Question 1

A market is composed of three firms. If the bigger two firms' market shares are 45 and 30 percent, what is the Herfindahl index for the industry?

Accepted Answer

A)  3,000 
B)  3,550 
C)  5,200 
D)  6,250 
A)  3,000 
B)  3,550 
C)  5,200 
D)  6,250 B

Question 2

The demand function for a product sold by an oligopolist is given below:
QD = 135 - 0.5P
The firm's marginal cost function is given below:
MC = 30 + 4Q
Calculate the equilibrium price and quantity.

Accepted Answer

P = 270 - 2Q so TR = 270Q - 2Q2 and MR = 270 - 4Q
MR = 270 - 4Q = 30 + 4Q = MC so Q = 30 and P = 210

Question 3

Assume that the industry consists of 2 firms each with 50 percent of the market share. If each of them is split into 2 smaller companies, by how much does the Herfindahl index decrease?

Accepted Answer

A)  800 
B)  2,000 
C)  2,500 
D)  2,800 
A)  800 
B)  2,000 
C)  2,500 
D)  2,800 C

Question 4

The Herfindahl index will be smallest for an industry that is

Accepted Answer

A)  a monopoly. 
B)  perfectly competitive. 
C)  a duopoly. 
D)  a differentiated oligopoly. 
A)  a monopoly. 
B)  perfectly competitive. 
C)  a duopoly. 
D)  a differentiated oligopoly.

Question 5

Successful firms concentrate on their core competencies and outsource all other activities.

Accepted Answer

A) True 
 B)False

Question 6

Use the following to answer questions below:  
-Refer to the price leadership graph. The quantity supplied by the barometric firm is

Accepted Answer

A)  2 units. 
B)  3 units. 
C)  4 units. 
D)  None of the above is correct. 
A)  2 units. 
B)  3 units. 
C)  4 units. 
D)  None of the above is correct.

Question 7

Which of the following U.S. corporations had the highest sales in 2015?

Accepted Answer

A)  Walmart 
B)  CVS 
C)  Ford Motor 
D)  AT&T 
A)  Walmart 
B)  CVS 
C)  Ford Motor 
D)  AT&T

Question 8

A cartel is an organization of colluding oligopolists.

Accepted Answer

A) True 
 B)False

Question 9

Assume that 4 identical firms in a purely oligopolistic industry form a centralized cartel. The total market demand function facing the cartel is and each of the firm's marginal cost function is given by . How much should each firm produce if the cartel wants to minimize production costs?

Accepted Answer

The answer of Assume that 4 identical firms in a...

Question 10

The kinked demand curve model provides an explanation of price rigidity in the face of changes in costs.

Accepted Answer

A) True 
 B)False

Question 11

Use the following to answer questions below :  
-Refer to the graph of market demand and marginal revenue. Two firms have formed a centralized cartel in order to maximize profit on the market. Their marginal cost curves are given below:
MC1 = 10Q1 and MC2 = 30Q2
In order to maximize profit, the firms should produce

Accepted Answer

A)  Q1 = 4, Q2 = 2, and charge P = 50. 
B)  Q1 = 8, Q2 = 0, and charge P = 40. 
C)  Q1 = 3, Q2 = 1, and charge P = 60. 
D)  None of the above is correct. 
A)  Q1 = 4, Q2 = 2, and charge P = 50. 
B)  Q1 = 8, Q2 = 0, and charge P = 40. 
C)  Q1 = 3, Q2 = 1, and charge P = 60. 
D)  None of the above is correct.

Question 12

Assume that the industry consists of 10 firms with 10% of the market share each. If three of these firms are allowed to merge and form a new firm with a 30% market share, while the remaining seven firms will remain with 10% each, what would the change in the Herfindahl index be due to this merger?

Accepted Answer

A)  1000 
B)  600 
C)  300 
D)  100 
A)  1000 
B)  600 
C)  300 
D)  100

Question 13

Two firms that comprise an industry have decided to engage in collusion. They intend to maximize their total collective profit, that is, to behave as a single monopolist. How should they behave?

Accepted Answer

A)  Both firms should increase their levels of output. 
B)  The firm with the higher marginal cost should reduce output and the firm with the lower marginal cost should increase output. 
C)  The firm with the lower marginal cost should reduce output and the firm with the higher marginal cost should increase output. 
D)  Both firms should reduce their levels of output. 
A)  Both firms should increase their levels of output. 
B)  The firm with the higher marginal cost should reduce output and the firm with the lower marginal cost should increase output. 
C)  The firm with the lower marginal cost should reduce output and the firm with the higher marginal cost should increase output. 
D)  Both firms should reduce their levels of output.

Question 14

The demand function for a product sold by an oligopolist is given below:
QD = 370 - P
The firm's marginal cost function is given below:
MC = 10 + 4Q
Calculate the equilibrium price and quantity.

Accepted Answer

The answer of The demand function for a product sold...

Question 15

The sector in which the size of the largest firms has grown most is retail.

Accepted Answer

A) True 
 B)False

Question 16

Two rival companies sell software packages that are perfect substitutes. The software is sold over the web as a download, so the marginal cost is zero. The demand for the software is Q = 1000 - P. Assume that these firms are Cournot duopolists. Derive the reaction functions for the two firms, the quantity each will produce, and the market price that will be charged.

Accepted Answer

The answer of Two rival companies sell software packages that...

Question 17

Oligopoly is the prevalent form of market organization in the manufacturing sectors of industrial nations.

Accepted Answer

A) True 
 B)False

Question 18

Oligopolistic firms can earn positive economic profits

Accepted Answer

A)  in the short run, but not in the long run. 
B)  in the short run and in the long run. 
C)  in the long run, but not in the short run. 
D)  in neither the short run nor the long run. 
A)  in the short run, but not in the long run. 
B)  in the short run and in the long run. 
C)  in the long run, but not in the short run. 
D)  in neither the short run nor the long run.

Question 19

A market that follows the price leadership of a barometric firm has the following demand function:
 $$Q D M = 1400 - 2 P$$ The follower firms have the following aggregate marginal cost function:
 $$M C _ { F } = 100 + 0.50 Q M C$$ The barometric firm has a horizontal marginal cost curve equal to $300. Determine total industry output, market price, and the division of output between the barometric firm and the follower firms.

Accepted Answer

The answer of A market that follows the price leadership...

Question 20

One reason that most economists do not support government industrial and trade policies is that the outcomes of these policies cannot

Accepted Answer

A)  have a positive effect on a country's industries. 
B)  be accurately predicted. 
C)  help a country to overcome a comparative disadvantage. 
D)  prevent a country from losing a comparative advantage. 
A)  have a positive effect on a country's industries. 
B)  be accurately predicted. 
C)  help a country to overcome a comparative disadvantage. 
D)  prevent a country from losing a comparative advantage.

A market is composed of three firms. If the bigger two firms' market shares are 45 and 30 percent, what is the Herfindahl index for the industry?

The demand function for a product sold by an oligopolist is given below: QD = 135 - 0.5P The firm's marginal cost function is given below: MC = 30 + 4Q Calculate the equilibrium price and quantity.

Assume that the industry consists of 2 firms each with 50 percent of the market share. If each of them is split into 2 smaller companies, by how much does the Herfindahl index decrease?

The Herfindahl index will be smallest for an industry that is

Successful firms concentrate on their core competencies and outsource all other activities.

Use the following to answer questions below: -Refer to the price leadership graph. The quantity supplied by the barometric firm is

Which of the following U.S. corporations had the highest sales in 2015?

A cartel is an organization of colluding oligopolists.

Assume that 4 identical firms in a purely oligopolistic industry form a centralized cartel. The total market demand function facing the cartel is and each of the firm's marginal cost function is given by . How much should each firm produce if the cartel wants to minimize production costs?

