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Exam 12: Monopolistic Competition and Oligopoly

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Question 31

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In the dominant firm model, the fringe firms:

A) are price takers.
B) maximize profit by equating average revenue and average cost.
C) determine their price and output before the dominant firm determines its price and output.
D) all of the above
E) none of the above

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Question 32

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Which of the following can be thought of as a barrier to entry?

A) scale economies.
B) patents.
C) strategic actions by incumbent firms.
D) all of the above

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Question 33

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Figure 12.1.1 -Refer to Figure 12.1.1 above. Which of the figures describes the long run equilibrium in a monopolistically competitive market?

Suppose that three oligopolistic firms are currently charging $12 for their product. The three firms are about the same size. Firm A decides to raise its price to $18, and announces to the press that it is doing so because higher prices are needed to restore economic vitality to the industry. Firms B and C go along with Firm A and raise their prices as well. This is an example of:

The demand for on-line brokerage services is: If the on-line brokerage firms collude, the collusive marginal revenue function is: The brokerage firm specific marginal cost functions are: Calculate the collusive output level and market price. If the brokerage firms behaved competitively and each firm set its own marginal cost equal to price, what would be the output level and market price?

Which of the following is true in long-run equilibrium for a firm in a monopolistic competitive industry?

Suppose that the market demand for mountain spring water is given as follows: P = 1200 - Q Mountain spring water can be produced at no cost. a. What is the profit maximizing level of output and price of a monopolist? b. What level of output would be produced by each firm in a Cournot duopoly in the long run? What will the price be? c. What will be the level of output and price in the long run if this industry were perfectly competitive?

Suppose two firms with differentiated products are competing on price. The reaction curve for Firm 1 is P₁ = 4 + 0.5 P₂, and the reaction curve for Firm 2 is P₂ = 4 + 0.5P₁. What is the equilibrium price outcome in this market?

Figure 12.1.2 -Which of the following is true for both perfect and monopolistic competition?

Refer to Scenario 12.3. Suppose that the marginal cost increases such that: MC = Q + 10 What is the profit maximizing level of output?

Which of the following markets is most likely to be oligopolistic?

In the ________, one firm sets its output first, and then a second firm, after observing the first firm's output, makes its output decision.

The market structure in which strategic considerations are most important is:

In the Stackelberg model, there is an advantage:

The market structure of the local boat industry is best characterized by monopolistic competition. Homer's Boat Manufacturing is one of the producers in the local market. The demand for Homer's Boats is: = 5000 - P ⇔ P = 5000 - . The resulting marginal revenue curve is MR( ) = 5000 - 2 . Homer's cost function is: C(Q) = 3 ⇒ MC(Q) = 6Q. Determine Homer's profit maximizing level of output and the price charged to customers. Is this a long-run equilibrium?

What condition may provide for a relatively small degree of inefficiency under monopolistic competition?

Under the kinked demand model, suppose the firm's demand curve shifts rightward but the price at which the kink occurs remains the same. In this case, the firm:

In the ________, two duopolists compete by simultaneously selecting price.

Relative to the Nash equilibrium in the Cournot model, the Nash equilibrium in the Bertrand model with homogeneous products

Which of the following is true about the demand curve facing the dominant firm?