Lesson test: Oligopoly and monopolistic competition

3.[2p]
What happens to the Cournot price as the number of identical firms rises?

It falls towards marginal cost, with the markup shrinking as $1 / (n + 1)$

Correct

It falls towards average total cost and stops there

The answer is: It falls towards marginal cost, with the markup shrinking as $1/(n+1)$

It stays at the monopoly level until entry is free

The answer is: It falls towards marginal cost, with the markup shrinking as $1/(n+1)$

It rises, because each firm produces less

The answer is: It falls towards marginal cost, with the markup shrinking as $1/(n+1)$

4.[3p]
What is the Bertrand paradox?

Two firms selling an identical good at equal marginal cost price at marginal cost, giving the competitive outcome

Correct

Two firms setting prices always collude

The answer is: Two firms selling an identical good at equal marginal cost price at marginal cost, giving the competitive outcome

Price competition yields a higher price than quantity competition

The answer is: Two firms selling an identical good at equal marginal cost price at marginal cost, giving the competitive outcome

Firms cannot set prices without knowing their rival's costs

The answer is: Two firms selling an identical good at equal marginal cost price at marginal cost, giving the competitive outcome

5.[3p]
Which of these resolve the Bertrand paradox?

Select all that apply

Capacity constraints that stop a firm serving the whole market

Correct

Product differentiation, so a price cut does not capture every buyer

Correct

Repetition, which sets a one-off gain against lost future profit

Correct

Rising marginal cost alone, with an identical product

The answer is: Capacity constraints that stop a firm serving the whole market, Product differentiation, so a price cut does not capture every buyer, Repetition, which sets a one-off gain against lost future profit

6.[3p]
In the market $p = 120 - Q$ with marginal cost £30, two firms split the monopoly output. What does each earn, in pounds?

CorrectNot quite: 1012.5

7.[2p]
A cartel agreement to split monopoly output is stable, because both firms earn more than under Cournot competition.

True

The answer is: False

False

Correct

9.[3p]
What does the excess capacity theorem say about monopolistic competition?

Free entry drives profit to zero at a tangency, leaving each firm below its minimum average cost

Correct

Firms hold spare capacity to deter entry

The answer is: Free entry drives profit to zero at a tangency, leaving each firm below its minimum average cost

Each firm produces more than its efficient scale

The answer is: Free entry drives profit to zero at a tangency, leaving each firm below its minimum average cost

Profits stay positive because products are differentiated

The answer is: Free entry drives profit to zero at a tangency, leaving each firm below its minimum average cost

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Oligopoly and monopolistic competition

1.[3p]
Two Cournot firms face $p = 120 - Q$ with marginal cost £30. How much does each produce?

2.[2p]
For that duopoly, what is the equilibrium price in pounds?

3.[2p]
What happens to the Cournot price as the number of identical firms rises?

4.[3p]
What is the Bertrand paradox?

5.[3p]
Which of these resolve the Bertrand paradox?

6.[3p]
In the market $p = 120 - Q$ with marginal cost £30, two firms split the monopoly output. What does each earn, in pounds?

7.[2p]
A cartel agreement to split monopoly output is stable, because both firms earn more than under Cournot competition.

8.[3p]
A market has four firms with shares of 40, 30, 20 and 10 per cent. What is its Herfindahl-Hirschman index?

9.[3p]
What does the excess capacity theorem say about monopolistic competition?

1.[3p] Two Cournot firms face p=120-Q with marginal cost £30. How much does each produce?

2.[2p] For that duopoly, what is the equilibrium price in pounds?

3.[2p] What happens to the Cournot price as the number of identical firms rises?

4.[3p] What is the Bertrand paradox?

5.[3p] Which of these resolve the Bertrand paradox?

6.[3p] In the market p=120-Q with marginal cost £30, two firms split the monopoly output. What does each earn, in pounds?

7.[2p] A cartel agreement to split monopoly output is stable, because both firms earn more than under Cournot competition.

8.[3p] A market has four firms with shares of 40, 30, 20 and 10 per cent. What is its Herfindahl-Hirschman index?

9.[3p] What does the excess capacity theorem say about monopolistic competition?

1.[3p]
Two Cournot firms face $p = 120 - Q$ with marginal cost £30. How much does each produce?

2.[2p]
For that duopoly, what is the equilibrium price in pounds?

3.[2p]
What happens to the Cournot price as the number of identical firms rises?

4.[3p]
What is the Bertrand paradox?

5.[3p]
Which of these resolve the Bertrand paradox?

6.[3p]
In the market $p = 120 - Q$ with marginal cost £30, two firms split the monopoly output. What does each earn, in pounds?

7.[2p]
A cartel agreement to split monopoly output is stable, because both firms earn more than under Cournot competition.

8.[3p]
A market has four firms with shares of 40, 30, 20 and 10 per cent. What is its Herfindahl-Hirschman index?

9.[3p]
What does the excess capacity theorem say about monopolistic competition?