Question 1

Which of the following models results in the greatest total profit,assuming a fixed number of firms with identical costs and a given demand curve?

Accepted Answer

A) Cournot 
B) Stackelberg 
C) Monopoly 
D) Perfect competition 
A) Cournot 
B) Stackelberg 
C) Monopoly 
D) Perfect competition C

Question 2

Perfect competition and monopolistic competition are similar in that both market structures include

Accepted Answer

A) price-taking behavior by firms. 
B) a homogeneous product. 
C) no barriers to entry. 
D) very few firms. 
A) price-taking behavior by firms. 
B) a homogeneous product. 
C) no barriers to entry. 
D) very few firms. C

Question 3

The Cournot Model of Oligopoly assumes that

Accepted Answer

A) firms decide what quantity to produce. 
B) firms make their decisions simultaneously. 
C) firms do not cooperate. 
D) All of the above. 
A) firms decide what quantity to produce. 
B) firms make their decisions simultaneously. 
C) firms do not cooperate. 
D) All of the above. D

Question 4

The ability to set a price greater than marginal cost guarantees an economic profit for the monopolistic competitor (assuming P > AC).

Accepted Answer

A) True 
 B)False

Question 5

In a Bertrand duopoly with product differentiation,explain how a change in one firm's marginal cost can have an effect on the price charged by the other firm.

Accepted Answer

Each firm's price is a functio

Question 6

In a sense,a cartel is self-destructive because

Accepted Answer

A) it reduces consumer surplus. 
B) it sets price above marginal cost. 
C) each cartel member has the incentive to cheat on the cartel. 
D) each cartel member earns economic profit. 
A) it reduces consumer surplus. 
B) it sets price above marginal cost. 
C) each cartel member has the incentive to cheat on the cartel. 
D) each cartel member earns economic profit.

Question 7

The Bertrand model is a more plausible model of firm behavior than the Cournot model

Accepted Answer

A) when firms set the quantity to be sold. 
B) when firms sell a differentiated product. 
C) because firms that sell a non-differentiated product typically act as price takers. 
D) because the Bertrand model predicts that firms will price at marginal cost. 
A) when firms set the quantity to be sold. 
B) when firms sell a differentiated product. 
C) because firms that sell a non-differentiated product typically act as price takers. 
D) because the Bertrand model predicts that firms will price at marginal cost.

Question 8

Which of the following will facilitate the enforcement of a cartel?

Accepted Answer

A) most-favored-customer clauses 
B) reports of bids on government contracts 
C) meet the competition or price match 
D) All of the above 
A) most-favored-customer clauses 
B) reports of bids on government contracts 
C) meet the competition or price match 
D) All of the above

Question 9

If a cartel is unable to monitor its members and punish those firms that violate the agreement,then

Accepted Answer

A) the member firms will each act as price setters. 
B) the cartel will prosper in the long run. 
C) the market will become a monopoly. 
D) the cartel will fail. 
A) the member firms will each act as price setters. 
B) the cartel will prosper in the long run. 
C) the market will become a monopoly. 
D) the cartel will fail.

Question 10

Which of the following models results in the greatest deadweight loss,assuming a fixed number of firms with identical costs and a given demand curve?

Accepted Answer

A) Cournot 
B) Stackelberg 
C) Monopoly 
D) Perfect competition 
A) Cournot 
B) Stackelberg 
C) Monopoly 
D) Perfect competition

Question 11

Oligopoly differs from monopolistic competition in that an oligopoly includes

Accepted Answer

A) product differentiation. 
B) barriers to entry. 
C) no barriers to entry. 
D) downward-sloping demand curves facing the firm. 
A) product differentiation. 
B) barriers to entry. 
C) no barriers to entry. 
D) downward-sloping demand curves facing the firm.

Question 12

In a Bertrand model,if one firm has a dominant strategy,its best-response function

Accepted Answer

A) does not exist. 
B) is identical to its rival. 
C) is a constant. 
D) is to respond to its rival's price increase with a price decrease. 
A) does not exist. 
B) is identical to its rival. 
C) is a constant. 
D) is to respond to its rival's price increase with a price decrease.

Question 13

Consider a market with inverse demand p = 100 - 2Q.Firms have no fixed cost and constant marginal cost c.
a.Derive the firms' outputs and profits when this market is served by Cournot duopolists.
b.How do outputs and profits vary with c? Specifically,use calculus to find the derivative of the output of each firm and profit of each firm with respect to c.
c.Suppose the firm's also have a fixed cost of F in addition to the marginal cost c.How does F alter the best response functions and NE? Explain in words.(For technical reasons,assume that both firms still produce a positive level of output in equilibrium)

Accepted Answer

a.First,the profit for firm 1 is: π₁ = (1

Question 14

Market failure or inefficient consumption will take place in the market structures EXCEPT for

Accepted Answer

A) perfect competition. 
B) monopolistic competition. 
C) oligopoly. 
D) monopoly. 
A) perfect competition. 
B) monopolistic competition. 
C) oligopoly. 
D) monopoly.

Question 15

Suppose two duopolists operate at zero marginal cost.The market demand is p = a - bQ.If firm 1 is the Stackelberg leader,what level of output will it choose?

Accepted Answer

A) q1 = (a - bq2)/2b 
B) q1 = (a - 2bq2)/2b 
C) q1 = a/b 
D) q1 = a/2b 
A) q1 = (a - bq2)/2b 
B) q1 = (a - 2bq2)/2b 
C) q1 = a/b 
D) q1 = a/2b

Question 16

Which of the following market models results in the highest price assuming a fixed number of firms with identical costs and a given demand curve?

Accepted Answer

A) Cournot 
B) Stackelberg 
C) Monopoly 
D) Price is the same in all three markets. 
A) Cournot 
B) Stackelberg 
C) Monopoly 
D) Price is the same in all three markets.

Question 17

Suppose that market demand can be represented as p = 100 - 2Q.There are 10 identical firms producing an undifferentiated product,each with the total cost function TC = 50 + q2.Compare the competitive outcome with the cartel outcome.What is the individual firm's incentive to cheat on the cartel?

Accepted Answer

Each firm has MC = 2q,so that market sup

Question 18

The three models of oligopolies,Cournot,Stackelberg and Bertrand,all assume firms independently choose the quantity of output to produce.

Accepted Answer

A) True 
 B)False

Question 19

Monopolistically competitive firms face downward sloping residual demand curves because these firms

Accepted Answer

A) have relatively few rivals (compared to competition). 
B) sell differentiated products. 
C) Both A and B. 
D) None of the above. 
A) have relatively few rivals (compared to competition). 
B) sell differentiated products. 
C) Both A and B. 
D) None of the above.

Question 20

A competitive market structure differs from the monopoly,oligopoly,and monopolistic competition structures in the

Accepted Answer

A) producers' ability to set price. 
B) profit maximization condition. 
C) amount of long run profit. 
D) entry conditions. 
A) producers' ability to set price. 
B) profit maximization condition. 
C) amount of long run profit. 
D) entry conditions.

Which of the following models results in the greatest total profit,assuming a fixed number of firms with identical costs and a given demand curve?

Perfect competition and monopolistic competition are similar in that both market structures include

The Cournot Model of Oligopoly assumes that

The ability to set a price greater than marginal cost guarantees an economic profit for the monopolistic competitor (assuming P > AC).

In a Bertrand duopoly with product differentiation,explain how a change in one firm's marginal cost can have an effect on the price charged by the other firm.

In a sense,a cartel is self-destructive because

The Bertrand model is a more plausible model of firm behavior than the Cournot model

Which of the following will facilitate the enforcement of a cartel?

If a cartel is unable to monitor its members and punish those firms that violate the agreement,then

Which of the following models results in the greatest deadweight loss,assuming a fixed number of firms with identical costs and a given demand curve?

Oligopoly differs from monopolistic competition in that an oligopoly includes

In a Bertrand model,if one firm has a dominant strategy,its best-response function

Market failure or inefficient consumption will take place in the market structures EXCEPT for

Suppose two duopolists operate at zero marginal cost.The market demand is p = a - bQ.If firm 1 is the Stackelberg leader,what level of output will it choose?

Which of the following market models results in the highest price assuming a fixed number of firms with identical costs and a given demand curve?

Suppose that market demand can be represented as p = 100 - 2Q.There are 10 identical firms producing an undifferentiated product,each with the total cost function TC = 50 + q².Compare the competitive outcome with the cartel outcome.What is the individual firm's incentive to cheat on the cartel?

The three models of oligopolies,Cournot,Stackelberg and Bertrand,all assume firms independently choose the quantity of output to produce.

Monopolistically competitive firms face downward sloping residual demand curves because these firms

A competitive market structure differs from the monopoly,oligopoly,and monopolistic competition structures in the

Introduction

Supply and Demand

A Consumers Constrained Choice

Demand

Consumer Welfare and Policy Analysis

Firms and Production

Costs

Competitive Firms and Markets

Properties and Applications of the Competitive Model

General Equilibrium and Economic Welfare

Monopoly and Monopsony

Pricing and Advertising

Game Theory

Factor Markets

Uncertainty

Property Rights, Externalities, Rivalry, and Exclusion

Asymmetric Information

Contracts and Moral Hazards

Filters

Exam 14: Oligopoly and Monopolistic Competition

Which of the following models results in the greatest total profit,assuming a fixed number of firms with identical costs and a given demand curve?

Perfect competition and monopolistic competition are similar in that both market structures include

The Cournot Model of Oligopoly assumes that

The ability to set a price greater than marginal cost guarantees an economic profit for the monopolistic competitor (assuming P > AC).

In a Bertrand duopoly with product differentiation,explain how a change in one firm's marginal cost can have an effect on the price charged by the other firm.

In a sense,a cartel is self-destructive because

The Bertrand model is a more plausible model of firm behavior than the Cournot model

Which of the following will facilitate the enforcement of a cartel?

If a cartel is unable to monitor its members and punish those firms that violate the agreement,then

Which of the following models results in the greatest deadweight loss,assuming a fixed number of firms with identical costs and a given demand curve?

Oligopoly differs from monopolistic competition in that an oligopoly includes

In a Bertrand model,if one firm has a dominant strategy,its best-response function

Market failure or inefficient consumption will take place in the market structures EXCEPT for

Suppose two duopolists operate at zero marginal cost.The market demand is p = a - bQ.If firm 1 is the Stackelberg leader,what level of output will it choose?

Which of the following market models results in the highest price assuming a fixed number of firms with identical costs and a given demand curve?

Suppose that market demand can be represented as p = 100 - 2Q.There are 10 identical firms producing an undifferentiated product,each with the total cost function TC = 50 + q2.Compare the competitive outcome with the cartel outcome.What is the individual firm's incentive to cheat on the cartel?

The three models of oligopolies,Cournot,Stackelberg and Bertrand,all assume firms independently choose the quantity of output to produce.

Monopolistically competitive firms face downward sloping residual demand curves because these firms

A competitive market structure differs from the monopoly,oligopoly,and monopolistic competition structures in the

Introduction

Supply and Demand

A Consumers Constrained Choice

Demand

Consumer Welfare and Policy Analysis

Firms and Production

Costs

Competitive Firms and Markets

Properties and Applications of the Competitive Model

General Equilibrium and Economic Welfare

Monopoly and Monopsony

Pricing and Advertising

Game Theory

Factor Markets

Uncertainty

Property Rights, Externalities, Rivalry, and Exclusion

Asymmetric Information

Contracts and Moral Hazards

Filters

Suppose that market demand can be represented as p = 100 - 2Q.There are 10 identical firms producing an undifferentiated product,each with the total cost function TC = 50 + q².Compare the competitive outcome with the cartel outcome.What is the individual firm's incentive to cheat on the cartel?