EABD_chapter 9

The Cournot theory of oligopoly assumes rivals will
A) keep their output constant.     

B) increase their output whenever a firm increases its output.

C) decrease output whenever a firm increases its output.
D) follow the learning curve.

• A

• B

• C

• D

Which of the following is true?

           
            A) In Bertrand oligopoly, each firm believes that its rivals will hold their output constant if it changes its output.       
            B) In Cournot oligopoly, firms produce an identical product at a constant marginal cost and engage in price competition.
            C) In oligopoly, a change in marginal cost never has an effect on output or price.
            D) None of the answers is correct.

• A

• B

• C

• D

In a Sweezy oligopoly, a decrease in a firm's marginal cost generally leads to
            A) reduced output and a higher price.           
            B) increased output and a lower price.
            C) higher output and a higher price.
            D) none of the provided answers.

• A

• B

• C

• D

The Bertrand model of oligopoly reveals that

           
            A) capacity constraints are not important in determining market performance.        
            B) perfectly competitive prices can arise in markets with only a few firms.
            C) changes in marginal cost do not affect prices.
            D) all of the provided statements are true.

• A

• B

• C

• D

Which of the following are quantity-setting oligopoly models?

           
            A) Stackelberg only   
            B) Cournot only
            C) Bertrand
            D) Stackelberg and Cournot

• A

• B

• C

• D

Both firms in a Cournot duopoly would enjoy higher profits if

           
            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.

• A

• B

• C

• D

Which of the following is  not a feature of a Sweezy oligopoly?

           
            A) There are few firms in the market serving many 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 exist.

• A

• B

• C

• D

Which of the following is a profit-maximizing condition for a Cournot oligopolist?

           
            A) MR = MC.
            B) Q₁ = Q₂ = ... = Q_n.
            C) P = MR.
            D) All of the statements associated with this question are correct.

• A

• B

• C

• D

A new firm enters a market that is initially serviced by a Bertrand duopoly charging a price of $20. What will the new price be should the three firms coexist after the entry?

           
            A) $25
            B) $20
            C) $15
            D) $8

• A

• B

• C

• D

A market is  not contestable if

           
            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.

• A

• B

• C

• D