The kinked demand curve model provides an explanation of price rigidity in the face of changes in costs.

Assume that the industry consists of 10 firms with 10% of the market share each. If three of these firms are allowed to merge and form a new firm with a 30% market share, while the remaining seven firms will remain with 10% each, what would the change in the Herfindahl index be due to this merger?

Two firms that comprise an industry have decided to engage in collusion. They intend to maximize their total collective profit, that is, to behave as a single monopolist. How should they behave?

The demand function for a product sold by an oligopolist is given below: QD = 370 - P The firm's marginal cost function is given below: MC = 10 + 4Q Calculate the equilibrium price and quantity.

The sector in which the size of the largest firms has grown most is retail.

Oligopoly is the prevalent form of market organization in the manufacturing sectors of industrial nations.

Oligopolistic firms can earn positive economic profits

One reason that most economists do not support government industrial and trade policies is that the outcomes of these policies cannot

The Nature and Scope of Managerial Economics

Demand, Supply, and Equilibrium Analysis

Optimization Techniques and New Management Tools

Demand Theory

Demand Estimation

Demand Forecasting

Production Theory and Estimation

Cost Theory and Estimation

Market Structure: Perfect Competition, Monopoly, and Monopolistic Competition

Game Theory and Strategic Behavior

Pricing Practices

Regulation and Antitrust: The Role of Government in the Economy

Risk Analysis

Long-Run Investment Decisions: Capital Budgeting

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Exam 10: Oligopoly and Firm Architecture

A market is composed of three firms. If the bigger two firms' market shares are 45 and 30 percent, what is the Herfindahl index for the industry?

The demand function for a product sold by an oligopolist is given below: QD = 135 - 0.5P The firm's marginal cost function is given below: MC = 30 + 4Q Calculate the equilibrium price and quantity.

Assume that the industry consists of 2 firms each with 50 percent of the market share. If each of them is split into 2 smaller companies, by how much does the Herfindahl index decrease?

The Herfindahl index will be smallest for an industry that is

Successful firms concentrate on their core competencies and outsource all other activities.

Use the following to answer questions below: -Refer to the price leadership graph. The quantity supplied by the barometric firm is

Which of the following U.S. corporations had the highest sales in 2015?

A cartel is an organization of colluding oligopolists.

Assume that 4 identical firms in a purely oligopolistic industry form a centralized cartel. The total market demand function facing the cartel is and each of the firm's marginal cost function is given by . How much should each firm produce if the cartel wants to minimize production costs?

The kinked demand curve model provides an explanation of price rigidity in the face of changes in costs.

Assume that the industry consists of 10 firms with 10% of the market share each. If three of these firms are allowed to merge and form a new firm with a 30% market share, while the remaining seven firms will remain with 10% each, what would the change in the Herfindahl index be due to this merger?

Two firms that comprise an industry have decided to engage in collusion. They intend to maximize their total collective profit, that is, to behave as a single monopolist. How should they behave?

The demand function for a product sold by an oligopolist is given below: QD = 370 - P The firm's marginal cost function is given below: MC = 10 + 4Q Calculate the equilibrium price and quantity.

The sector in which the size of the largest firms has grown most is retail.

Oligopoly is the prevalent form of market organization in the manufacturing sectors of industrial nations.

Oligopolistic firms can earn positive economic profits

One reason that most economists do not support government industrial and trade policies is that the outcomes of these policies cannot

The Nature and Scope of Managerial Economics

Demand, Supply, and Equilibrium Analysis

Optimization Techniques and New Management Tools

Demand Theory

Demand Estimation

Demand Forecasting

Production Theory and Estimation

Cost Theory and Estimation

Market Structure: Perfect Competition, Monopoly, and Monopolistic Competition

Game Theory and Strategic Behavior

Pricing Practices

Regulation and Antitrust: The Role of Government in the Economy

Risk Analysis

Long-Run Investment Decisions: Capital Budgeting

Filters