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An in-depth exploration of the different types of oligopolies and their implications for optimal pricing, output, and profit decisions. It covers the sweezy, cournot, stackelberg, and bertrand oligopoly models, examining the conditions under which a firm operates in each type of oligopoly and the ramifications for the firm's pricing, output, and profitability. The document delves into the concepts of reaction functions, best-response functions, and the strategic interactions between oligopolistic firms. It also includes various learning objectives, bloom's taxonomy levels, and difficulty ratings to assess the complexity of the material. This comprehensive resource is valuable for students and researchers interested in understanding the dynamics of oligopolistic markets and the strategic decision-making processes of firms operating in such environments.
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Chapter 09 Basic Oligopoly Models
Multiple Choice Questions
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. 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. reduced output and a higher price. B. increased output and a lower price. C. higher output and a higher price. D. None of the answers is correct.
A. Stackelberg. B. Cournot. C. Bertrand. D. Cournot and Stackelberg.
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. 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.
B. Q1 = Q2 = ... = Qn. C. P = MR. D. All of the statements associated with this question are correct.
A. Sweezy oligopoly. B. Cournot oligopoly. C. Stackelberg oligopoly. D. Bertrand oligopoly.
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.
B. ProfitA < ProfitB C. Revenue of firm A < Revenue of firm B D. PriceA < PriceB
A. output of rivals as given. B. prices of rivals as given. C. profits of rivals as given. D. All of the statements associated with this question are correct.
A. The firm competes with others in the Cournot fashion. B. Other firms match price increases but do not match price reductions. C. Other firms match price reductions but do not match price changes. D. The firm competes with others in the Bertrand fashion.
A. more output and charge a lower price than firm 2. B. more output and charge the same price as firm 2. C. less output and charge the same price as firm 2. D. less output and charge a higher price than firm 2.
A. Sweezy fashion. B. Cournot fashion. C. Bertrand fashion. D. Cournot fashion and Bertrand fashion.
B. Profits of firm 1 = profits of firm 2. C. Producer's surplus of firm 1 = producer's surplus of firm
D. All of the statements associated with this question are correct.
A. The market is contestable. B. Barriers to entry exist. C. A single firm (the leader) selects an output before all other firms choose their outputs. D. The firms produce either differentiated or homogeneous products.
A. πL = $384; πF = $192. B. πL = $192; πF = $91. C. πL = $56; πF = -$28. D. πL = $56; πF = $28.
A. Sweezy B. Cournot C. Stackelberg D. Bertrand
A. it is prohibited by law. B. every firm has an incentive to cheat given that others follow the agreement. C. firms usually take care of consumers' interests as a decision priority. D. it is prohibited by law and every firm has an incentive to cheat given that others follow the agreement.
A. MCI is probably competing in a Bertrand oligopolistic industry. B. stockholders are sometimes not rational. C. there is increased demand for MCI's stock. D. AT&T sold out its stock of MCI just after the announcement.
A. Sweezy B. Cournot C. Stackelberg D. Bertrand
A. beliefs play an important role in oligopolistic competition. B. firms do not maximize profits in oligopolistic competition. C. oligopoly is the most complicated type of market structure. D. beliefs play an important role in oligopolistic competition and oligopoly is the most complicated type of market structure.
A. Monopolistic competition B. Perfect competition C. Monopolistic oligopoly D. Monopoly
