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Exam 12: Monopolistic Competition and Oligopoly

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Question 21

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If all producers in a market are cartel members,then the demand curve facing the cartel is

A) the market demand curve.
B) horizontal.
C) identical to the demand curve in the dominant firm model.
D) identical to the monopolist's demand curve.

E) A) and C)
F) All of the above

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Question 22

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What happens to an incumbent firm's demand curve in monopolistic competition as new firms enter?

A) It shifts right.
B) It shifts left.
C) It becomes horizontal.
D) New entrants will not affect an incumbent firm's demand curve.

E) None of the above
F) A) and B)

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Question 23

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In the Bertrand model with homogeneous products,

Use the following statements to answer this question: I.Cartels are illegal in the United States. II.Once price and production levels are agreed upon,each member of a cartel has an incentive to "cheat" on the agreement.

A firm operating in a monopolistically competitive market faces demand and marginal revenue curves as given below: P = 10 - 0.1Q MR = 10 - 0.2Q The firm's total and marginal cost curves are: where P is in dollars per unit,output rate Q is in units per time period,and total cost C is in dollars. a.Determine the price and output rate that will allow the firm to maximize profit or minimize losses. b.Compute a Lerner index.

Suppose the supply of non-OPEC oil increases due to new petroleum discoveries in other countries.What happens to the price of oil on the world market?

In which oligopoly model(s) do firms earn zero profit?

Which one of the following statements is a common criticism of the original Bertrand duopoly model?

The authors explain that the international copper cartel (CIPEC) has been largely ineffective in raising the price of copper in world markets,and the reason is mainly due to the relatively elastic demand for copper.Suppose the cartel recognized that there are multiple uses for copper,and some of the uses have few substitute products (e.g.,copper electrical wire) while others have several close substitutes (e.g.,copper water pipes) .If cartel attempted to raise the price of copper in one of these sub-markets,which market should the cartel choose?

The key disadvantage of the kinked-demand model is that it:

The market structure of home video gaming systems is best characterized by monopolistic competition.Quasar Entertainment is one of the producers in this market.The inverse demand for Quasar systems is: P = 500 - 9.75Q^d The resulting marginal revenue curve is MR(Q^d)= 500 - 19.5 Q^d. Quasar's cost function is: C(Q)= 0.25Q² + 6,250 ⇒ MC(Q)= 0.5Q. Determine Quasar's profit maximizing level of output and the price charged to customers.Is this a long-run equilibrium?

The Cournot equilibrium can be found by treating __________ as a pair of simultaneous equations and by finding the combination of Q1 and Q2 that satisfy both equations.

Excess capacity in monopolistically competitive industries results because in equilibrium

Suppose the supply of non-OPEC oil increases due to new petroleum discoveries in other countries.What happens OPEC's share of the world oil market?

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

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

The most important factor in determining the long-run profit potential in monopolistic competition is

Cartels can more easily detect cheating by cartel members if the products sold by each member are largely homogeneous.As product quality varies,the observed prices charged by cartel members may be due to differences in the products,or they may be due to cheating.Which of the following goods would more difficult to monitor for potential cheating?

The market structure in which there is interdependence among firms is

A situation in which each firm selects its best action,given what its rivals are doing,is called a