Question 1

Suppose the demand for pizza in a small isolated town is p = 10 - Q.There are only two firms,A and B,and each has a cost function TC = 2 + Q.Compare the firms' profits if they behave as Cournot duopolists with their profits if they form a cartel and share the market.

Accepted Answer

First,the Cournot equilibrium.Firm A's p...

Question 2

Mergers are closely scrutinized by the government because

Accepted Answer

A)  they might allow the firms involved to dominate the market and act as a legalized cartel (monopoly) .
B)  they always result in a more efficient market.
C)  they always result in lower joint profits of the firms involved.
D)  all mergers are undesirable.E) B) and D)
F) A) and C)

Question 3

Product differentiation

Accepted Answer

A)  may allow firms to price above a competitive level.
B)  generates value as consumers value more choices.
C)  depends on perceived differences between products.
D)  All of the above.E) All of the above
F) A) and C)

Question 4

What happens in a duopoly if both firms try to act as the Stackelberg leader?

Accepted Answer

If both firms think they are the leader,...

Question 5

The organization of petroleum exporting countries (OPEC) is an example of a(n)

Accepted Answer

A)  oil monopoly.
B)  cartel.
C)  competitive arrangement.
D)  prisoners' dilemma.E) None of the above
F) All of the above

Question 6

The market power for a firm in the Cournot model will be greater

Accepted Answer

A)  if the market demand is more elastic.
B)  if there are fewer firms in the industry.
C)  if market demand is higher.
D)  the more output this firm produces.E) A) and B)
F) B) and D)

Question 7

Draw a graph that shows the effect on the equilibrium quantities if the government subsidizes one firm in a Cournot duopoly with a per-unit subsidy.Assume that the best-response functions are linear.Explain the new equilibrium quantities.

Accepted Answer

<img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> See the above figure.The subsidized fir...

Question 8

Minimum efficient scale refers to the lowest level of output at which

Accepted Answer

A)  the firm can earn a profit.
B)  average cost is minimized.
C)  the firm will operate.
D)  the average cost curve is downward sloping.E) B) and C)
F) A) and D)

Question 9

Explain why gasoline stations across the street from each other with large signs displaying their prices may "legally" jointly set monopoly prices.

Accepted Answer

A gasoline station posts its prices on a...

Question 10

A group of firms are selling undifferentiated products if

Accepted Answer

A)  consumers perceive the products identical between the firms.
B)  production costs are the same for all firms.
C)  the firms are selling goods that are identical,though consumers view them as different.
D)  the firms are part of a single cartel.E) A) and B)
F) A) and C)

Question 11

Which of the following conditions can help prolong the life of a cartel?

Accepted Answer

A)  There are only a few firms in the market and they all belong to the cartel.
B)  There are many firms in the market that are not members of the cartel.
C)  It is difficult to know what price any cartel member is actually charging.
D)  The cartel has no ability to punish members who cheat on the cartel.E) C) and D)
F) A) and B)

Question 12

Collusion is more successful in a game that will continue forever or in a game with an uncertain ending time,than in a game with a known ending time.

Accepted Answer

A) True 
 B)False

Question 13

Perfect competition and monopolistic competition are similar in that firms in both types of market structure will

Accepted Answer

A)  act as price takers.
B)  produce a level of output where price equals marginal cost.
C)  earn zero profit in the long run.
D)  act as price setters.E) A) and B)
F) None of the above

Question 14

Consider a market with just one firm.The demand in the market is p = 18 - Q and the firm has a linear cost function C(Q)= 2Q.
a.How much output will this firm produce.What will be the profit and consumers surplus?
b.Suppose a second firm with the same cost function enters the market and the two firms compete in a Cournot style (simultaneous output choice).What will be the equilibrium price and quantity in the market? What is the total market profit and CS?

Accepted Answer

a.A monopolist will produce to maximize ...

Question 15

If a Cournot duopolist announced that it will double its output,

Accepted Answer

A)  it becomes the leader.
B)  the other firm does not view the announcement as credible.
C)  the other firm will shut down.
D)  the other firm will double output also.E) A) and B)
F) C) and D)

Question 16

In the long run,a monopolistically competitive firm

Accepted Answer

A)  earns zero economic profit.
B)  produces at minimum average cost.
C)  operates at full capacity.
D)  All of the above.E) None of the above
F) B) and D)

Question 17

In the long run,a monopolistic competitor

Accepted Answer

A)  sets MR = MC.
B)  produces where P = AC.
C)  sets P > MC.
D)  All of the above.E) All of the above
F) C) and D)

Question 18

The outcome of the Stackelberg model is

Accepted Answer

A)  a Nash equilibrium.
B)  the same as the Cournot outcome.
C)  that the follower earns zero profit.
D)  that the follower cannot be on its best-response curve.E) A) and D)
F) A) and C)

Question 19

In the Cournot model,if a firm's marginal cost increases,its best-response function will

Accepted Answer

A)  shift inward.
B)  not change.
C)  shift outward.
D)  The shift is ambiguous.E) All of the above
F) A) and C)

Question 20

In the Cournot model,the output that a firm chooses to produce increases as

Accepted Answer

A)  the total output of other firms increases.
B)  the number of firms in the market increases.
C)  the number of firms in the market decreases.
D)  its marginal cost increases.E) None of the above
F) All of the above

Exam 14: Oligopoly and Monopolistic Competition

Which of the following conditions can help prolong the life of a cartel?

Correct Answer
verified

Product differentiation

Correct Answer
verified

A group of firms are selling undifferentiated products if

Correct Answer
verified

Draw a graph that shows the effect on the equilibrium quantities if the government subsidizes one firm in a Cournot duopoly with a per-unit subsidy.Assume that the best-response functions are linear.Explain the new equilibrium quantities.

Correct Answer
verified
See the above figure.The subsidized fir...
View Answer

Mergers are closely scrutinized by the government because

Correct Answer
verified

Suppose the demand for pizza in a small isolated town is p = 10 - Q.There are only two firms,A and B,and each has a cost function TC = 2 + Q.Compare the firms' profits if they behave as Cournot duopolists with their profits if they form a cartel and share the market.

Correct Answer
verified
First,the Cournot equilibrium.Firm A's p...
View Answer

Perfect competition and monopolistic competition are similar in that firms in both types of market structure will

Correct Answer
verified

The outcome of the Stackelberg model is

Correct Answer
verified

Correct Answer
verified
a.A monopolist will produce to maximize ...
View Answer

In the long run,a monopolistic competitor

Correct Answer
verified

In the Cournot model,the output that a firm chooses to produce increases as

Correct Answer
verified

If a Cournot duopolist announced that it will double its output,

Correct Answer
verified

What happens in a duopoly if both firms try to act as the Stackelberg leader?

Correct Answer
verified
If both firms think they are the leader,...
View Answer

The organization of petroleum exporting countries (OPEC) is an example of a(n)

Correct Answer
verified

Collusion is more successful in a game that will continue forever or in a game with an uncertain ending time,than in a game with a known ending time.

Correct Answer
verified

The market power for a firm in the Cournot model will be greater

Correct Answer
verified

In the long run,a monopolistically competitive firm

Correct Answer
verified

In the Cournot model,if a firm's marginal cost increases,its best-response function will

Correct Answer
verified

Minimum efficient scale refers to the lowest level of output at which

Correct Answer
verified

Explain why gasoline stations across the street from each other with large signs displaying their prices may "legally" jointly set monopoly prices.

Correct Answer
verified
A gasoline station posts its prices on a...
View Answer

Exam 14: Oligopoly and Monopolistic Competition

Which of the following conditions can help prolong the life of a cartel?

Correct AnswerverifiedShow Answer

Product differentiation

Correct AnswerverifiedShow Answer

A group of firms are selling undifferentiated products if

Correct AnswerverifiedShow Answer

Draw a graph that shows the effect on the equilibrium quantities if the government subsidizes one firm in a Cournot duopoly with a per-unit subsidy.Assume that the best-response functions are linear.Explain the new equilibrium quantities.

Correct Answerverified See the above figure.The subsidized fir...View AnswerShow Answer

Mergers are closely scrutinized by the government because

Correct AnswerverifiedShow Answer

Suppose the demand for pizza in a small isolated town is p = 10 - Q.There are only two firms,A and B,and each has a cost function TC = 2 + Q.Compare the firms' profits if they behave as Cournot duopolists with their profits if they form a cartel and share the market.

Correct AnswerverifiedFirst,the Cournot equilibrium.Firm A's p...View AnswerShow Answer

Perfect competition and monopolistic competition are similar in that firms in both types of market structure will

Correct AnswerverifiedShow Answer

The outcome of the Stackelberg model is

Correct AnswerverifiedShow Answer

Correct Answerverifieda.A monopolist will produce to maximize ...View AnswerShow Answer

In the long run,a monopolistic competitor

Correct AnswerverifiedShow Answer

In the Cournot model,the output that a firm chooses to produce increases as

Correct AnswerverifiedShow Answer

If a Cournot duopolist announced that it will double its output,

Correct AnswerverifiedShow Answer

What happens in a duopoly if both firms try to act as the Stackelberg leader?

Correct AnswerverifiedIf both firms think they are the leader,...View AnswerShow Answer

The organization of petroleum exporting countries (OPEC) is an example of a(n)

Correct AnswerverifiedShow Answer

Collusion is more successful in a game that will continue forever or in a game with an uncertain ending time,than in a game with a known ending time.

Correct AnswerverifiedShow Answer

The market power for a firm in the Cournot model will be greater

Correct AnswerverifiedShow Answer

In the long run,a monopolistically competitive firm

Correct AnswerverifiedShow Answer

In the Cournot model,if a firm's marginal cost increases,its best-response function will

Correct AnswerverifiedShow Answer

Minimum efficient scale refers to the lowest level of output at which

Correct AnswerverifiedShow Answer

Explain why gasoline stations across the street from each other with large signs displaying their prices may "legally" jointly set monopoly prices.

Correct AnswerverifiedA gasoline station posts its prices on a...View AnswerShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
See the above figure.The subsidized fir...
View Answer

Correct Answer
verified

Correct Answer
verified
First,the Cournot equilibrium.Firm A's p...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
a.A monopolist will produce to maximize ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
If both firms think they are the leader,...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A gasoline station posts its prices on a...
View Answer