Question 1

Which of the following is a profit-maximizing condition for a Cournot oligopolist?

Accepted Answer

A)  MR = MC. 
B)  Q1 = Q2 = ... = Qn. 
C)  P = MR. 
D)  All of the statements associated with this question are correct. 
A)  MR = MC. 
B)  Q1 = Q2 = ... = Qn. 
C)  P = MR. 
D)  All of the statements associated with this question are correct.

Question 2

A new firm enters a market which is initially serviced by a Cournot duopoly charging a price of $10.What will the new market price be should the three firms coexist after the entry?

Accepted Answer

A)  $10 
B)  Below $10 
C)  Above $10 
D)  None of the preceding answers is correct. 
A)  $10 
B)  Below $10 
C)  Above $10 
D)  None of the preceding answers is correct.

Question 3

Orion and Zeda are the only producers of a unique product that is sold in a market where the inverse demand curve is P = 200 - 2Q.The firms produce identical products and have identical cost functions given by C(Qi)= 4Qi.The managers of each firm must decide on their outputs on Monday morning and then bring products to market by noon.
a.What is each firm's marginal revenue?
 Marginal cost?
b.Equate each firm's marginal revenue to marginal cost.
c.Use your result in part (b)to solve for each firm's reaction function.
d.Use your results in part (c)to solve for the Cournot equilibrium levels of output for each firm.

Accepted Answer

a.MR_O = 200 - 4q_o - 2q_z; MR_z = 200 - 2q_o - 4q

Question 4

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 quantity in the different equilibrium oligopoly models will follow which of the following orderings?

Accepted Answer

A)  QCollusion Stackelberg Cournot Bertrand 
B)  QCollusion Cournot Stackelberg Bertrand 
C)  QBertrand Collusion Cournot Stackelberg 
D)  QBertrand Stackelberg Cournot Collusion 
A)  QCollusion Stackelberg Cournot Bertrand 
B)  QCollusion Cournot Stackelberg Bertrand 
C)  QBertrand Collusion Cournot Stackelberg 
D)  QBertrand Stackelberg Cournot Collusion

Question 5

The peak of the isoprofit curve has which of the following characteristics?

Accepted Answer

A)  It is the point at which monopoly profits are always achieved. 
B)  It is the point at which the isoprofit curve crosses the reaction function. 
C)  It is the point on the isoprofit curves associated with the highest profit. 
D)  It is the point on the isoprofit curves where Cournot competitors can efficiently achieve collusion profits. 
A)  It is the point at which monopoly profits are always achieved. 
B)  It is the point at which the isoprofit curve crosses the reaction function. 
C)  It is the point on the isoprofit curves associated with the highest profit. 
D)  It is the point on the isoprofit curves where Cournot competitors can efficiently achieve collusion profits.

Question 6

The market demand in a Bertrand duopoly is P = 15 − 4Q,and the marginal costs are $3.Fixed costs are zero for both firms.Which of the following statement(s)is/are true?

Accepted Answer

A)  P = $3 
B)  P = $10 
C)  P = $15 
D)  None of the preceding answers is correct. 
A)  P = $3 
B)  P = $10 
C)  P = $15 
D)  None of the preceding answers is correct.

Question 7

If firms compete in a Cournot fashion,then each firm views the:

Accepted Answer

A)  output of rivals as given. 
B)  prices of rivals as given. 
C)  profits of rivals as given. 
D)  All of the statements associated with this question are correct. 
A)  output of rivals as given. 
B)  prices of rivals as given. 
C)  profits of rivals as given. 
D)  All of the statements associated with this question are correct.

Question 8

"An oligopoly is an oligopoly.Firms behave the same no matter what type of oligopoly it is." This statement is true of:

Accepted Answer

A)  Bertrand and Cournot oligopolies. 
B)  Cournot and Stackelberg oligopolies. 
C)  Bertrand and Stackelberg oligopolies. 
D)  None of the preceding answers is correct. 
A)  Bertrand and Cournot oligopolies. 
B)  Cournot and Stackelberg oligopolies. 
C)  Bertrand and Stackelberg oligopolies. 
D)  None of the preceding answers is correct.

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 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 10

Two firms compete in a Stackelberg fashion.If firm 2 is the leader,then:

Accepted Answer

A)  firm 1 views the output of firm 2 as given. 
B)  firm 2 views the output of firm 1 as given. 
C)  Both A and B are correct. 
D)  None of the preceding answers is correct. 
A)  firm 1 views the output of firm 2 as given. 
B)  firm 2 views the output of firm 1 as given. 
C)  Both A and B are correct. 
D)  None of the preceding answers is correct.

Question 11

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

Accepted Answer

A)  the firms simultaneously reduced output below the Nash equilibrium level. 
B)  each firm simultaneously increased output above the Nash equilibrium level. 
C)  one firm reduced output below the Cournot Nash equilibrium level, while the other firm continued to produce its Cournot Nash equilibrium output. 
D)  None of the preceding answers is correct. 
A)  the firms simultaneously reduced output below the Nash equilibrium level. 
B)  each firm simultaneously increased output above the Nash equilibrium level. 
C)  one firm reduced output below the Cournot Nash equilibrium level, while the other firm continued to produce its Cournot Nash equilibrium output. 
D)  None of the preceding answers is correct.

Question 12

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 no

Question 13

An increase in firm 2's marginal cost will cause:

Accepted Answer

A)  a downward shift in firm 1's reaction function, resulting in a new Cournot equilibrium where firm 1 is producing a lower quantity and firm 2 is producing a higher quantity. 
B)  an upward shift in firm 1's reaction function, resulting in a new Cournot equilibrium where firm 1 is producing a higher quantity and firm 2 is producing a lower quantity. 
C)  a downward shift in firm 2's reaction function, resulting in a new Cournot equilibrium where firm 1 is producing a higher quantity and firm 2 is producing a lower quantity. 
D)  an upward shift in firm 2's reaction function, resulting in a new Cournot equilibrium where firm 1 is producing a lower quantity and firm 2 is producing a higher quantity. 
A)  a downward shift in firm 1's reaction function, resulting in a new Cournot equilibrium where firm 1 is producing a lower quantity and firm 2 is producing a higher quantity. 
B)  an upward shift in firm 1's reaction function, resulting in a new Cournot equilibrium where firm 1 is producing a higher quantity and firm 2 is producing a lower quantity. 
C)  a downward shift in firm 2's reaction function, resulting in a new Cournot equilibrium where firm 1 is producing a higher quantity and firm 2 is producing a lower quantity. 
D)  an upward shift in firm 2's reaction function, resulting in a new Cournot equilibrium where firm 1 is producing a lower quantity and firm 2 is producing a higher quantity.

Question 14

Which of the following is true about a Sweezy oligopoly?

Accepted Answer

A)  The marginal cost function has a downward "jump" or "discontinuity." 
B)  The marginal revenue function has a downward "jump" or "discontinuity." 
C)  The marginal cost function has an upward "jump" or "discontinuity." 
D)  The marginal revenue function has an upward "jump" or "discontinuity." 
A)  The marginal cost function has a downward "jump" or "discontinuity." 
B)  The marginal revenue function has a downward "jump" or "discontinuity." 
C)  The marginal cost function has an upward "jump" or "discontinuity." 
D)  The marginal revenue function has an upward "jump" or "discontinuity."

Question 15

Which of the following are quantity-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 16

Over the past 20 years,the 12 members of the Organization of Petroleum Exporting Countries have made repeated attempts to restrict output in order to maintain high crude oil prices.Between 1990 and 1995,however,crude oil prices dropped by about 20 percent,due in part to increased production from the former Soviet Union,Latin America,Asia,and the North Sea.In light of these increases in oil production from non-OPEC countries,what must OPEC do to maintain the price of oil at its desired level?
 Do you think this will be easy for OPEC to do?

Accepted Answer

OPEC must decrease its total quantity of

Question 17

An oligopolist faces a demand curve that is steeper at higher prices than at lower prices.Which of the following is most likely?

Accepted Answer

A)  The firm competes with others in the Cournot fashion. 
B)  Other firms match price increases but do not match price reductions. 
C)  Other firms match price reductions but do not match price changes. 
D)  The firm competes with others in the Bertrand fashion. 
A)  The firm competes with others in the Cournot fashion. 
B)  Other firms match price increases but do not match price reductions. 
C)  Other firms match price reductions but do not match price changes. 
D)  The firm competes with others in the Bertrand fashion.

Question 18

Sue and Jane own two local gas stations.They have identical constant marginal costs,but earn zero economic profits.Sue and Jane constitute:

Accepted Answer

A)  a Sweezy oligopoly. 
B)  a Cournot oligopoly. 
C)  a Bertrand oligopoly. 
D)  None of the preceding answers is correct. 
A)  a Sweezy oligopoly. 
B)  a Cournot oligopoly. 
C)  a Bertrand oligopoly. 
D)  None of the preceding answers is correct.

Question 19

The market demand in a Bertrand duopoly is P = 10 − 3Q,and the marginal costs are $1.Fixed costs are zero for both firms.Based on this information we can conclude that:

Accepted Answer

A)  P = $7 and firm 1 will sell 7 units of output. 
B)  P = $1 and firms 1 and 2 will each sell 7 units of output. 
C)  P = $1 and firms 1 and 2 will each sell 1.5 units of output. 
D)  P = $1.5 and firms 1 and 2 will each sell 10 units of output. 
A)  P = $7 and firm 1 will sell 7 units of output. 
B)  P = $1 and firms 1 and 2 will each sell 7 units of output. 
C)  P = $1 and firms 1 and 2 will each sell 1.5 units of output. 
D)  P = $1.5 and firms 1 and 2 will each sell 10 units of output.

Question 20

An oligopolist has a marginal revenue curve that jumps down at 500 units of output.What kind of oligopoly does the firm most likely belong to?

Accepted Answer

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

Which of the following is a profit-maximizing condition for a Cournot oligopolist?

A new firm enters a market which is initially serviced by a Cournot duopoly charging a price of $10.What will the new market price be should the three firms coexist after the entry?

The peak of the isoprofit curve has which of the following characteristics?

The market demand in a Bertrand duopoly is P = 15 − 4Q,and the marginal costs are $3.Fixed costs are zero for both firms.Which of the following statement(s)is/are true?

If firms compete in a Cournot fashion,then each firm views the:

"An oligopoly is an oligopoly.Firms behave the same no matter what type of oligopoly it is." This statement is true of:

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 reaction function is:

Two firms compete in a Stackelberg fashion.If firm 2 is the leader,then:

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

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?

An increase in firm 2's marginal cost will cause:

Which of the following is true about a Sweezy oligopoly?

Which of the following are quantity-setting oligopoly models?

An oligopolist faces a demand curve that is steeper at higher prices than at lower prices.Which of the following is most likely?

Sue and Jane own two local gas stations.They have identical constant marginal costs,but earn zero economic profits.Sue and Jane constitute:

The market demand in a Bertrand duopoly is P = 10 − 3Q,and the marginal costs are $1.Fixed costs are zero for both firms.Based on this information we can conclude that:

An oligopolist has a marginal revenue curve that jumps down at 500 units of output.What kind of oligopoly does the firm most likely belong to?

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

Which of the following is a profit-maximizing condition for a Cournot oligopolist?

A new firm enters a market which is initially serviced by a Cournot duopoly charging a price of $10.What will the new market price be should the three firms coexist after the entry?

The peak of the isoprofit curve has which of the following characteristics?

The market demand in a Bertrand duopoly is P = 15 − 4Q,and the marginal costs are $3.Fixed costs are zero for both firms.Which of the following statement(s)is/are true?

If firms compete in a Cournot fashion,then each firm views the:

"An oligopoly is an oligopoly.Firms behave the same no matter what type of oligopoly it is." This statement is true of:

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 Stackelberg follower's reaction function is:

Two firms compete in a Stackelberg fashion.If firm 2 is the leader,then:

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

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?

An increase in firm 2's marginal cost will cause:

Which of the following is true about a Sweezy oligopoly?

Which of the following are quantity-setting oligopoly models?

An oligopolist faces a demand curve that is steeper at higher prices than at lower prices.Which of the following is most likely?

Sue and Jane own two local gas stations.They have identical constant marginal costs,but earn zero economic profits.Sue and Jane constitute:

The market demand in a Bertrand duopoly is P = 10 − 3Q,and the marginal costs are $1.Fixed costs are zero for both firms.Based on this information we can conclude that:

An oligopolist has a marginal revenue curve that jumps down at 500 units of output.What kind of oligopoly does the firm most likely belong to?

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 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 reaction function is: