q₂) = c₂Q₂.The Government has imposed a per unit tax of $t on each unit sold by each firm.The tax revenue is:

Firm A has a higher marginal cost than firm B's.They compete in a homogeneous product Cournot duopoly.Which of the following results will not occur?

Which of the following are not price setting oligopoly models?

Consider a Stackelberg duopoly with the following inverse demand function: P = 100 - 2Q₁ - 2Q₂.The firms' marginal cost are identical and given by MC_i(Q_i) = 2Q_i.Based on this information the Stackelberg follower's reaction function is

An important condition for a contestable market is:

MCI announced a price discount plan for small firms.Their stock immediately fell in price.This shows that:

Collusion in oligopoly is difficult to achieve because:

Which of the following is not a feature of Sweezy oligopoly?

The profits of the follower in a Stackelberg duopoly

Firm A has a higher marginal cost than firm B's.They compete in a homogeneous product Bertrand duopoly.Which of the following results will not occur?

In the above graph, industry profits are maximized

A slight increase in the marginal cost of a firm definitely leads to a reduction in its output if the firm competes in the:

Since the end of the war in the Persian Gulf, the world price of oil has fallen.But in some areas, consumers have seen little relief at the pump.This phenomenon can be explained by the theory of:

A firm's isoprofit curve is defined as the combinations of outputs produced by:

One of the characteristics of a contestable market is that

Consider a Stackelberg duopoly with the following inverse demand function: P = 100 - 2Q₁ - 2Q₂.The firms' marginal cost are identical and given by MC_i(Q_i) = 2Q_i.Based on this information the Stackelberg leader's reaction function is

The Fundamentals of Managerial Economics

Market Forces: Demand and Supply

Quantitative Demand Analysis

The Theory of Individual Behavior

The Production Process and Costs

The Organization of the Firm

The Nature of Industry

Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets

Game Theory: Inside Oligopoly

Pricing Strategies for Firms With Market Power

The Economics of Information

Advanced Topics in Business Strategy

A Managers Guide to Government in the Marketplace

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Exam 9: Basic Oligopoly Models

Suppose that the duopolists competing in Cournot fashion agree to produce the collusive output.Given that firm two commits to this collusive output, it pays firm one to

When MCI announced a price discount plan designed to induce small firms to use its services, the price of its stock immediately declined.Why do you think the stock market reacted negatively to MCI's plan to attract new customers?

With a linear inverse demand function and the same constant marginal costs for both firms in a homogeneous product Stackelberg duopoly, which of the following will result?

The inverse demand in a Cournot duopoly is P = a - b (Q1 + Q2), and costs are C1(Q1) = c1Q1 and C2(Q2) = c2Q2.The Government has imposed a per unit tax of $t on each unit sold by each firm.The tax revenue is:

Consider a market consisting of two firms where the inverse demand curve is given by P = 500 - 2Q1 - 2Q2.Each firm has a marginal cost of $50.Based on this information we can conclude that aggregate profits in the different equilibrium oligopoly models will follow which of the following orderings.

Firm A has a higher marginal cost than firm B's.They compete in a homogeneous product Cournot duopoly.Which of the following results will not occur?

Which of the following are not price setting oligopoly models?

Consider a Stackelberg duopoly with the following inverse demand function: P = 100 - 2Q1 - 2Q2.The firms' marginal cost are identical and given by MCi(Qi) = 2Qi.Based on this information the Stackelberg follower's reaction function is

An important condition for a contestable market is:

MCI announced a price discount plan for small firms.Their stock immediately fell in price.This shows that:

Collusion in oligopoly is difficult to achieve because:

Which of the following is not a feature of Sweezy oligopoly?

The profits of the follower in a Stackelberg duopoly

Firm A has a higher marginal cost than firm B's.They compete in a homogeneous product Bertrand duopoly.Which of the following results will not occur?

In the above graph, industry profits are maximized

A slight increase in the marginal cost of a firm definitely leads to a reduction in its output if the firm competes in the:

Since the end of the war in the Persian Gulf, the world price of oil has fallen.But in some areas, consumers have seen little relief at the pump.This phenomenon can be explained by the theory of:

A firm's isoprofit curve is defined as the combinations of outputs produced by:

One of the characteristics of a contestable market is that

Consider a Stackelberg duopoly with the following inverse demand function: P = 100 - 2Q1 - 2Q2.The firms' marginal cost are identical and given by MCi(Qi) = 2Qi.Based on this information the Stackelberg leader's reaction function is

The Fundamentals of Managerial Economics

Market Forces: Demand and Supply

Quantitative Demand Analysis

The Theory of Individual Behavior

The Production Process and Costs

The Organization of the Firm

The Nature of Industry

Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets

Game Theory: Inside Oligopoly

Pricing Strategies for Firms With Market Power

The Economics of Information

Advanced Topics in Business Strategy

A Managers Guide to Government in the Marketplace

Filters

The inverse demand in a Cournot duopoly is P = a - b (Q₁ + Q₂), and costs are C₁(Q₁) = c₁Q₁ and C₂(Q₂) = c₂Q₂.The Government has imposed a per unit tax of $t on each unit sold by each firm.The tax revenue is:

Consider a Stackelberg duopoly with the following inverse demand function: P = 100 - 2Q₁ - 2Q₂.The firms' marginal cost are identical and given by MC_i(Q_i) = 2Q_i.Based on this information the Stackelberg follower's reaction function is

Consider a Stackelberg duopoly with the following inverse demand function: P = 100 - 2Q₁ - 2Q₂.The firms' marginal cost are identical and given by MC_i(Q_i) = 2Q_i.Based on this information the Stackelberg leader's reaction function is