Exam 9: Basic Oligopoly Models

Consider a Stackelberg duopoly with the following inverse demand function: P = 100 − 2Q₁ − 2Q₂.The firms' marginal costs are identical and are given by MC_i = 2.Based on this information,the Stackelberg leader's marginal revenue function is:

An important condition for a contestable market is:

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

There are many different models of oligopoly because:

Two firms compete as a Stackelberg duopoly.The demand they face is P = 24 − Q.The cost function for each firm is C(Q)= 4Q.The profits of the two firms are:

Firm A has a strictly higher marginal cost than firmB.They compete in a homogeneous product Bertrand duopoly.Which of the following results will NOT occur?

Tom and Jack are the only two local gas stations.Although they have different constant marginal costs,they both survive continued competition.Tom and Jack do NOT constitute a:

Which of the following is true?

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:

The market demand in a Bertrand duopoly is P = 10 − 3Q,and the marginal costs are $1.Fixed costs are zero for both firms.Which of the following statement(s)is/are true?

The profits of the leader in a Stackelberg duopoly:

In a Cournot oligopoly,a decrease in a firm's marginal cost leads to:

The Bertrand theory of oligopoly assumes:

The Bertrand model of oligopoly reveals that:

Which of the following is true about a differentiated-product Bertrand duopoly?

Both firms in a Cournot duopoly would experience lower profits if:

One of the characteristics of a contestable market is that:

Zelda Industries is the only firm of its kind in the world.Due largely to historical accident,it began producing streganomas in 1985 in a vacant warehouse.Virtually anyone with a degree in college chemistry could easily replicate the firm's formula,which is not patent protected.Nonetheless,since 1985 Zelda has averaged accounting profits of 6 percent on investment.This rate is comparable to the average interest rate that large banks paid on deposits over the period.Do you think Zelda is earning monopoly profits? Why?

You are the manager of a firm operating in a differentiated-product oligopoly.Show graphically your optimal response to an increase in marginal cost if a.You believe rivals will follow price reductions but not price increases. b.You believe rivals will hold output constant if you decrease output. c.You believe rivals will follow price increases but not price decreases.

Which of the following is true?