100B MT2 MC

The above figure shows the reaction functions for two pizza shops in a small isolated town. The Stackelberg leader will produce

100 pizzas

The above figure shows the reaction functions for two pizza shops in a small isolated town. The Stackelberg leader will produce

100 pizzas.

The Marginal Revenue for the following demand function Q=50-1/2P equals

100-4Q

In the above figure, if both firms instead compete in a Cournot model, they will produce

66.7 pizzas.

Two firms sell 100% orange juice in 10 ounce bottles. The juice is only good for one week. The two firms have contracts for all the oranges produced in a large geographic area. Each firm decides how many bottles of juice to produce at the same time. This market is best described with a

Cournot model.

In which of the following market structures with two identical firms do both firms individually produce more than the Cournot outcome?

Perfect Competition

In which of the following market structures with two identical firms do both firms produce more than the Cournot outcome?

Perfect Competition

***The outcome of the Stackelberg model is

a Nash equilibrium

The outcome of the Stackelberg model is

a Nash equilibrium.

For an oligopolistic firm, which of the following could be identified as a strategy?

a) Produce 10,000 units regardless of what the rivals do. b) Advertise if the rival advertises, do not advertise if the rival does not advertise. c) Raise the price if the rival raises the price, keep the current price if the rival lowers its price. D)ALL OF THE ABOVE

In the presence of a negative externality in production, a monopoly produces

a) more than the social optimum. b) less than the social optimum. c) the social optimum. D) All of the above are possible.

Game theory shows that

a) sometimes pursuing profit maximization will not yield the highest joint profit. b) interdependencies between firms have to be taken into account when few firms dominate the market. c) in an oligopolistic market, firms are likely to collude. d) All of the above.

Game theory shows that

a) sometimes pursuing profit maximization will not yield the highest joint profit. b) the actions of the other firms in the market have to be taken into account by each firm. c) in an oligopolistic market, firms could collude. d) All of the above.

Suppose two Cournot duopolist firms operate at zero marginal cost. The market demand is p = a - bQ. The optimal quantity for firm 1 is

a/3b.

***Oligopoly differs from monopolistic competition in that an oligopoly includes

barriers to entry

Oligopoly differs from monopolistic competition in that an oligopoly includes

barriers to entry.

The above figure shows the payoff matrix for two firms, A and B, selecting an advertising budget. The firms must choose between a high advertising budget and a low advertising budget. A Nash equilibrium is that

both firms select a high advertising budget.

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

cartel.

In the Stackelberg model, the leader has a first-mover advantage because it

commits to producing a larger quantity.

The above figure shows the payoff matrix for two firms, A and B, selecting an advertising budget. The firms must choose between a high advertising budget and a low advertising budget. Firm A's dominant strategy

does not exist.

One firm previously operated as a monopoly. Now, one potential entrant exists. Consumers would prefer

entry, and for the existing firm to produce the Stackelberg leader output, while the new entrant produces the follower output.

One firm previously operated as a monopoly. Now, one potential entrant exists. Consumers would prefer

entry, and for the incumbent to produce the Stackelberg leader level of output.

In a Bertrand model with differentiated products,

firms can set price above marginal cost.

The Cournot Model of Oligopoly assumes that

firms decide what quantity to produce.

The above figure shows the payoff matrix for two firms, A and B, selecting an advertising budget. The firms must choose between a high advertising budget and a low advertising budget. Firm B's dominant strategy

is to select a high advertising budget.

Assuming a homogeneous product, the Bertrand duopoly equilibrium price is

less than the Cournot equilibrium price.

Regardless of market structure, all firms

maximize profit by setting marginal revenue equal to marginal cost.

Perfect competition and monopolistic competition are similar in that both market structures include

no barriers to entry.

In the case of a good that has no exclusion and no rivalry, private markets fail because

of free-ridership.

Markets tend to produce too little of an excludable public good because

of the lack of rivalry.

The Stackelberg model is more appropriate than the Cournot model in situations where

one firm makes its output decision before the other.

Suppose two Cournot duopolist firms operate at zero marginal cost. The market demand is p = a - bQ. Firm 1's best-response function is

q1 = (a - bq2)/2b.

Suppose two Cournot duopolist firms operate at zero marginal cost. The market demand is p = a - bQ. Firm 1's best-response function is

q1 = (a - bq2)/2b.

Suppose two Cournot duopolist firms operate at zero marginal cost. The market demand is p = a - bQ. Firm 2's best-response function is

q2 = (a - bq1)/2b.

In a Bertrand model, graphically, the intersection of all firms' best-response curves determines

the Nash equilibrium prices.

What strategic advantage compared to a Cournot Oligopoly results in the Stackelberg outcome?

the ability to move first

If a cartel is unable to monitor its members and punish defectors, then

the cartel will fail in the long run.

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

the number of firms in the market decreases.

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

the other firm does not view the announcement as credible.

The applied papers discussed in class illustrated an application of

the theory of the second best.

Collusion is more likely to occur when

there is fear of punishment for not colluding.

Mergers are closely scrutinized by the government because

they might allow the firms involved to dominate the market and act as a legalized cartel (monopoly).

The total demand for a public good is found by

vertically summing all individual demands.

The Bertrand model is a more plausible model of firm behavior than the Cournot model

when firms sell a differentiated product.

A profit-maximizing monopolist will never operate in the portion of the demand curve with price elasticity equal to

-1/3.