Question 1

There are many different models of oligopoly because:

Accepted Answer

A) beliefs are not incorporated in oligopolistic competition. 
B) firms do not maximize profits in oligopolistic competition. 
C) oligopoly is the most complicated type of market structure. 
D) both beliefs are not incorporated in oligopolistic competition and oligopoly is the most complicated type of market structure.

Question 2

Sue and Jane own two local gas stations.They have identical constant marginal costs, but earn zero economic profits.Sue and Jane constitute

Accepted Answer

A) a Sweezy oligopoly. 
B) a Cournot oligopoly. 
C) a Bertrand oligopoly. 
D) none of the statements associated with this question are correct.

Question 3

The spirit of equating marginal cost with marginal revenue is not held by

Accepted Answer

A) perfectly competitive firms. 
B) oligopolistic firms. 
C) perfectly competitive firms and oligopolistic firms. 
D) none of the statements associated with this question are correct.

Question 4

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.

Question 5

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.

Question 6

With linear demand and constant marginal cost, a Stackelberg leader's profits are ___________ the follower.

Accepted Answer

A) less than. 
B) equal to. 
C) greater than. 
D) either less than or greater to.

Question 7

Both firms in a Cournot duopoly would enjoy higher profits if

Accepted Answer

A) the firms simultaneously reduced output below the Nash equilibrium level. 
B) each firm simultaneously increased output above the Nash equilibrium level. 
C) one firm reduced output below the Cournot Nash equilibrium level, while the other firm continued to produce its Cournot Nash equilibrium output. 
D) the firms simultaneously reduced output below the Nash equilibrium level and one firm reduced output below the Cournot Nash equilibrium level, while the other firm continued to produce its Cournot Nash equilibrium output.

Question 8

Ed just finished an empirical study of oligopoly.He found the following result: "In the examined industry, a firm's demand curve is such that other firm's match price increases but do not match price reductions." What kind of oligopoly is the examined industry?

Accepted Answer

A) Sweezy model. 
B) Cournot model. 
C) Stackelberg model. 
D) none of the statements associated with this question are correct.

Question 9

The peak of the isoprofit curve has which of the following characteristics?

Accepted Answer

A) It is the point at which Monopoly profits are always achieved. 
B) It is the point at which the isoprofit curve crosses the reaction function. 
C) It is the point on the isoprofit curves associated with the highest profit. 
D) It is the point on the isoprofit curves Cournot competitors can efficiently achieve collusion profits.

Question 10

Two firms compete as a Stackelberg duopoly.The inverse market demand they face is P = 62 - 4.5Q.The cost function for each firm is C(Q) = 8Q.The outputs of the two firms are:

Accepted Answer

A) QL = 48; QF = 24. 
B) QL = 35; QF = 6. 
C) QL = 6; QF = 3. 
D) None of the statements associated with this question are correct.

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.The government has imposed a per unit tax of $t on each unit sold by each firm.The equilibrium output of each firm is the same as a situation where each firm's:

Accepted Answer

A) demand increases by t. 
B) demand decreases by t. 
C) marginal cost increases by t. 
D) marginal cost decreases by t.

Question 12

Consider a Stackelberg duopoly with the following inverse demand function: P = 100 - 2Q1 - 2Q2.The firms' marginal cost are identical and given by MCi(Qi) = 2Qi.Based on this information the Stackelberg follower's marginal revenue function is

Accepted Answer

A) MRF(QL,QF) = 100 - 2QL - 4QF. 
B) MRF(QL,QF) = 100 - 4QL - 2QF. 
C) MRF(QL,QF) = 100 - 2QL - QF. 
D) MRF(QL,QF) = 100 - QL - 2QF.

Question 13

A market is not contestable if:

Accepted Answer

A) all producers have access to the same technology. 
B) consumers respond quickly to a price change. 
C) existing firms cannot respond quickly to entry by lowering their price. 
D) there are sunk costs.

Question 14

Consider a Stackelberg duopoly with the following inverse demand function: P = 100 - 2Q1 - 2Q2.The firms' marginal cost are identical and given by MCi(Qi) = 2.Based on this information follower's reaction function is

Accepted Answer

A) rF(QL) = 24.5 - 0.5QF. 
B) QL = 49 - 0.5QF. 
C) rF(QL) = 24.5 - 0.5QL. 
D) QF = 49 - 0.25QL.

Question 15

Which of the following is true about a differentiated-product Bertrand duopoly?

Accepted Answer

A) Firm 1 and firm 2's reaction functions are downward sloping. 
B) Firm 1 and firm 2's reactions functions are upward sloping. 
C) Firm 1's reaction function is downward sloping but firm 2's reaction function is upward sloping. 
D) In a differentiated-product Bertrand duopoly neither firm has a reaction function.

Question 16

Orion and Zeda are the only producers of a unique product that sold in a market where the inverse demand curve is

Accepted Answer

The answer of Orion and Zeda are the only producers...

Question 17

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.

Question 18

You are the manager of a firm operating in a differentiated-product oligopoly.Show graphically your optimal response to an increase in marginal cost if
a.You believe rivals will follow price reductions but not price increases.
b.You believe rivals will hold output constant if you decrease output.
c.You believe rivals will follow price increases but not price decreases.
B.Thus, the manager of firm one should reduce output to maximize profits.
  Figure 9-3b
c.In this case, the demand curve is ABC in Figure 9-3c, while MR is ADEF.An increase in marginal cost from MC to MC* leads to a reduction in the profit-maximizing level of output.
Figure 9-3c

Accepted Answer

The answer of You are the manager of a firm...

Question 19

Consider a market consisting of two firms where the inverse demand curve is given by P = 500 - 2(Q1 + Q2).If the Stackelberg leader's and follower's marginal costs are zero, the leader's marginal revenue is

Accepted Answer

A) MR(QL, QF) = 125 - QL + 0.5QF. 
B)  MR(QL) = 250 - 2QL. 
C) MR(QF) = 250 - 2QF. 
D) MR(QL, QF) = 125 - 0.5QL + QF.

Question 20

Which of the following is true about a Sweezy oligopoly?

Accepted Answer

A) The marginal cost function has a downward "jump" or "discontinuity." 
B) The marginal revenue function a downward "jump" or "discontinuity." 
C) The marginal cost function an upward "jump" or "discontinuity." 
D) The marginal revenue function an upward "jump" or "discontinuity."

Exam 9: Basic Oligopoly Models

There are many different models of oligopoly because:

Sue and Jane own two local gas stations.They have identical constant marginal costs, but earn zero economic profits.Sue and Jane constitute

The spirit of equating marginal cost with marginal revenue is not held by

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

With linear demand and constant marginal cost, a Stackelberg leader's profits are ___________ the follower.

Both firms in a Cournot duopoly would enjoy higher profits if

Ed just finished an empirical study of oligopoly.He found the following result: "In the examined industry, a firm's demand curve is such that other firm's match price increases but do not match price reductions." What kind of oligopoly is the examined industry?

The peak of the isoprofit curve has which of the following characteristics?

Two firms compete as a Stackelberg duopoly.The inverse market demand they face is P = 62 - 4.5Q.The cost function for each firm is C(Q) = 8Q.The outputs of the two firms are:

The inverse demand in a Cournot duopoly is P = a - b (Q₁ + Q₂) , and costs are C₁(Q₁) = c₁Q₁ and C₂(Q₂) = c₂Q₂.The government has imposed a per unit tax of $t on each unit sold by each firm.The equilibrium output of each firm is the same as a situation where each firm's:

Consider a Stackelberg duopoly with the following inverse demand function: P = 100 - 2Q₁ - 2Q₂.The firms' marginal cost are identical and given by MC_i(Q_i) = 2Q_i.Based on this information the Stackelberg follower's marginal revenue function is

A market is not contestable if:

Consider a Stackelberg duopoly with the following inverse demand function: P = 100 - 2Q₁ - 2Q₂.The firms' marginal cost are identical and given by MC_i(Q_i) = 2.Based on this information follower's reaction function is

Which of the following is true about a differentiated-product Bertrand duopoly?

Orion and Zeda are the only producers of a unique product that sold in a market where the inverse demand curve is

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

Consider a market consisting of two firms where the inverse demand curve is given by P = 500 - 2(Q₁ + Q₂) .If the Stackelberg leader's and follower's marginal costs are zero, the leader's marginal revenue is

Which of the following is true about a Sweezy oligopoly?

Exam 9: Basic Oligopoly Models

There are many different models of oligopoly because:

Sue and Jane own two local gas stations.They have identical constant marginal costs, but earn zero economic profits.Sue and Jane constitute

The spirit of equating marginal cost with marginal revenue is not held by

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.

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

With linear demand and constant marginal cost, a Stackelberg leader's profits are ___________ the follower.

Both firms in a Cournot duopoly would enjoy higher profits if

Ed just finished an empirical study of oligopoly.He found the following result: "In the examined industry, a firm's demand curve is such that other firm's match price increases but do not match price reductions." What kind of oligopoly is the examined industry?

The peak of the isoprofit curve has which of the following characteristics?

Two firms compete as a Stackelberg duopoly.The inverse market demand they face is P = 62 - 4.5Q.The cost function for each firm is C(Q) = 8Q.The outputs of the two firms are:

The inverse demand in a Cournot duopoly is P = a - b (Q1 + Q2) , and costs are C1(Q1) = c1Q1 and C2(Q2) = c2Q2.The government has imposed a per unit tax of $t on each unit sold by each firm.The equilibrium output of each firm is the same as a situation where each firm's:

Consider a Stackelberg duopoly with the following inverse demand function: P = 100 - 2Q1 - 2Q2.The firms' marginal cost are identical and given by MCi(Qi) = 2Qi.Based on this information the Stackelberg follower's marginal revenue function is

A market is not contestable if:

Consider a Stackelberg duopoly with the following inverse demand function: P = 100 - 2Q1 - 2Q2.The firms' marginal cost are identical and given by MCi(Qi) = 2.Based on this information follower's reaction function is

Which of the following is true about a differentiated-product Bertrand duopoly?

Orion and Zeda are the only producers of a unique product that sold in a market where the inverse demand curve is

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

Consider a market consisting of two firms where the inverse demand curve is given by P = 500 - 2(Q1 + Q2) .If the Stackelberg leader's and follower's marginal costs are zero, the leader's marginal revenue is

Which of the following is true about a Sweezy oligopoly?

The inverse demand in a Cournot duopoly is P = a - b (Q₁ + Q₂) , and costs are C₁(Q₁) = c₁Q₁ and C₂(Q₂) = c₂Q₂.The government has imposed a per unit tax of $t on each unit sold by each firm.The equilibrium output of each firm is the same as a situation where each firm's:

Consider a Stackelberg duopoly with the following inverse demand function: P = 100 - 2Q₁ - 2Q₂.The firms' marginal cost are identical and given by MC_i(Q_i) = 2Q_i.Based on this information the Stackelberg follower's marginal revenue function is

Consider a Stackelberg duopoly with the following inverse demand function: P = 100 - 2Q₁ - 2Q₂.The firms' marginal cost are identical and given by MC_i(Q_i) = 2.Based on this information follower's reaction function is

Consider a market consisting of two firms where the inverse demand curve is given by P = 500 - 2(Q₁ + Q₂) .If the Stackelberg leader's and follower's marginal costs are zero, the leader's marginal revenue is