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ECON 705 New 2023 /77 Questions And Answers Download To Pass!!!
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ECON 705 New 2023 /77 Questions And AnswersDownload To Pass!!!
Quiz :A firm's market power ____ with an increase in competition. -
Answer :declines
Quiz :oligopoly: - Answer :an industry dominated by a few large firms
producing near or perfect substitutes
Quiz :Examples of oligopolies: - Answer :automobile industry
gas industry
Quiz :What are distinguishing features of oligopolies? - Answer :-strategic
behavior
-advertising competition --> reinforcing customer loyalty through product
differentiation
Quiz :What is the goal of oligopolies? - Answer :to carve out a market niche of
loyal customers
Quiz :collusion: - Answer :firms cooperating by forming a multi-plant coalition
to maximize joint profits
Quiz :Oligopoly Models: - Answer :1. Cournot
2. Stackelberg
3. Collusion
(1 & 2 involve rivalry interaction)
Quiz :Cournot Model: - Answer :1. duopoly
2. firms make simultaneous and independent decisions on how much to
product
3. outputs are perfect substitutes
4. industry supply = sum of each firm's output
5. market price adjusts to clear the market
6. firms attempt to maximize their own profits
Quiz :What is the objective of firms using the oligopoly model? - Answer :to
maximize profits given the output of its rival
, Quiz :Best response function is AKA ____. - Answer :reaction function
Quiz :best response function: - Answer :output level of firm 1 (or 2) when
plugging in the other firm's output level
profit max where Q @ MR = MC
Quiz :Cournot equilibrium: - Answer :where firm 1 & 2 profit-maximizing
output levels are equal
Quiz :How is output determined in the Stackelberg Model? -
Answer :sequentially
Quiz :Who has a reaction function in the Stackelberg Model? - Answer :only
the Stackelberg follower
Quiz :Who has a reaction function in the Cournot Model? - Answer :both firms
Quiz :What does the Stackelberg leader enjoy? - Answer :a first-mover
advantage
Quiz :What is assumed about the Stackelberg leader? - Answer :they know
the follower's reaction function
Quiz :Cournot output setting is not ____. - Answer :optimal
Quiz :Why is Cournot not optimal? - Answer :both firms would be better off
by forming a coalition
BUT this does not happen because both firms have the incentive to maximize
their individual profits
Quiz :Collusion involves firms behaving like a ____. - Answer :multi-plant
monopolist
Quiz :Why don't firms choose to collude rater than compete? - Answer :-price
fixing is illegal in many countries
-the present value of future earnings from collusion are less than the present
value of future earnings from compeition
Quiz :Collusion model = - Answer :lower output
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