Lesson test: Competing on quantity and price

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Competing on quantity and price

1.[2p]
Demand is $p = 100 - Q$ and each unit costs £40. What is firm 1's best response if firm 2 produces 30?

CorrectNot quite: 15

2.[2p]
With the same demand and cost, what quantity does each firm produce in the Cournot duopoly equilibrium?

CorrectNot quite: 20

3.[2p]
What is the market price in that equilibrium, in pounds?

CorrectNot quite: 60

4.[3p]
The two firms instead split the monopoly output, 15 each. If firm 1 cheats optimally while firm 2 holds at 15, what is firm 1's profit in pounds?

CorrectNot quite: 506.25

5.[3p]
Put these market structures in order of price, from highest to lowest, for demand $p = 100 - Q$ with cost £40.

Cournot duopoly
Monopoly
Bertrand duopoly with identical goods
Cournot with five firms

Show the answer

a, b, c, d

6.[2p]
In the Bertrand model with identical goods and equal costs, the equilibrium price is

exactly marginal cost, because any higher price invites undercutting

Correct

the monopoly price, because both firms prefer it

The answer is: exactly marginal cost, because any higher price invites undercutting

halfway between marginal cost and the monopoly price

The answer is: exactly marginal cost, because any higher price invites undercutting

undefined, because no equilibrium exists

The answer is: exactly marginal cost, because any higher price invites undercutting

7.[3p]
Which assumptions, if dropped, allow a Bertrand duopoly to price above marginal cost?

Select all that apply

Each firm can serve the whole market at its posted price

Correct

The two goods are perfect substitutes

Correct

The game is played once

Correct

Both firms know the demand curve

The answer is: Each firm can serve the whole market at its posted price, The two goods are perfect substitutes, The game is played once

8.[3p]
Cournot quantities are strategic substitutes and differentiated Bertrand prices are strategic complements. This means

a rival producing more makes you produce less, while a rival pricing higher makes you price higher

Correct

both models predict that firms imitate each other

The answer is: a rival producing more makes you produce less, while a rival pricing higher makes you price higher

quantities and prices are interchangeable choice variables

The answer is: a rival producing more makes you produce less, while a rival pricing higher makes you price higher

the Cournot best-response function slopes upward

The answer is: a rival producing more makes you produce less, while a rival pricing higher makes you price higher

9.[2p]
With $n$ identical Cournot firms, demand $p = 100 - Q$ and cost £40, what is the price in pounds when $n = 5$ ?

CorrectNot quite: 50

1.[2p] Demand is p=100-Q and each unit costs £40. What is firm 1's best response if firm 2 produces 30?

2.[2p] With the same demand and cost, what quantity does each firm produce in the Cournot duopoly equilibrium?

3.[2p] What is the market price in that equilibrium, in pounds?

4.[3p] The two firms instead split the monopoly output, 15 each. If firm 1 cheats optimally while firm 2 holds at 15, what is firm 1's profit in pounds?

5.[3p] Put these market structures in order of price, from highest to lowest, for demand p=100-Q with cost £40.

6.[2p] In the Bertrand model with identical goods and equal costs, the equilibrium price is

7.[3p] Which assumptions, if dropped, allow a Bertrand duopoly to price above marginal cost?

8.[3p] Cournot quantities are strategic substitutes and differentiated Bertrand prices are strategic complements. This means

9.[2p] With n identical Cournot firms, demand p=100-Q and cost £40, what is the price in pounds when n=5?

1.[2p]
Demand is $p = 100 - Q$ and each unit costs £40. What is firm 1's best response if firm 2 produces 30?

2.[2p]
With the same demand and cost, what quantity does each firm produce in the Cournot duopoly equilibrium?

3.[2p]
What is the market price in that equilibrium, in pounds?

4.[3p]
The two firms instead split the monopoly output, 15 each. If firm 1 cheats optimally while firm 2 holds at 15, what is firm 1's profit in pounds?

5.[3p]
Put these market structures in order of price, from highest to lowest, for demand $p = 100 - Q$ with cost £40.

6.[2p]
In the Bertrand model with identical goods and equal costs, the equilibrium price is

7.[3p]
Which assumptions, if dropped, allow a Bertrand duopoly to price above marginal cost?

8.[3p]
Cournot quantities are strategic substitutes and differentiated Bertrand prices are strategic complements. This means

9.[2p]
With $n$ identical Cournot firms, demand $p = 100 - Q$ and cost £40, what is the price in pounds when $n = 5$ ?