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(Q_i)= 2.Based on this information,the follower's reaction function is:

Which of the following statements is NOT a condition for a Stackelberg oligopoly?

When firm 1 acts as a Stackelberg leader:

The inverse demand curve for a Stackelberg duopoly is P = 10,000 - 6Q.The leader's cost structure is C_L(Q_L)= 15Q_L.The follower's cost structure is C_F(Q_F)= 25Q_F. a.Determine the reaction function for the follower. b.Determine the equilibrium output levels for both the leader and the follower. c.What are the profits for the leader? For the follower?

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 follower's marginal revenue function is:

Which of the following is NOT a type of market structure?

Both firms in a Cournot duopoly would enjoy higher profits if:

In Gelate,Pennsylvania,the market for compact discs has evolved as follows: There are two firms that each use a marquee to post the price they charge for compact discs.Each firm buys CDs from the same supplier at a cost of $5.00 per disc.The inverse market demand in their area is given by P = 10 - 2Q,where Q is the total output produced by the two firms. a.Solve for the Bertrand equilibrium price and market output. b.Would your answer differ if the products were not perfect substitutes?

A decrease in firm 2's marginal cost will cause:

Which would you expect to make the highest profits,other things equal?

Ed just finished an empirical study of oligopoly.He found the following result: "In the examined industry,a firm's demand curve is such that other firms match price increases but do not match price reductions." What kind of oligopoly is the examined industry?

Collusion in oligopoly is difficult to achieve because:

Which of the following is true?

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

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 reaction function is:

From a consumer's point of view,which type of oligopoly is most desirable?

Two identical firms compete as a Cournot duopoly.The demand they face is P = 100 − 2Q.The cost function for each firm is C(Q)= 4Q.In equilibrium,the deadweight loss is:

Industry profits are maximized in the figure below:

Two identical firms compete as a Cournot duopoly.The inverse market demand they face is P = 80 − 4Q.The cost function for each firm is C(Q)= 8Q.The price charged in this market will be:

Two firms compete as a Stackelberg duopoly.The demand they face is P = 100 − 3Q.The cost function for each firm is C(Q)= 4Q.The profits of the two firms are: