Question 1

The producer's surplus of all firms in an oligopoly is usually the least in the case of 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 2

Which of the following are price-setting oligopoly models?

Accepted Answer

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

Question 3

Compare and contrast the output levels and profits for the Cournot,Stackelberg,and Bertrand models.Use the following cost and demand conditions for your comparison,and suppose there are two firms:
 P = 1,500 - 10Q.Each firm has a marginal cost of $20 and fixed costs of zero.

Accepted Answer

\[\begin{array} { | l | l | l | l | l |

Question 4

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.The equilibrium output of each firm is:

Accepted Answer

A)  8. 
B)  16. 
C)  32. 
D)  36. 
A)  8. 
B)  16. 
C)  32. 
D)  36.

Question 5

Which of the following is NOT true about a differentiated-product Bertrand duopoly?

Accepted Answer

A)  Firm 1 and firm 2's prices will be equal to marginal cost. 
B)  Firm 1's price will always be above marginal cost, while firm 2's price will be less than marginal cost. 
C)  Firm 1's price will always be less than marginal cost, while firm 2's price will be above marginal cost. 
D)  None of the preceding answers is correct. 
A)  Firm 1 and firm 2's prices will be equal to marginal cost. 
B)  Firm 1's price will always be above marginal cost, while firm 2's price will be less than marginal cost. 
C)  Firm 1's price will always be less than marginal cost, while firm 2's price will be above marginal cost. 
D)  None of the preceding answers is correct.

Question 6

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

Accepted Answer

A)  r1(Q2) = 24.5 − 0.5Q1 and r2(Q1) = 24.5 − 0.5Q2. 
B)  r1(Q2) = 24.5 − 0.5Q2 and r1(Q2) = 24.5 − 0.5Q1. 
C)  Q1 = 49 − 0.5Q2 and Q2 = 49 − 0.5Q1. 
D)  The Stackelberg leader does not react to the output decision of its rival. 
A)  r1(Q2) = 24.5 − 0.5Q1 and r2(Q1) = 24.5 − 0.5Q2. 
B)  r1(Q2) = 24.5 − 0.5Q2 and r1(Q2) = 24.5 − 0.5Q1. 
C)  Q1 = 49 − 0.5Q2 and Q2 = 49 − 0.5Q1. 
D)  The Stackelberg leader does not react to the output decision of its rival.

Question 7

Two firms compete as a Stackelberg duopoly.The demand they face is P = 40 − Q.The cost function for each firm is C(Q)= 4Q.The profits of the two firms are:

Accepted Answer

A)  F1F1F1S1F1F1F10L = $162; F1F1F1S1F1F1F10F = $81. 
B)  F1F1F1S1F1F1F10L = $81; F1F1F1S1F1F1F10F = $40.5. 
C)  F1F1F1S1F1F1F10L = $81; F1F1F1S1F1F1F10F = −$40.5. 
D)  F1F1F1S1F1F1F10L = $162; F1F1F1S1F1F1F10F = $40.5. 
A)  F1F1F1S1F1F1F10L = $162; F1F1F1S1F1F1F10F = $81. 
B)  F1F1F1S1F1F1F10L = $81; F1F1F1S1F1F1F10F = $40.5. 
C)  F1F1F1S1F1F1F10L = $81; F1F1F1S1F1F1F10F = −$40.5. 
D)  F1F1F1S1F1F1F10L = $162; F1F1F1S1F1F1F10F = $40.5.

Question 8

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

Accepted Answer

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

Question 9

You are the CEO of ClipIt,a paper clip manufacturer.Your company enjoys a patented technology that allows it to produce paper clips faster and at a lower cost than your only rival,FastenIt.Clipit uses this advantage to be the first to choose its profit-maximizing output level in the market.The inverse demand function for paper clips is P = 500 - 2Q,ClipIt's costs are CC(QC)= 2QC,and FastenIt's costs are CF(QF)= 4QF.
a.What is ClipIt's profit-maximizing output level?
 FastenIt's?
b.What is the market's equilibrium price?
c.How much profit does each firm earn?
d.Ignoring antitrust considerations,would it be profitable for your firm to merge with FastenIt?
 If not,explain why not; if so,put together an offer that would permit you to profitably complete the merger.

Accepted Answer

a.Stackelberg leader's profit-maximizing

Question 10

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

Accepted Answer

A)  $25 
B)  $20 
C)  $15 
D)  None of the preceding answers is correct. 
A)  $25 
B)  $20 
C)  $15 
D)  None of the preceding answers is correct.

Question 11

Which of the following is NOT a quantity-setting oligopoly model?

Accepted Answer

A)  Stackelberg 
B)  Cournot 
C)  Bertrand 
D)  All of the choices are quantity-setting models. 
A)  Stackelberg 
B)  Cournot 
C)  Bertrand 
D)  All of the choices are quantity-setting models.

Question 12

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 13

The Cournot theory of oligopoly is based on the assumption that each firm believes that rivals will:

Accepted Answer

A)  keep their output constant if it changes its output. 
B)  increase their output whenever it increases its output. 
C)  decrease their output whenever it increases its output. 
D)  randomly change output whenever it changes its output. 
A)  keep their output constant if it changes its output. 
B)  increase their output whenever it increases its output. 
C)  decrease their output whenever it increases its output. 
D)  randomly change output whenever it changes its output.

Question 14

In a market where two firms compete by setting quantity,the Cournot equilibrium has which of the following characteristics?

Accepted Answer

A)  The two firms' reaction functions intersect. 
B)  There is no incentive for the two firms to collude. 
C)  The two firms' isoprofit curves intersect one another at the highest point. 
D)  The two firms' reaction functions intersect at the highest point where the two firms' isoprofit curves intersect one another. 
A)  The two firms' reaction functions intersect. 
B)  There is no incentive for the two firms to collude. 
C)  The two firms' isoprofit curves intersect one another at the highest point. 
D)  The two firms' reaction functions intersect at the highest point where the two firms' isoprofit curves intersect one another.

Question 15

Firm 1 and firm 2 compete as a Cournot oligopoly.There is an increase in marginal cost for firm 1.Which of the following is NOT true?

Accepted Answer

A)  Firm 1 will produce less. 
B)  Firm 2 will produce more. 
C)  Both firm 1's and firm 2's reaction functions are shifted. 
D)  Profits of firm 1 will decrease. 
A)  Firm 1 will produce less. 
B)  Firm 2 will produce more. 
C)  Both firm 1's and firm 2's reaction functions are shifted. 
D)  Profits of firm 1 will decrease.

Question 16

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 = 2.Based on this information,consumer surplus in this market is:

Accepted Answer

A)  $16.33. 
B)  $32.67. 
C)  $1,067.11. 
D)  $2,134.22. 
A)  $16.33. 
B)  $32.67. 
C)  $1,067.11. 
D)  $2,134.22.

Question 17

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

Accepted Answer

A)  There are few firms in the market serving many consumers. 
B)  The firms produce homogeneous 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 few firms in the market serving many consumers. 
B)  The firms produce homogeneous 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 18

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

Accepted Answer

A)  CSCollusion > CSStackelberg > CSCournot > CSBertrand 
B)  CSBertrand > CSStackelberg > CSCournot > CSCollusion 
C)  CSBertrand > CSCournot > CSStackelberg > CSCollusion 
D)  CSStackelberg > CSBertrand > CSCournot > CSCollusion 
A)  CSCollusion > CSStackelberg > CSCournot > CSBertrand 
B)  CSBertrand > CSStackelberg > CSCournot > CSCollusion 
C)  CSBertrand > CSCournot > CSStackelberg > CSCollusion 
D)  CSStackelberg > CSBertrand > CSCournot > CSCollusion

Question 19

Which of the following is true?

Accepted Answer

A)  If there are only two firms in a market, prices must be above marginal cost. 
B)  If there is only one firm in a market, prices must be above marginal cost. 
C)  Both A and B are correct. 
D)  None of the preceding answers is correct. 
A)  If there are only two firms in a market, prices must be above marginal cost. 
B)  If there is only one firm in a market, prices must be above marginal cost. 
C)  Both A and B are correct. 
D)  None of the preceding answers is correct.

