Question 1

With linear demand and constant marginal cost,a Stackelberg leader's profits are ___________ the follower.

Accepted Answer

A)  less than 
B)  equal to 
C)  greater than 
D)  either less than or greater than 
A)  less than 
B)  equal to 
C)  greater than 
D)  either less than or greater than

Question 2

A duopoly in which both firms have a Lerner index of monopoly power equal to 0 is probably a:

Accepted Answer

A)  Sweezy oligopoly. 
B)  Cournot oligopoly. 
C)  Stackelberg oligopoly. 
D)  Bertrand oligopoly. 
A)  Sweezy oligopoly. 
B)  Cournot oligopoly. 
C)  Stackelberg oligopoly. 
D)  Bertrand oligopoly.

Question 3

Firm A has a higher marginal cost than firm B. 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 4

Consider a Cournot duopoly with the following inverse demand function: P = 10 − 0.5Q1 − 0.5Q2.The firms' marginal costs are identical and are given by MCi(Qi)= 3.Based on this information,firm 1 and 2's reaction functions are:

Accepted Answer

A)  r1(Q2) = 7 − 0.5Q1 and r2(Q1) = 7 − 0.5Q2. 
B)  r1(Q2) = 14 − 0.25Q2 and r1(Q2) = 14 − 0.25Q1. 
C)  Q1 = 7 − 0.5Q2 and Q2 = 7 − 0.5Q1. 
D)  Q1 = 14 − 0.25Q2 and Q2 = 14 − 0.25Q1. 
A)  r1(Q2) = 7 − 0.5Q1 and r2(Q1) = 7 − 0.5Q2. 
B)  r1(Q2) = 14 − 0.25Q2 and r1(Q2) = 14 − 0.25Q1. 
C)  Q1 = 7 − 0.5Q2 and Q2 = 7 − 0.5Q1. 
D)  Q1 = 14 − 0.25Q2 and Q2 = 14 − 0.25Q1.

Question 5

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 6

The profits of the leader in a Stackelberg duopoly:

Accepted Answer

A)  are less than those of the follower. 
B)  equal those of the follower. 
C)  are greater than those of the follower. 
D)  are less than those of a Sweezy oligopolist. 
A)  are less than those of the follower. 
B)  equal those of the follower. 
C)  are greater than those of the follower. 
D)  are less than those of a Sweezy oligopolist.

Question 7

When firm 1 enjoys a first-mover advantage in a Stackelberg duopoly,it will produce:

Accepted Answer

A)  more output and charge a lower price than firm 2. 
B)  more output and charge the same price as firm 2. 
C)  less output and charge the same price as firm 2. 
D)  less output and charge a higher price than firm 2. 
A)  more output and charge a lower price than firm 2. 
B)  more output and charge the same price as firm 2. 
C)  less output and charge the same price as firm 2. 
D)  less output and charge a higher price than firm 2.

Question 8

A new firm enters a market which is initially serviced by a Bertrand duopoly charging a price of $30.Assuming that the new firm is equally as efficient as the incumbent firms,what will the new price be should the three firms coexist after the entry?

Accepted Answer

A)  Above $30 
B)  Below $30 
C)  Equal to $30 
D)  Unable to tell given the information provided. 
A)  Above $30 
B)  Below $30 
C)  Equal to $30 
D)  Unable to tell given the information provided.

Question 9

Consider a Stackelberg duopoly with the following inverse demand function: P = 100 − 2Q1 − 2Q2.The firms' marginal costs are identical and are given by MCi = 2.Based on this information,the consumer surplus in this market is:

Accepted Answer

A)  $36.75. 
B)  $73.50. 
C)  $1,352.40. 
D)  $2,704.80. 
A)  $36.75. 
B)  $73.50. 
C)  $1,352.40. 
D)  $2,704.80.

Question 10

The spirit of equating marginal cost with marginal revenue is NOT held by:

Accepted Answer

A)  perfectly competitive firms. 
B)  oligopolistic firms. 
C)  perfectly competitive firms and oligopolistic firms. 
D)  None of the preceding answers is correct. 
A)  perfectly competitive firms. 
B)  oligopolistic firms. 
C)  perfectly competitive firms and oligopolistic firms. 
D)  None of the preceding answers is correct.

Question 11

There are many different models of oligopoly because:

Accepted Answer

A)  beliefs are not incorporated in oligopolistic competition. 
B)  firms do not maximize profits in oligopolistic competition. 
C)  oligopoly is the most complicated type of market structure. 
D)  beliefs are not incorporated in oligopolistic competition and oligopoly is the most complicated type of market structure. 
A)  beliefs are not incorporated in oligopolistic competition. 
B)  firms do not maximize profits in oligopolistic competition. 
C)  oligopoly is the most complicated type of market structure. 
D)  beliefs are not incorporated in oligopolistic competition and oligopoly is the most complicated type of market structure.

Question 12

Consider a Cournot duopoly with the following inverse demand function: P = 50 − 0.2Q1 − 0.2Q2.The firms' marginal costs are identical and are given by MCi(Qi)= 2.Based on this information,firm 1 and 2's reaction functions are:

Accepted Answer

A)  r1(Q2) = 120 − 0.5Q1 and r2(Q1) = 120 − 0.5Q2. 
B)  r1(Q2) = 120 − 0.5Q2 and r1(Q2) = 120 − 0.5Q1. 
C)  Q1 = 240 − 0.75Q2 and Q2 = 240 − 0.75Q1. 
D)  Q1 = 240 − 0.5Q2 and Q2 = 240 − 0.5Q1. 
A)  r1(Q2) = 120 − 0.5Q1 and r2(Q1) = 120 − 0.5Q2. 
B)  r1(Q2) = 120 − 0.5Q2 and r1(Q2) = 120 − 0.5Q1. 
C)  Q1 = 240 − 0.75Q2 and Q2 = 240 − 0.75Q1. 
D)  Q1 = 240 − 0.5Q2 and Q2 = 240 − 0.5Q1.

Question 13

Two firms compete as a Stackelberg duopoly.The inverse market demand they face is P = 62 − 4.5Q.The cost function for each firm is C(Q)= 8Q.The outputs of the two firms are:

Accepted Answer

A)  QL = 48; QF = 24. 
B)  QL = 35; QF = 6. 
C)  QL = 6; QF = 3. 
D)  None of the preceding answers is correct. 
A)  QL = 48; QF = 24. 
B)  QL = 35; QF = 6. 
C)  QL = 6; QF = 3. 
D)  None of the preceding answers is correct.

Question 14

The Sweezy model of oligopoly reveals that:

Accepted Answer

A)  capacity constraints are not important in determining market performance. 
B)  perfectly competitive prices can arise in markets with only a few firms. 
C)  changes in marginal cost may not affect prices. 
D)  All of the statements associated with this question are correct. 
A)  capacity constraints are not important in determining market performance. 
B)  perfectly competitive prices can arise in markets with only a few firms. 
C)  changes in marginal cost may not affect prices. 
D)  All of the statements associated with this question are correct.

Question 15

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

Accepted Answer

A)  There are a few firms in the market serving many consumers. 
B)  The firms produce differentiated 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)  Free entry and exit occurs in the market. 
A)  There are a few firms in the market serving many consumers. 
B)  The firms produce differentiated 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)  Free entry and exit occurs in the market.

Question 16

A new firm enters a market which is initially serviced by a Cournot duopoly charging a price of $20.What will the new market price be should the three firms coexist after the entry?

Accepted Answer

A)  $20 
B)  Below $20 
C)  Above $20 
D)  None of the preceding answers is correct. 
A)  $20 
B)  Below $20 
C)  Above $20 
D)  None of the preceding answers is correct.

Question 17

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.Each firm earns equilibrium profits of:

Accepted Answer

A)  $1,024. 
B)  $2,048. 
C)  $4,096. 
D)  $512. 
A)  $1,024. 
B)  $2,048. 
C)  $4,096. 
D)  $512.

Question 18

Consider a Cournot duopoly with the following inverse demand function: P = 100 − 2Q1 − 2Q2.The firms' marginal costs are identical and are given by MCi(Qi)= 2Qi.Based on this information,firm 1 and 2's reaction functions are:

Accepted Answer

A)  r1(Q2) = 24.5 − 0.5Q1 and r2(Q1) = 24.5 − 0.5Q2. 
B)  r1(Q2) = 24.5 − 0.5Q2 and r2(Q1) = 24.5 − 0.5Q1. 
C)  Q1 = 49 − 0.5Q2 and Q2 = 49 − 0.5Q1. 
D)  Q1 = 49 − 0.25Q2 and Q2 = 49 − 0.25Q1. 
A)  r1(Q2) = 24.5 − 0.5Q1 and r2(Q1) = 24.5 − 0.5Q2. 
B)  r1(Q2) = 24.5 − 0.5Q2 and r2(Q1) = 24.5 − 0.5Q1. 
C)  Q1 = 49 − 0.5Q2 and Q2 = 49 − 0.5Q1. 
D)  Q1 = 49 − 0.25Q2 and Q2 = 49 − 0.25Q1.

Question 19

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 equilibrium output of each firm is the same as a situation where each firm's:

Accepted Answer

A)  demand increases by t. 
B)  demand decreases by t. 
C)  marginal cost increases by t. 
D)  marginal cost decreases by t. 
A)  demand increases by t. 
B)  demand decreases by t. 
C)  marginal cost increases by t. 
D)  marginal cost decreases by t.

Question 20

Consider two firms competing to sell a homogeneous product by setting price.The inverse demand curve is given by P = 6 − Q.If each firm's cost function is Ci(Qi)= 2Qi,then consumer surplus in this market is:

Accepted Answer

A)  $2. 
B)  $4. 
C)  $8. 
D)  There is insufficient information to determine consumer surplus in this market. 
A)  $2. 
B)  $4. 
C)  $8. 
D)  There is insufficient information to determine consumer surplus in this market.

With linear demand and constant marginal cost,a Stackelberg leader's profits are ___________ the follower.

A duopoly in which both firms have a Lerner index of monopoly power equal to 0 is probably a:

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

Consider a Cournot duopoly with the following inverse demand function: P = 10 − 0.5Q₁ − 0.5Q₂.The firms' marginal costs are identical and are given by MC_i(Q_i)= 3.Based on this information,firm 1 and 2's reaction functions are:

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

The profits of the leader in a Stackelberg duopoly:

When firm 1 enjoys a first-mover advantage in a Stackelberg duopoly,it will produce:

A new firm enters a market which is initially serviced by a Bertrand duopoly charging a price of $30.Assuming that the new firm is equally as efficient as the incumbent firms,what will the new price be should the three firms coexist after the entry?

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 consumer surplus in this market is:

The spirit of equating marginal cost with marginal revenue is NOT held by:

There are many different models of oligopoly because:

Consider a Cournot duopoly with the following inverse demand function: P = 50 − 0.2Q₁ − 0.2Q₂.The firms' marginal costs are identical and are given by MC_i(Q_i)= 2.Based on this information,firm 1 and 2's reaction functions are:

Two firms compete as a Stackelberg duopoly.The inverse market demand they face is P = 62 − 4.5Q.The cost function for each firm is C(Q)= 8Q.The outputs of the two firms are:

The Sweezy model of oligopoly reveals that:

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

A new firm enters a market which is initially serviced by a Cournot duopoly charging a price of $20.What will the new market price be should the three firms coexist after the entry?

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.Each firm earns equilibrium profits of:

Consider a Cournot 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)= 2Q_i.Based on this information,firm 1 and 2's reaction functions are:

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 equilibrium output of each firm is the same as a situation where each firm's:

Consider two firms competing to sell a homogeneous product by setting price.The inverse demand curve is given by P = 6 − Q.If each firm's cost function is C_i(Q_i)= 2Q_i,then consumer surplus in this market 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

Exam 9: Basic Oligopoly Models

With linear demand and constant marginal cost,a Stackelberg leader's profits are ___________ the follower.

A duopoly in which both firms have a Lerner index of monopoly power equal to 0 is probably a:

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

Consider a Cournot duopoly with the following inverse demand function: P = 10 − 0.5Q1 − 0.5Q2.The firms' marginal costs are identical and are given by MCi(Qi)= 3.Based on this information,firm 1 and 2's reaction functions are:

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

The profits of the leader in a Stackelberg duopoly:

When firm 1 enjoys a first-mover advantage in a Stackelberg duopoly,it will produce:

A new firm enters a market which is initially serviced by a Bertrand duopoly charging a price of $30.Assuming that the new firm is equally as efficient as the incumbent firms,what will the new price be should the three firms coexist after the entry?

Consider a Stackelberg duopoly with the following inverse demand function: P = 100 − 2Q1 − 2Q2.The firms' marginal costs are identical and are given by MCi = 2.Based on this information,the consumer surplus in this market is:

The spirit of equating marginal cost with marginal revenue is NOT held by:

There are many different models of oligopoly because:

Consider a Cournot duopoly with the following inverse demand function: P = 50 − 0.2Q1 − 0.2Q2.The firms' marginal costs are identical and are given by MCi(Qi)= 2.Based on this information,firm 1 and 2's reaction functions are:

Two firms compete as a Stackelberg duopoly.The inverse market demand they face is P = 62 − 4.5Q.The cost function for each firm is C(Q)= 8Q.The outputs of the two firms are:

The Sweezy model of oligopoly reveals that:

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

A new firm enters a market which is initially serviced by a Cournot duopoly charging a price of $20.What will the new market price be should the three firms coexist after the entry?

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.Each firm earns equilibrium profits of:

Consider a Cournot duopoly with the following inverse demand function: P = 100 − 2Q1 − 2Q2.The firms' marginal costs are identical and are given by MCi(Qi)= 2Qi.Based on this information,firm 1 and 2's reaction functions are:

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 equilibrium output of each firm is the same as a situation where each firm's:

Consider two firms competing to sell a homogeneous product by setting price.The inverse demand curve is given by P = 6 − Q.If each firm's cost function is Ci(Qi)= 2Qi,then consumer surplus in this market 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

Consider a Cournot duopoly with the following inverse demand function: P = 10 − 0.5Q₁ − 0.5Q₂.The firms' marginal costs are identical and are given by MC_i(Q_i)= 3.Based on this information,firm 1 and 2's reaction functions are:

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 consumer surplus in this market is:

Consider a Cournot duopoly with the following inverse demand function: P = 50 − 0.2Q₁ − 0.2Q₂.The firms' marginal costs are identical and are given by MC_i(Q_i)= 2.Based on this information,firm 1 and 2's reaction functions are:

Consider a Cournot 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)= 2Q_i.Based on this information,firm 1 and 2's reaction functions are:

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 equilibrium output of each firm is the same as a situation where each firm's:

Consider two firms competing to sell a homogeneous product by setting price.The inverse demand curve is given by P = 6 − Q.If each firm's cost function is C_i(Q_i)= 2Q_i,then consumer surplus in this market is: