Deck 19: Oligopoly

Question 1

A residual demand curve:

A) shows the relationship between the market price and the quantity demanded by consumers at each price.
B) shows the relationship between a firm's output and the market price given the prices charged by the firm's rivals.
C) shows the relationship between a firm's output and the market price given the outputs of the firm's rivals.
D) shows the remaining demand for a good after a firm's rivals have sold their output.

Answer 1

shows the relationship between a firm's output and the market price given the outputs of the firm's rivals.

Question 2

In a market for homogenous goods:

A) firms sell identical products.
B) firms sell different products.
C) firms sell identical products for identical prices.
D) firms sell different goods for identical prices.

Answer 2

firms sell identical products.

Question 3

Kate and Alice are small-town ready-mix concrete duopolists.The market demand function is Q^d = 20,000 - 200P,where P is the price of a cubic yard of concrete and Q^d is the number of cubic yards demanded per year.Marginal cost is $80 per cubic yard.The Cournot model describes the competition in this market.Which of the following best represents Kate's inverse residual demand function?

A) P(Q_K) = (100 - 0.005Q_A) - 0.005Q_K
B) P(Q_K) = (100 - 0.005Q_K) - 0.005Q_A
C) P(Q_K) = (200 - 0.005Q_A) - 0.005Q_K
D) P(Q_K) = (200 - 0.005Q_A) - 0.005Q_A

Answer 3

P(Q_K) = (100 - 0.005Q_A) - 0.005Q_K

Question 4

Kate and Alice are small-town ready-mix concrete duopolists.The market demand function is Q^d = 20,000 - 200P,where P is the price of a cubic yard of concrete and Q^d is the number of cubic yards demanded per year.Marginal cost is $80 per cubic yard.The Cournot model describes the competition in this market.How much does Alice produce in the Nash equilibrium?

A) 2,000
B) 1,333.33
C) 800
D) 4,000

Question 5

Kate and Alice are small-town ready-mix concrete duopolists.The market demand function is Q^d = 20,000 - 200P,where P is the price of a cubic yard of concrete and Q^d is the number of cubic yards demanded per year.Marginal cost is $80 per cubic yard.The Cournot model describes the competition in this market.If Kate produces 10,000 cubic yards per year,what is Alice's inverse demand function?

A) P = 75 - 0.005Q_K
B) P = 75 - 0.005Q_A
C) P = 50 - 0.005Q_K
D) P = 50 - 0.005Q_A

Question 6

Kate and Alice are small-town ready-mix concrete duopolists.The market demand function is Q^d = 20,000 - 200P,where P is the price of a cubic yard of concrete and Q^d is the number of cubic yards demanded per year.Marginal cost is $80 per cubic yard.The Cournot model describes the competition in this market.Which of the following gives Alice's best response function?

A) Q_A = 200 - 0.01Q_A
B) Q_A = 100 - 0.005Q_K
C) Q_A = 2,000 - 0.5Q_K
D) Q_A = 2,000 - 0.5Q_A

Question 7

Kate and Alice are small-town ready-mix concrete duopolists.The market demand function is Q^d = 20,000 - 200P,where P is the price of a cubic yard of concrete and Q^d is the number of cubic yards demanded per year.Marginal cost is $80 per cubic yard.The Cournot model describes the competition in this market.How much does Kate produce in the Nash equilibrium?

A) 2,000
B) 1,333.33
C) 800
D) 4,000

Question 8

In a Bertrand model of oligopoly:

A) firms produce differentiated products and set their prices simultaneously.
B) firms produce homogenous products and set their prices simultaneously.
C) firms choose how much to produce simultaneously and the price clears the market given the total quantity produced.
D) firms choose how much to produce and the price to charge simultaneously.

Question 9

Kate and Alice are small-town ready-mix concrete duopolists.The market demand function is Q^d = 20,000 - 200P,where P is the price of a cubic yard of concrete and Q^d is the number of cubic yards demanded per year.Marginal cost is $80 per cubic yard.The Cournot model describes the competition in this market.If Alice produces 5,000 cubic yards per year,what is Kate's inverse demand function?

A) P = 75 - 0.005Q_K
B) P = 75 - 0.005Q_A
C) P = 150 - 0.005Q_K
D) P = 175 - 0.005Q_A

Question 10

Suppose the demand in a certain duopoly market with homogenous goods is Q^d = 8,000 - 100P.The two firms in the market are firm V and firm W,and the marginal cost of producing the goods in question is equal to $25.Which of the following describes the Nash equilibrium in this market?

A) P_V = P_W = $25
B) One of the firms charges a price higher than $25, and one of the firms charges a price lower than $25.
C) P_V = P_W > $25
D) P_V = P_W < $25

Question 11

Kate and Alice are small-town ready-mix concrete duopolists.The market demand function is Q^d = 20,000 - 200P,where P is the price of a cubic yard of concrete and Q^d is the number of cubic yards demanded per year.Marginal cost is $80 per cubic yard.The Cournot model describes the competition in this market.What is Kate's marginal revenue function?

A) MR = 100 - 0.005Q_K - 0.01Q_A
B) MR = 100 - 0.005Q_A - 0.005Q_K
C) MR = 100 - 0.005Q_A - 0.01Q_K
D) MR = 100 - 0.005Q_K - 0.005Q_A

Question 12

Kate and Alice are small-town ready-mix concrete duopolists.The market demand function is Q^d = 20,000 - 200P,where P is the price of a cubic yard of concrete and Q^d is the number of cubic yards demanded per year.Marginal cost is $80 per cubic yard.The Cournot model describes the competition in this market.Which of the following best represents Alice's inverse residual demand function?

A) P(Q_A) = (100 - 0.005Q_A) - 0.005Q_K
B) P(Q_A) = (100 - 0.005Q_K) - 0.005Q_A
C) P(Q_A) = (200 - 0.005Q_A) - 0.005Q_K
D) P(Q_A) = (200 - 0.005Q_A) - 0.005Q_A

Question 13

Kate and Alice are small-town ready-mix concrete duopolists.The market demand function is Q^d = 20,000 - 200P,where P is the price of a cubic yard of concrete and Q^d is the number of cubic yards demanded per year.Marginal cost is $80 per cubic yard.The Cournot model describes the competition in this market.What is total output in the Nash equilibrium?

A) 4,000
B) 2,666.66
C) 1,600
D) 8,000

Question 14

In the Cournot model of oligopoly:

A) firms produce differentiated products and set their prices simultaneously.
B) firms produce homogenous products and set their prices simultaneously.
C) firms choose how much to produce simultaneously and the price clears the market given the total quantity produced.
D) firms choose how much to produce and the price to charge simultaneously.

Question 15

Kate and Alice are small-town ready-mix concrete duopolists.The market demand function is Q^d = 20,000 - 200P,where P is the price of a cubic yard of concrete and Q^d is the number of cubic yards demanded per year.Marginal cost is $80 per cubic yard.The Cournot model describes the competition in this market.Which of the following gives Kate's best response function?

A) Q_K = 200 - 0.01Q_K
B) Q_K = 100 - 0.005Q_A
C) Q_K = 2,000 - 0.5Q_K
D) Q_K = 2,000 - 0.5Q_A

Question 16

An individual firm's best response:

A) is the firm's most profitable choice given the actions of its rivals.
B) is not necessarily selected by all firms in a Nash equilibrium.
C) is always the option with the highest price for each firm.
D) is to set the same price and quantity as all of its rivals.

Question 17

Kate and Alice are small-town ready-mix concrete duopolists.The market demand function is Q^d = 20,000 - 200P,where P is the price of a cubic yard of concrete and Q^d is the number of cubic yards demanded per year.Marginal cost is $80 per cubic yard.The Cournot model describes the competition in this market.What is Alice's marginal revenue function?

A) MR = 100 - 0.005Q_K - 0.01Q_A
B) MR = 100 - 0.005Q_A - 0.005Q_K
C) MR = 100 - 0.005Q_A - 0.01Q_K
D) MR = 100 - 0.005Q_K - 0.005Q_A

Question 18

A market with two sellers is called a:

A) monopoly.
B) perfectly competitive market.
C) duopoly.
D) biopoly.

Question 19

At the Nash equilibrium of an oligopoly market:

A) only one firm is able to earn profits.
B) each firm is making a profit-maximizing choice, regardless of the choices of its rivals.
C) each firm is making a profit-maximizing choice given the choices of its rivals.
D) each firm produces the same quantity.

Question 20

Suppose the demand in a certain duopoly market with homogenous goods is Q^d = 8,000 - 100P.The two firms in the market are firm V and firm W,and the marginal cost of producing the goods in question is equal to $25.Which of the following describes the Nash equilibrium in this market?

A) Q_V + Q_W = 2,750
B) One of the firms produces 5,500 units of output, and one of the firms does not produce.
C) Q_V = Q_W = 5,500
D) Q_V = Q_W = 2,750

Question 21

Kate and Alice are small-town ready-mix concrete duopolists.The market demand function is Q^d = 20,000 - 200P,where P is the price of a cubic yard of concrete and Q^d is the number of cubic yards demanded per year.Marginal cost is $80 per cubic yard.The Cournot model describes the competition in this market.What is the amount of the deadweight loss?

A) $8,888.89
B) $2,222.22
C) $1,333,33
D) $4,444.44

Question 22

Suppose the daily demand for Coke and Pepsi in a small city are given by Q_C = 90 - 100P_C + 400(P_P - P_C)and Q_P = 90 - 100P_P + 400(P_C - P_P),where Q_C and Q_P are the number of cans Coke and Pepsi sell,respectively,in thousands per day.P_C and P_P are the prices of a can of Coke and Pepsi,respectively,measured in dollars.The marginal cost is $0.45 per can for both Coke and Pepsi.What is Pepsi's inverse demand function?

A) P_P = (0.18 + 0.8P_C) - 0.002Q_P
B) Q_P = (0.18 + 0.8P_C) - 0.002P_P
C) P_P = (90 + 400P_C) - 0.002Q_P
D) Q_P = (90 + 400P_C) - 0.002P_P

Question 23

Suppose the daily demand for Coke and Pepsi in a small city are given by Q_C = 90 - 100P_C + 400(P_P - P_C)and Q_P = 90 - 100P_P + 400(P_C - P_P),where Q_C and Q_P are the number of cans Coke and Pepsi sell,respectively,in thousands per day.P_C and P_P are the prices of a can of Coke and Pepsi,respectively,measured in dollars.The marginal cost is $0.45 per can for both Coke and Pepsi.What is Coke's best response function?

A) Q_C = 200P_P - 67.5
B) Q_C = (90 + 400P_P) - 500P_C
C) P_C = 0.315 + 0.4P_P
D) P_C = (0.18 + 0.8P_P) - 0.002Q_C

Question 24

Suppose the daily demand for Coke and Pepsi in a small city are given by Q_C = 90 - 100P_C + 400(P_P - P_C)and Q_P = 90 - 100P_P + 400(P_C - P_P),where Q_C and Q_P are the number of cans Coke and Pepsi sell,respectively,in thousands per day.P_C and P_P are the prices of a can of Coke and Pepsi,respectively,measured in dollars.The marginal cost is $0.45 per can for both Coke and Pepsi.If P_C = $0.60,what is Pepsi's demand function?

A) Q_P = 90 - 500P_P
B) Q_P = 330 - 400P_P
C) Q_P = 500 - 330P_P
D) Q_P = 330 - 500P_P

Question 25

As products become less differentiated:

A) consumers are less willing to switch in response to price changes and competition becomes more intense.
B) consumers are more willing to switch in response to price changes and competition becomes more intense.
C) consumers are less willing to switch in response to price changes and competition becomes less intense.
D) consumers are more willing to switch in response to price changes and competition becomes less intense.

Question 26

When consumers do not view similar products as perfect substitutes,those products are called:

A) homogenous.
B) complements.
C) differentiated.
D) normal.

Question 27

Suppose the daily demand for Coke and Pepsi in a small city are given by Q_C = 90 - 100P_C + 400(P_P - P_C)and Q_P = 90 - 100P_P + 400(P_C - P_P),where Q_C and Q_P are the number of cans Coke and Pepsi sell,respectively,in thousands per day.P_C and P_P are the prices of a can of Coke and Pepsi,respectively,measured in dollars.The marginal cost is $0.45 per can for both Coke and Pepsi.What is Coke's inverse demand function?

A) Q_C = (90 - 400P_P) - 500P_C
B) P_C = (0.18 + 0.8P_P) - 0.002Q_C
C) Q_C = (490 - 400P_C)
D) P_C = (400 - 500Q_C)

Question 28

In the infinitely-repeated Bertrand model:

A) firms play the Bertrand pricing game over and over, with no definite end.
B) firms play the Bertrand pricing game one time.
C) firms play the Bertrand pricing game several times, with a clearly defined endpoint.
D) firms play the Bertrand pricing game at least two times, but no more than four.

Question 29

Suppose the daily demand for Coke and Pepsi in a small city are given by Q_C = 90 - 100P_C + 400(P_P - P_C)and Q_P = 90 - 100P_P + 400(P_C - P_P),where Q_C and Q_P are the number of cans Coke and Pepsi sell,respectively,in thousands per day.P_C and P_P are the prices of a can of Coke and Pepsi,respectively,measured in dollars.The marginal cost is $0.45 per can for both Coke and Pepsi.What is Pepsi's best response function?

A) Q_P = 200P_C - 67.5
B) Q_P = (90 + 400P_C) - 500P_P
C) P_P = 0.315 + 0.4P_C
D) P_P = (0.18 + 0.8P_C) - 0.002Q_P

Question 30

Suppose the daily demand for Coke and Pepsi in a small city are given by Q_C = 90 - 100P_C + 400(P_P - P_C)and Q_P = 90 - 100P_P + 400(P_C - P_P),where Q_C and Q_P are the number of cans Coke and Pepsi sell,respectively,in thousands per day.P_C and P_P are the prices of a can of Coke and Pepsi,respectively,measured in dollars.The marginal cost is $0.45 per can for both Coke and Pepsi.What is the Nash equilibrium price for Pepsi?

A) $0.016
B) $0.45
C) $0.53
D) $0.38

Question 31

Kate and Alice are small-town ready-mix concrete duopolists.The market demand function is Q^d = 20,000 - 200P,where P is the price of a cubic yard of concrete and Q^d is the number of cubic yards demanded per year.Marginal cost is $80 per cubic yard.The Cournot model describes the competition in this market.How much more profit would a monopolist earn compared to the combined profit earned by the two duopoly firms together in the Nash equilibrium?

A) $180,000
B) $2,222.22
C) $11,111.11
D) $9,333.33

Question 32

Suppose the daily demand for Coke and Pepsi in a small city are given by Q_C = 90 - 100P_C + 400(P_P - P_C)and Q_P = 90 - 100P_P + 400(P_C - P_P),where Q_C and Q_P are the number of cans Coke and Pepsi sell,respectively,in thousands per day.P_C and P_P are the prices of a can of Coke and Pepsi,respectively,measured in dollars.The marginal cost is $0.45 per can for both Coke and Pepsi.What is the Nash equilibrium price for Coke?

A) $0.016
B) $0.45
C) $0.53
D) $0.38

Question 33

Kate and Alice are small-town ready-mix concrete duopolists.The market demand function is Q^d = 20,000 - 200P,where P is the price of a cubic yard of concrete and Q^d is the number of cubic yards demanded per year.Marginal cost is $80 per cubic yard.The Cournot model describes the competition in this market.How much profit does each producer earn in the Nash equilibrium?

A) $115,555.56
B) $10,666.67
C) $8,888.89
D) $16,000

Question 34

All else equal,in which oligopolistic market below would one expect the markup to be the smallest?

A) An oligopolistic market with inelastic demand and a very few firms
B) An oligopolistic market with elastic demand and a very few firms
C) An oligopolistic market with inelastic demand and a greater number of firms
D) An oligopolistic market with elastic demand and a greater number of firms

Question 35

Kate and Alice are small-town ready-mix concrete duopolists.The market demand function is Q^d = 20,000 - 200P,where P is the price of a cubic yard of concrete and Q^d is the number of cubic yards demanded per year.Marginal cost is $80 per cubic yard.The Cournot model describes the competition in this market.What is the market price in the Nash equilibrium?

A) $80
B) $86.67
C) $100
D) $93.34

Question 36

In an oligopolistic market,:

A) the larger the number of firms and the more elastic the demand, the greater the markup.
B) the larger the number of firms and the less elastic the demand, the greater the markup.
C) the smaller the number of firms and the less elastic the demand, the greater the markup.
D) the smaller the number of firms and the more elastic the demand, the greater the markup.

Question 37

Kate and Alice are small-town ready-mix concrete duopolists.The market demand function is Q^d = 20,000 - 200P,where P is the price of a cubic yard of concrete and Q^d is the number of cubic yards demanded per year.Marginal cost is $80 per cubic yard.The Cournot model describes the competition in this market.What is the difference in the deadweight loss compared to a monopoly in this market?

A) A monopoly would create $6,666.67 more deadweight loss
B) A monopoly would create $6,666.67 less deadweight loss
C) A monopoly would create $5,555.56 more deadweight loss
D) A monopoly would create $5,555.56 less deadweight loss

Question 38

As products become more differentiated:

A) consumers are less willing to switch in response to price changes and competition becomes more intense.
B) consumers are more willing to switch in response to price changes and competition becomes more intense.
C) consumers are less willing to switch in response to price changes and competition becomes less intense.
D) consumers are more willing to switch in response to price changes and competition becomes less intense.

Question 39

Suppose the daily demand for Coke and Pepsi in a small city are given by Q_C = 90 - 100P_C + 400(P_P - P_C)and Q_P = 90 - 100P_P + 400(P_C - P_P),where Q_C and Q_P are the number of cans Coke and Pepsi sell,respectively,in thousands per day.P_C and P_P are the prices of a can of Coke and Pepsi,respectively,measured in dollars.The marginal cost is $0.45 per can for both Coke and Pepsi.If P_P = $0.75,what is Coke's demand function?

A) Q_C = 90 - 400P_C
B) Q_C = 390 - 500P_C
C) Q_C = 390 - 400P_C
D) Q_C = 465 - 400P_C

Question 40

In a setting of repeated competition:

A) the cooperative outcome is the repetition in each period of the Nash equilibrium outcome that would arise were the firms to compete just once.
B) the non-cooperative outcome is the repetition in each period of the Nash equilibrium outcome that would arise were the firms to compete just once.
C) the non-cooperative outcome is the Nash equilibrium that arises only after firms compete many times.
D) the cooperative outcome is the Nash equilibrium that arises after firms compete many times.

Question 41

Kate and Alice are small-town ready-mix concrete duopolists.The market demand function is Q^d = 20,000 - 200P where P is the price of a cubic yard of concrete and Q^d is the number of cubic yards demanded per year.Marginal cost is $80 per cubic yard.Suppose Kate enters the market first and chooses her output before Alice.What is Alice's profit maximizing output?

A) 2,000
B) 1,333.34
C) 1,000
D) 4,000

Question 42

Kate and Alice are small-town ready-mix concrete duopolists.The market demand function is Q^d = 20,000 - 200P where P is the price of a cubic yard of concrete and Q^d is the number of cubic yards demanded per year.Marginal cost is $80 per cubic yard.Suppose Kate enters the market first and chooses her output before Alice.What is Kate's profit?

A) $10,000
B) $5,000
C) $20,000
D) $15,000

Question 43

Kate and Alice are small-town ready-mix concrete duopolists.The market demand function is Q^d = 20,000 - 200P where P is the price of a cubic yard of concrete and Q^d is the number of cubic yards demanded per year.Marginal cost is $80 per cubic yard.Suppose Kate enters the market first and chooses her output before Alice.What is the difference in Kate's profit when she enters the market first compared to when Kate and Alice choose their outputs simultaneously?

A) When Kate enters the market first, her profit is $13,333.33 higher.
B) When Kate enters the market first, her profit is $5,000 higher.
C) When Kate enters the market first, her profit is $1,111.11 higher.
D) When Kate enters the market first, her profit is $3,888.89 lower.

Question 44

The typical test applied for merger approval under U.S.antitrust law requires that:

A) quantities produced not fall.
B) prices not rise.
C) aggregate surplus not fall.
D) the merger not be horizontal in nature.

Question 45

Which of the following is NOT a reason why collusion may be hard to sustain?

A) Firms observe their rivals' prices only imperfectly.
B) Marginal costs, and therefore agreed-upon prices, may differ among firms or products.
C) Prices wars in practice may not conform to the predictions of the Bertrand model.
D) The potential profits from collusion can be so high as to create an incentive not to undercut.

Question 46

Under monopolistic competition,firms produce ________ products and have long-run profits that are ________ (net of fixed costs).

A) differentiated; positive
B) differentiated; close to zero
C) homogenous; positive
D) homogenous; close to zero

Question 47

Firms engage in tacit collusion when:

A) they predict what the other will do and attempt to undercut them.
B) they collude without communicating, sustaining a price above the noncooperative price that would arise in a single competitive interaction.
C) they communicate to reach an agreement about the prices they will charge.
D) they communicate what type of good they will produce.

Question 48

Kate and Alice are small-town ready-mix concrete duopolists.The market demand function is Q^d = 20,000 - 200P where P is the price of a cubic yard of concrete and Q^d is the number of cubic yards demanded per year.Marginal cost is $80 per cubic yard.Suppose Kate enters the market first and chooses her output before Alice.Given market demand,what is the market price per cubic yard?

A) $80
B) $85
C) $90
D) $95

Question 49

Monopolistic competition occurs in a market with free entry:

A) when there are only a few firms, each producing a unique product, prices above marginal cost and earns zero profit net of fixed costs.
B) when there is a large number of firms, each producing an identical product, prices above marginal cost and earns zero profit net of its fixed costs.
C) when there is a large number of firms, each of which produces a unique product, prices above marginal cost and earns zero profit net of its fixed costs.
D) when there is a large number of firms, each of which produces a unique product, prices above marginal cost and earns a positive profit net of its fixed costs.

Question 50

Kate and Alice are small-town ready-mix concrete duopolists.The market demand function is Q^d = 20,000 - 200P where P is the price of a cubic yard of concrete and Q^d is the number of cubic yards demanded per year.Marginal cost is $80 per cubic yard.Suppose Kate enters the market first and chooses her output before Alice.What is the difference in Alice's profit when Kate enters the market first,compared to when they simultaneously select their outputs?

A) When Kate enters the market first, Alice's profit is $13,333.33 lower.
B) When Kate enters the market first, Alice's profit is $5,000 lower.
C) When Kate enters the market first, Alice's profit is $1,111.11 higher.
D) When Kate enters the market first, Alice's profit is $3,888.89 lower.

Question 51

Which of the following is not one of the laws that provides the foundation for antitrust policy in the U.S.?

A) The Sherman Act
B) The Cargill Act
C) The Clayton Act
D) The Federal Trade Commission Act

Question 52

The greater the number of firms in a colluding oligopoly,the ________ the gain from undercutting the monopoly price and the ________ the potential future loss from a price war.

A) smaller; smaller
B) smaller; larger
C) larger; larger
D) larger; smaller

Question 53

When competitors reach an agreement with one another about the quantities they will produce in order to keep profits high,they have engaged in:

A) price fixing.
B) quantity fixing.
C) profit fixing.
D) tacit collusion.

Question 54

A strategic pre-commitment occurs when a firm:

A) commits to some actions before rivals take theirs, with the aim of increasing its future competitive profit.
B) commits to some actions after rivals take theirs, with the aim of increasing its future competitive profit.
C) commits to some actions before rivals take theirs purely by accident.
D) commits to some actions after rivals take theirs because there are no other options.

Question 55

Under monopolistic competition,firms produce ________ products and have prices ________ marginal cost.

A) differentiated; above
B) differentiated; below
C) homogenous; above
D) homogenous; below

Question 56

Under monopolistic competition,firms have prices ________ marginal cost and long-run profits that are ________ (net of fixed costs).

A) above; positive
B) above; close to zero
C) below; positive
D) below; close to zero

Question 57

Kate and Alice are small-town ready-mix concrete duopolists.The market demand function is Q^d = 20,000 - 200P where P is the price of a cubic yard of concrete and Q^d is the number of cubic yards demanded per year.Marginal cost is $80 per cubic yard.Suppose Kate enters the market first and chooses her output before Alice.What is Alice's profit?

A) $10,000
B) $5,000
C) $20,000
D) $15,000

Question 58

Kate and Alice are small-town ready-mix concrete duopolists.The market demand function is Q^d = 20,000 - 200P where P is the price of a cubic yard of concrete and Q^d is the number of cubic yards demanded per year.Marginal cost is $80 per cubic yard.Suppose Kate enters the market first and chooses her output before Alice.What is Kate's profit maximizing output?

A) 2,000
B) 1,333.34
C) 1,000
D) 4,000

Question 59

One of the most notable features of the main provisions of the Sherman Act is that they are:

A) strict.
B) weak.
C) vague.
D) obsolete.

Question 60

Firms engage in explicit collusion when:

A) they predict what the other will do and attempt to undercut them.
B) they collude without communicating, sustaining a price above the noncooperative price that would arise in a single competitive interaction.
C) they communicate to reach an agreement about the prices they will charge.
D) they communicate what type of good they will produce.

Question 61

Define the Bertrand model and its assumptions.Explain why the model predicts the perfectly competitive outcome despite the number of sellers.Discuss the limitations of the model.

Question 62

Compare and contrast the Bertrand and Cournot models of oligopoly.Your discussion should include assumptions made,goals of the firms and the resulting outcomes.