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| 1 | |
Which of the following types of oligopoly competition would you expect to result in the lowest market output, other things equal? |
| | A) | Collusion. |
| | B) | Betrand. |
| | C) | Cournot. |
| | D) | Stackelberg. |
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| 2 | |
Two symmetric firms in a Bertrand duopoly face the inverse market demand P = 60 - 3Q, and the marginal costs of the two firms are $6. Also, fixed costs are zero for both firms. What will the market price be? |
| | A) | $10. |
| | B) | $15. |
| | C) | $6. |
| | D) | $8. |
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| 3 | |
Two symmetric firms in a Bertrand duopoly face the inverse market demand P = 60 - 3Q, and the marginal costs of the two firms are $6. Also, fixed costs are zero for both firms. How much output will each firm produce? |
| | A) | 15. |
| | B) | 18. |
| | C) | 9. |
| | D) | 30. |
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| 4 | |
Which of the following is a feature of Sweezy oligopoly? |
| | A) | There are a many firms in the market serving few consumers. |
| | B) | The firms produce homogeneous products. |
| | C) | Each firm believes that rivals will cut their prices in response to a price reduction, but will not raise their prices in response to a price increase. |
| | D) | Barriers to entry are low. |
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| 5 | |
Which of the following is a characteristic of a contestable market? |
| | A) | Productive technologies are patent protected. |
| | B) | Consumers react quickly to a price change. |
| | C) | Existing firms can respond quickly to entry by lowering their price. |
| | D) | There are significant sunk costs. |
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| 6 | |
Two identical firms compete as a Cournot duopoly. The inverse market demand they face is P = 150 - 2Q. The cost function for each firm is C(Q) = 6Q. The total industry output will be |
| | A) | 6. |
| | B) | 12. |
| | C) | 32. |
| | D) | 48. |
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| 7 | |
Two identical firms compete as a Cournot duopoly. The inverse market demand they face is P = 150 - 2Q. The cost function for each firm is C(Q) = 6Q. Each firm will earn equilibrium profits of |
| | A) | $1,152. |
| | B) | $2,304. |
| | C) | $2,592. |
| | D) | $1,510. |
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| 8 | |
Suppose that two firms competing in Cournot fashion agree to produce the collusive output. Given that the two firms both agree to the collusive output, one of the firms can increase their profits by cheating and |
| | A) | raising prices. |
| | B) | lowering prices. |
| | C) | producing less output. |
| | D) | None of the responses are correct. |
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| 9 | |
Two firms compete as a Stackelberg duopoly. The inverse market demand function they face is P = 65 - 3Q. The cost function for each firm is C(Q) = 11Q.
The outputs of the two firms are |
| | A) | QL = 9; QF = 4.5. |
| | B) | QL = 9; QF = 10.5. |
| | C) | QL = 6; QF = 3. |
| | D) | QL = 4; QF = 2. |
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| 10 | |
Two firms compete as a Stackelberg duopoly. The inverse market demand function they face is P = 65 - 3Q. The cost function for each firm is C(Q) = 11Q.
The market price charged will be |
| | A) | $21.5. |
| | B) | $8. |
| | C) | $24.5. |
| | D) | $48.5. |
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| 11 | |
Which of the following is correct? |
| | A) | In Cournot oligopoly each firm believes that their rivals will hold their output constant if it changes its output. |
| | B) | In Betrand oligopoly firms produce a differentiated product at an increasing marginal cost and engage in price competition. |
| | C) | In Sweezy oligopoly each firm believes rivals will increase their prices in response to a price reduction, but will not raise prices in response to price decreases. |
| | D) | In oligopoly a change in marginal cost never has an effect on output or price. |
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| 12 | |
If a new entrant wants to leave a contestable market, |
| | A) | another firm will always want to enter to take its place. |
| | B) | all, or nearly all, the invested capital values can be recovered. |
| | C) | its leaving will be contested by government regulators that seek to limit exit. |
| | D) | it will have to accept large losses in its capital investment, so it is unlikely to exit. |
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| 13 | |
A basic characteristic of the firms in an oligopoly market is that firms exhibit |
| | A) | interdependent behaviors and are large relative to the total market. |
| | B) | independent behaviors and are small relative to the total market. |
| | C) | independent behaviors and are large relative to the total market. |
| | D) | interdependent behaviors and are small relative to the total market. |
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| 14 | |
Among the following options, which best represents a price-setting oligopoly model? |
| | A) | Stackelberg. |
| | B) | Cournot. |
| | C) | Sweezy. |
| | D) | Contestable market. |
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| 15 | |
A market is initially serviced by a Bertrand duopoly, where each firm has a constant marginal cost of $25. If a new firm enters the market that has the same cost structure, what conclusion can we draw about the price charged in the market, should the three firms co-exist after the entry? |
| | A) | The market price after the entry will be equal to $25, with three firms active in the post-entry market. |
| | B) | The market price after the entry will be below $25, with two firms active in the post-entry market. |
| | C) | The market price after the entry will be above $25, with three firms active in the post-entry market. |
| | D) | Unable to tell given the information provided. |
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