Question 1

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 outputs of the two firms are:

Accepted Answer

A)  QL = 16; QF = 8. 
B)  QL = 24; QF = 12. 
C)  QL = 12; QF = 8. 
D)  QL = 20; QF = 15. 
A)  QL = 16; QF = 8. 
B)  QL = 24; QF = 12. 
C)  QL = 12; QF = 8. 
D)  QL = 20; QF = 15.

Question 2

You are a potential entrant into a market that previously has had entry blocked by the government.Your market research has estimated that the inverse market demand curve for this industry is P = 22,500 - 75Q,where 
 $\mathbf { Q } = \sum _ { \mathbf { i } = 1 } ^ { \mathbf { n } } \mathbf { Q } _ { \mathbf { i } }$ .You estimate that if you enter the market,your own cost function will be Cy(Qy)= 15,300Qy .The government has invited your firm to enter the industry,but it will require you to pay a one-time license fee of $100,000.You do not know the cost functions of the firms currently in the market; however,the price is now $16,000.Last year 87 units were sold by existing firms.Would you choose to enter this market?

Accepted Answer

In this case,your inverse demand functio

Question 3

Which of the following is a feature of a contestable market?

Accepted Answer

A)  There are several firms in the market serving many consumers. 
B)  There is a single firm in the market serving many consumers. 
C)  The market price is equal to marginal cost. 
D)  There is a single firm in the market serving many consumers and the market price is equal to marginal cost. 
A)  There are several firms in the market serving many consumers. 
B)  There is a single firm in the market serving many consumers. 
C)  The market price is equal to marginal cost. 
D)  There is a single firm in the market serving many consumers and the market price is equal to marginal cost.

Question 4

In the presence of large sunk costs,which of the following market structures generally leads to the highest price?

Accepted Answer

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

Question 5

In the late 1990s,Chrysler announced a new incentive program on its minivans that included subsidized interest rates and cash allowances.Under the plan,consumers could enjoy financing rates as low as 4.9 percent,as well as a $500 cash allowance toward the lease or purchase of a new minivan.What changes in sales would you anticipate if you were the manager of a Dodge/Plymouth franchise,the official dealer of Chrysler?
 Why?

Accepted Answer

Other things equal,your sales would rise

Question 6

Consider two firms competing to sell a homogeneous product by setting price.The inverse demand curve is given by P = 20 − Q.Firm 1 has MC1(Q1)= 2 and firm 2 has MC2(Q2)= 2.25.Based on this information,we can conclude that the market price will be:

Accepted Answer

A)  $2 and each firm will produce 9 units. 
B)  $2.25 and each firm will produce 8.875 units. 
C)  $2.24 and firm 1 will produce 17.76 units and firm 2 will produce 0 units. 
D)  $2 and firm 1 will produce 18 units and firm 2 will produce 0 units. 
A)  $2 and each firm will produce 9 units. 
B)  $2.25 and each firm will produce 8.875 units. 
C)  $2.24 and firm 1 will produce 17.76 units and firm 2 will produce 0 units. 
D)  $2 and firm 1 will produce 18 units and firm 2 will produce 0 units.

Question 7

If firms are in Cournot equilibrium,they could increase profits by:

Accepted Answer

A)  jointly increasing output. 
B)  jointly reducing output. 
C)  unilaterally increasing prices. 
D)  unilaterally reducing prices. 
A)  jointly increasing output. 
B)  jointly reducing output. 
C)  unilaterally increasing prices. 
D)  unilaterally reducing prices.

Question 8

In a Sweezy Oligopoly,a decrease in a firm's marginal cost generally leads to:

Accepted Answer

A)  reduced output and a higher price. 
B)  increased output and a lower price. 
C)  higher output and a higher price. 
D)  None of the preceding answers is correct. 
A)  reduced output and a higher price. 
B)  increased output and a lower price. 
C)  higher output and a higher price. 
D)  None of the preceding answers is correct.

Question 9

The profits of the follower in a Stackelberg duopoly:

Accepted Answer

A)  are greater than those of the leader. 
B)  equal those of the leader. 
C)  are less than those of the leader. 
D)  All the statements associated with this question are correct. 
A)  are greater than those of the leader. 
B)  equal those of the leader. 
C)  are less than those of the leader. 
D)  All the statements associated with this question are correct.

Question 10

If firms are in Cournot equilibrium:

Accepted Answer

A)  each firm could increase profits by unilaterally increasing output. 
B)  each firm could increase profits by unilaterally decreasing output. 
C)  firms could increase profits by jointly increasing output. 
D)  firms could increase profits by jointly reducing output. 
A)  each firm could increase profits by unilaterally increasing output. 
B)  each firm could increase profits by unilaterally decreasing output. 
C)  firms could increase profits by jointly increasing output. 
D)  firms could increase profits by jointly reducing output.

Question 11

The (inverse)demand in a Cournot duopoly is P = a - b (Q1 + Q2),and costs are C1(Q1)= c1Q1 and C2(Q2)= c2Q2.
Show that the Cournot equilibrium levels of output are $$Q _ { 1 } = \frac { a + c _ { 2 } - 2 c _ { 1 } } { 3 b }$$ and $Q _ { 2 } = \frac { a + c _ { 1 } - 2 c _ { 2 } } { 3 b }$ .

Accepted Answer

Equating MR = MC for firm 1 yields a − b

Question 12

What real-world evidence would lead you to believe that firms were acting as Cournot oligopolists?
 Stackelberg oligopolists?
 Bertrand oligopolists?

Accepted Answer

Evidence of Cournot oligopoly would be a

Question 13

Firm A has a higher marginal cost than firm B.They compete in a homogeneous product Bertrand 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 14

The Cournot theory of oligopoly assumes rivals will:

Accepted Answer

A)  keep their output constant. 
B)  increase their output whenever a firm increases its output. 
C)  decrease output whenever a firm increases its output. 
D)  follow the learning curve. 
A)  keep their output constant. 
B)  increase their output whenever a firm increases its output. 
C)  decrease output whenever a firm increases its output. 
D)  follow the learning curve.

Question 15

Suppose that the duopolists competing in Cournot fashion agree to produce the collusive output.Given that firm 2 commits to this collusive output,it pays firm 1 to:

Accepted Answer

A)  cheat by producing a higher level of output. 
B)  cheat by producing a lower level of output. 
C)  cheat by raising prices. 
D)  None of the preceding answers is correct. 
A)  cheat by producing a higher level of output. 
B)  cheat by producing a lower level of output. 
C)  cheat by raising prices. 
D)  None of the preceding answers is correct.

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 outputs of the two firms are:

Which of the following is a feature of a contestable market?

In the presence of large sunk costs,which of the following market structures generally leads to the highest price?

Consider two firms competing to sell a homogeneous product by setting price.The inverse demand curve is given by P = 20 − Q.Firm 1 has MC₁(Q₁)= 2 and firm 2 has MC₂(Q₂)= 2.25.Based on this information,we can conclude that the market price will be:

If firms are in Cournot equilibrium,they could increase profits by:

In a Sweezy Oligopoly,a decrease in a firm's marginal cost generally leads to:

The profits of the follower in a Stackelberg duopoly:

If firms are in Cournot equilibrium:

What real-world evidence would lead you to believe that firms were acting as Cournot oligopolists? Stackelberg oligopolists? Bertrand oligopolists?

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

The Cournot theory of oligopoly assumes rivals will:

Suppose that the duopolists competing in Cournot fashion agree to produce the collusive output.Given that firm 2 commits to this collusive output,it pays firm 1 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

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 outputs of the two firms are:

Which of the following is a feature of a contestable market?

In the presence of large sunk costs,which of the following market structures generally leads to the highest price?

Consider two firms competing to sell a homogeneous product by setting price.The inverse demand curve is given by P = 20 − Q.Firm 1 has MC1(Q1)= 2 and firm 2 has MC2(Q2)= 2.25.Based on this information,we can conclude that the market price will be:

If firms are in Cournot equilibrium,they could increase profits by:

In a Sweezy Oligopoly,a decrease in a firm's marginal cost generally leads to:

The profits of the follower in a Stackelberg duopoly:

If firms are in Cournot equilibrium:

What real-world evidence would lead you to believe that firms were acting as Cournot oligopolists? Stackelberg oligopolists? Bertrand oligopolists?

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

The Cournot theory of oligopoly assumes rivals will:

Suppose that the duopolists competing in Cournot fashion agree to produce the collusive output.Given that firm 2 commits to this collusive output,it pays firm 1 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 two firms competing to sell a homogeneous product by setting price.The inverse demand curve is given by P = 20 − Q.Firm 1 has MC₁(Q₁)= 2 and firm 2 has MC₂(Q₂)= 2.25.Based on this information,we can conclude that the market price will be: