Question 1

A function that specifies a firm's optimal choice for some variable such as output, given the choices of its competitors, is called a

Accepted Answer

A)   reaction function
B)   best-response function
C)   Both answers are correct C

Question 2

What is the difference between convergent and divergent Cournot equilibria?

Accepted Answer

A convergent process occurs when the reaction function for firm 2 is flatter than the reaction function for firm 1. As the firms choose quantities and react to each other, the process will lead the firms to converge on the intersection of the reaction functions. This is a stable equilibrium. A divergent process occurs when the reaction function for firm 2 is steeper than the reaction function for firm 1. As the firms choose quantities and react to each other, the process will lead the firms to move away from the intersection of the reaction functions. This is an unstable equilibrium.

Question 3

The Nash equilibrium applied to a model in which duopolistic firms compete with one another by choosing output levels is known as a(n)

Accepted Answer

A)   isoprofit equilibrium
B)   Cournot equilibrium
C)   Stackelberg equilibrium B

Question 4

A duopoly game in which firms alternate in setting quantities is known as a first-mover quantity-setting duopoly game.

Accepted Answer

A) True 
 B)False

Question 5

The assumption that firms will match a reduction but not an increase in the prevailing price that is responsible for the stability of duopolistic and oligopolistic markets is known as the

Accepted Answer

A)   Stackelberg conjecture
B)   kinked-demand curve conjecture
C)   Cournot conjecture

Question 6

Isoprofit curves are the set of outputs for all firms in a market, which yield a given firm the same profit level.

Accepted Answer

A) True 
 B)False

Question 7

The change that a firm expects in its competitor's choice of an output level in response to a change the firm makes in its own output level is called the

Accepted Answer

A)   conjectural variation
B)   expected value
C)   reaction function

Question 8

The set of output combinations for two duopolistic firms that has the property of the sum of the outputs being constant is called an

Accepted Answer

A)   isocost curve
B)   iso-output line
C)   isoprofit curve

Question 9

The final step in the simultaneous-move quantity-setting duopoly game is

Accepted Answer

A)   both firms choose their output levels simultaneously, with neither firm knowing what level the other firm has chosen
B)   the demand curve tells the players what the price will be
C)   each firm calculates its payoffs (profits)

Question 10

Under the Edgeworth model, will firms engage in price wars?

Accepted Answer

The answer of Under the Edgeworth model, will firms engage...

Question 11

The advantage the leader has in the Stackelberg model, which allows the leader to produce a higher level of output than in the Cournot equilibrium, thus receiving greater profits, is known as the

Accepted Answer

A)   first-mover advantage
B)   Stackelberg follower dominance
C)   unstable equilibrium

Question 12

In a Cournot duopoly, the Cournot conjecture is an assumption that, no matter what change in price a firm makes, the other firm will not change its own output choice in response.

Accepted Answer

A) True 
 B)False

Question 13

Describe a Cournot equilibrium.

Accepted Answer

The answer of Describe a Cournot equilibrium....

Question 14

The isoprofit curves ___________ the _____________ axis contain higher levels of profit.

Accepted Answer

A)   closer to, vertical
B)   farther from, horizontal
C)   closer to, horizontal

Question 15

The firm to move second in the Stackelberg model is called the Stackelberg equilibrium.

Accepted Answer

A) True 
 B)False

Question 16

A Stackelberg leader is the firm to move first in the Stackelberg model.

Accepted Answer

A) True 
 B)False

Question 17

A model of oligopolistic competition where firms compete by setting prices is called a

Accepted Answer

A)   Cournot model
B)   Bertrand model
C)   Stackelberg model

Question 18

At a Bertrand equilibrium, the quantity sold in the market is the

Accepted Answer

A)   same as in a Cournot equilibrium
B)   welfare-optimal quantity
C)   monopoly quantity

Question 19

An equilibrium to an oligopoly game played by firms' setting prices (Bertrand competition) such that competition forces the price down to the marginal price is called a Bertrand equilibrium.

Accepted Answer

A) True 
 B)False

Question 20

An entrepreneur will be able to make a substantial profit if the entrepreneur

Accepted Answer

A)   can keep competitors out of the market
B)   lowers price below average total cost
C)   increases costs at all possible quantities of output

Exam 19: The World of Oligopoly: Preliminaries to Successful Entry

A function that specifies a firm's optimal choice for some variable such as output, given the choices of its competitors, is called a

What is the difference between convergent and divergent Cournot equilibria?

The Nash equilibrium applied to a model in which duopolistic firms compete with one another by choosing output levels is known as a(n)

A duopoly game in which firms alternate in setting quantities is known as a first-mover quantity-setting duopoly game.

The assumption that firms will match a reduction but not an increase in the prevailing price that is responsible for the stability of duopolistic and oligopolistic markets is known as the

Isoprofit curves are the set of outputs for all firms in a market, which yield a given firm the same profit level.

The change that a firm expects in its competitor's choice of an output level in response to a change the firm makes in its own output level is called the

The set of output combinations for two duopolistic firms that has the property of the sum of the outputs being constant is called an

The final step in the simultaneous-move quantity-setting duopoly game is

Under the Edgeworth model, will firms engage in price wars?

The advantage the leader has in the Stackelberg model, which allows the leader to produce a higher level of output than in the Cournot equilibrium, thus receiving greater profits, is known as the

In a Cournot duopoly, the Cournot conjecture is an assumption that, no matter what change in price a firm makes, the other firm will not change its own output choice in response.

Describe a Cournot equilibrium.

The isoprofit curves _ the ___ axis contain higher levels of profit.

The firm to move second in the Stackelberg model is called the Stackelberg equilibrium.

A Stackelberg leader is the firm to move first in the Stackelberg model.

A model of oligopolistic competition where firms compete by setting prices is called a

At a Bertrand equilibrium, the quantity sold in the market is the

An equilibrium to an oligopoly game played by firms' setting prices (Bertrand competition) such that competition forces the price down to the marginal price is called a Bertrand equilibrium.

An entrepreneur will be able to make a substantial profit if the entrepreneur