Question 20

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 marginal revenue functions are:

Accepted Answer

A)  MR1(Q1,Q2) = 100 − 2Q1 − Q2 and MR2(Q1,Q2) = 100 − Q1 − 2Q2. 
B)  MR1(Q1,Q2) = 100 − 4Q1 − 2Q2 and MR2(Q1,Q2) = 100 − 2Q1 − 4Q2. 
C)  MR1(Q1,Q2) = 100 − 2Q1 − 4Q2 and MR2(Q1,Q2) = 100 − 4Q1 − 2Q2. 
D)  MR1(Q1,Q2) = 24.5 − 0.5Q2 and MR2(Q1,Q2) = 24.5 − 0.5Q1. 
A)  MR1(Q1,Q2) = 100 − 2Q1 − Q2 and MR2(Q1,Q2) = 100 − Q1 − 2Q2. 
B)  MR1(Q1,Q2) = 100 − 4Q1 − 2Q2 and MR2(Q1,Q2) = 100 − 2Q1 − 4Q2. 
C)  MR1(Q1,Q2) = 100 − 2Q1 − 4Q2 and MR2(Q1,Q2) = 100 − 4Q1 − 2Q2. 
D)  MR1(Q1,Q2) = 24.5 − 0.5Q2 and MR2(Q1,Q2) = 24.5 − 0.5Q1.

The producer's surplus of all firms in an oligopoly is usually the least in the case of a:

Which of the following are price-setting oligopoly models?

Compare and contrast the output levels and profits for the Cournot,Stackelberg,and Bertrand models.Use the following cost and demand conditions for your comparison,and suppose there are two firms: P = 1,500 - 10Q.Each firm has a marginal cost of $20 and fixed costs of zero.

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.The equilibrium output of each firm is:

Which of the following is NOT 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(Q_i)= 2.Based on this information,the leader's reaction function is:

Two firms compete as a Stackelberg duopoly.The demand they face is P = 40 − Q.The cost function for each firm is C(Q)= 4Q.The profits of the two firms are:

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

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

Which of the following is NOT a quantity-setting oligopoly model?

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

The Cournot theory of oligopoly is based on the assumption that each firm believes that rivals will:

In a market where two firms compete by setting quantity,the Cournot equilibrium has which of the following characteristics?

Firm 1 and firm 2 compete as a Cournot oligopoly.There is an increase in marginal cost for firm 1.Which of the following is NOT true?

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 = 2.Based on this information,consumer surplus in this market is:

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

Which of the following is true?

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 marginal revenue functions are:

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

The producer's surplus of all firms in an oligopoly is usually the least in the case of a:

Which of the following are price-setting oligopoly models?

Compare and contrast the output levels and profits for the Cournot,Stackelberg,and Bertrand models.Use the following cost and demand conditions for your comparison,and suppose there are two firms: P = 1,500 - 10Q.Each firm has a marginal cost of $20 and fixed costs of zero.

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.The equilibrium output of each firm is:

Which of the following is NOT 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 MCi(Qi)= 2.Based on this information,the leader's reaction function is:

Two firms compete as a Stackelberg duopoly.The demand they face is P = 40 − Q.The cost function for each firm is C(Q)= 4Q.The profits of the two firms are:

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

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

Which of the following is NOT a quantity-setting oligopoly model?

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

The Cournot theory of oligopoly is based on the assumption that each firm believes that rivals will:

In a market where two firms compete by setting quantity,the Cournot equilibrium has which of the following characteristics?

Firm 1 and firm 2 compete as a Cournot oligopoly.There is an increase in marginal cost for firm 1.Which of the following is NOT true?

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 = 2.Based on this information,consumer surplus in this market is:

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

Which of the following is true?

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 marginal revenue functions are:

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

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 = 2.Based on this information,consumer surplus in this market is:

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 marginal revenue functions are: