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Mock Exam 2 - Bitty
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Questions in this quiz (22)
11. Sweezy model of oligopoly – general observations
In the Sweezy model of oligopoly, competitors match price decreases but do not match price increases.- ATrue
- BFalse
21. Sweezy model of oligopoly – general observations
Firms under the Sweezy model will have no motivation to change their prices because competitors match price decreases and ignore the price increase.- ATrue
- BFalse
31. Sweezy model of oligopoly – general observations
With the Sweezy model, if the firm increases or decreases its prices compared to sticky prices TR will decrease.- ATrue
- BFalse
4Which of the following statements is not correct regarding the kinked demand curve (Sweezy) model?
Select one:- Aa. At prices below the sticky price, the firm is on the steeper portion of the demand curve.
- Bb. There are barriers to entry.
- Cc. The price corresponding to the sticky price is where the discontinuity is found on the demand curve.
- Dd. The firm faces more elastic demand if it raises its price than if it lowers its price.
- Ee. Any change in the firm’s marginal cost definitely causes a change in the profit-maximizing output.
52. Bertrand's model of oligopoly; determination of profit-maximizing output and profit
When all firms in an industry adopt price a price matching strategy, the result is cutthroat Bertrand competition and zero economic profit.- ATrue
- BFalse
62. Bertrand's model of oligopoly; determination of profit-maximizing output and profit
Assume the inverse demand function for a Bertrand oligopoly is P = 200- Q/6, and that the firm’s marginal cost is constant at $70. What is the firm’s profit-maximizing output?- A780
- B420
- C649
- D880
7● Consider a Bertrand oligopoly consisting of 8 firms that produce an identical product at an MC of $200. The inverse demand for this product is P = 1300 - 5Q. What is the equilibrium level of output in this market and revenue?
- A220
- B320
- C620
- D520
8● The (inverse) market demand function in a homogeneous product. Cournot duopoly is as follows: P = 800-40*(Q1+Q2). The total cost functions are TC1 = 300+ 80Q1 for firm one and TC2 = 300+ 32Q2 for firm two. What is the reaction function for firm one?
- AQ1= 9 - 0.5Q2
- BQ1 = 12 – 0.25Q2
- CQ1 = 24 – 0.5Q2
- DQ1 = 36 – 0.5Q2
9Cournot model of oligopoly; determine the profit-maximizing output for one firm – builds off the previous question
Using the information from the above question, what is the profit-maximizing output for firm one?- A8
- B12
- C18
- D24
10Which of the following statements is incorrect regarding a Cournot oligopoly?
- Aa. When demand for the good is more elastic, the markup is smaller
- Bb. An increase in the number of firms in the industry causes the price to decrease
- Cc. If marginal cost decreases, the selling price increases.
- Dd. None of the above
11The inverse demand for a homogeneous product Stackelberg duopoly is P = 80-Q. The total cost function for each firm is C(Q) = 8Q. What is the output of the leader?
- A45
- B19
- C21
- D36
12Two firms compete in a Stalkerberg Oligopoly. The inverse demand function is P= 15,000 - 8Q. The MC of the leader is $4,760 and for the follower is $6,040. What is the output of the leader/ follower?
- AQLeader= 720, Q2= 200
- BQLeader= 610, Q2= 200
- CQLeader= 290, Q2= 200
- DQLeader= 130, Q2= 200
13Which of the following is not correct if a market is contestable?
- AFirms have no market power
- BThere are no barriers to entry for new firms
- CFirms can earn a positive economic profit
- DThere are no sunk costs
- EAll firms have access to the same technology
14A single firm produces all of the output in a contestable market. The market demand function is Q = 840 - P/4, and the firm’s cost function is TC = 160Q. What is the firm’s output? (Q= 800)
Under the Contestable Market Model, consumers respond to price changes, no sunk cost, and existing firms in the industry cannot quickly lower their prices.- ATrue
- BFalse
15For a Cartel to be successful, it must find a way to enforce the agreement to keep output at a lower level.
- ATrue
- BFalse
16Under the Cartel market model, a group of firms try to act like a Monopoly.
- ATrue
- BFalse
17Under the Cartel Market Model, firms agree to reduce output, which leads to P decreases and TR increases.
- ATrue
- BFalse
18Some problems with Cartels are that it's illegal and there is a huge incentive to cheat.
- ATrue
- BFalse
19In a finite repeating game with a definite end, collusion is not possible.
- ATrue
- BFalse
20In a finite game with a definite end, collusion is possible because the end is known, and players can work backward to achieve the highest profits on the final play.
- Atrue
- Bfalse
21What is the maximum interest rate at which collusion could occur between these firms with a trigger strategy if the game is played an infinite number of times?
- A50%
- B30%
- C10%
- D40%
22What is the maximum interest rate at which collusion could occur between these firms with a trigger strategy if the game is played an infinite number of times?
- A25%
- B15%
- C50%
- D60%
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- Quiz on Mock Exam 2 - Bitty, created by Orfa Cartagena on 15/11/2022.
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- Orfa Cartagena
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- English
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