Quick Quiz


1	Problems 1-3 are related to the graph shown in 13-1 and to each other. The MC is $40/unit. In the graph of a Cournot duopoly below, firm 2 assumes firm 1 will produce Q1 output. The demand curve for firm 2 will be frank_mci_13-1.gif
		A)	P = 100 - Q2
		B)	P = Q1 - Q2
		C)	P = (100 + Q1) - Q2
		D)	P = (100 - Q1) - Q2


2	When the demand curve for firm 2 is determined, the reaction curve for firm 2 can be derived by
		A)	setting the demand = MC and solving for Q2.
		B)	solving demand for Q2.
		C)	finding the MR function, setting it equal to MC and solving for Q2.
		D)	a process different from any described above.


3	If the reaction curve for firm 2 turns out to be Q2 = 30 - 0.5Q1, then the Cournot equilibrium output will have each firm producing
		A)	10
		B)	20
		C)	30
		D)	40
		E)	50


4	A duopolist in the Bertrand model assumes that the opponent''s _______ will not change. The operation of the model eventually results in an equilibrium output that is the same as in __________.
		A)	quantity; single-price monopoly
		B)	price; perfect competition
		C)	quantity; perfect competition
		D)	price; single-price monopoly
		E)	reaction curve; the Cournot model


5	In the Stackelberg model, the Stackelberg leader assumes it knows
		A)	the opponent''s reaction curve.
		B)	its own marginal cost curve.
		C)	the demand curve it faces.
		D)	all of the above.


6	In the graph below, four points representing price and quantity are shown. The MC is shown as 20. If the outcomes of the four oligopoly models (Cournot, Bertrand, Stackelberg, and Shared Monopoly) were located on the demand curve in their positions relative to each other with respect to quantity and price, the match-ups would be frank_mci_13-5.gif
		A)	A = Bertrand, B = Stackelberg, C = Cournot, D = shared monopoly
		B)	A = shared monopoly, B = Cournot, C = Stackelberg, D = Bertrand
		C)	A = Cournot, B = Bertrand, C = Stackelberg, D = shared monopoly
		D)	A = shared monopoly, B = Stackelberg, C = Cournot, D = Bertrand


7	In a prisoner''s dilemma with prisoners A and B, if they both confess, A gets 5 years and B gets 8 years. If both remain silent, A gets 2 years and B goes free. If one confesses and the other does not, the one who confesses gets 1 year and the other gets 15 years. Which statement is true of this case?
		A)	There is a dominant strategy for both A and B.
		B)	There is no dominant strategy for either A or B.
		C)	There is a dominant strategy for A but not for B.
		D)	There is a dominant strategy for B but not for A.


8	In baseball games, if a pitcher appears to have thrown at an opposing batter it is generally understood that someone on that pitcher''s team will be thrown at later in the game. Sometimes bench-clearing brawls result, but these incidents happen relatively infrequently over a season. Once each team has made its point, the incident is usually forgotten. All of this seems to fit with the oligopoly strategy called
		A)	Cournot duopoly strategy
		B)	Prisoner''s dilemma dominant strategy
		C)	Tit-for-tat strategy
		D)	Contestable market strategy
		E)	Strategic entry deterrence.


9	Monopolistic competition is different from perfect competition in that monopolistic competition does not assume
		A)	many buyers and many sellers.
		B)	a homogeneous product.
		C)	low-cost or free information.
		D)	ease of entry and exit.


10	Monopolistically competitive firms must decide how much to differentiate their product from similar products. Suppose your university is trying to decide how many academic majors it should offer its constituency. The two costs it must consider are shown in the graph below. To find the optimal number of majors, given these cost functions, school administrators should frank_mci_13-10.gif
		A)	horizontally sum the costs and minimize the result.
		B)	offer the number of majors represented by the point where the 2 costs intersect.
		C)	vertically sum the costs and then minimize the resulting total costs.
		D)	find the point where the rate of decline of one cost equals the rate of increase of the other cost (i.e. where the slopes of the two functions are equal in absolute value).
		E)	do either c or d, since they both amount to the same thing.


11	The text developed a model for determining the optimal number of restaurants that should be built around a lake. To work with the model one needs to know the average distance traveled by each citizen. If the lake is 10 kilometres in circumference and the people are evenly distributed around the lake, what is the average distance travelled to and from a restaurant, if there are 4 restaurants?
		A)	0.625 kilometres
		B)	1.25 kilometres
		C)	2.5 kilometres
		D)	5 kilometres


12	The text argues that the consumer preference-driven market sequence is more likely to be an accurate description of the way markets work than the producer/advertiser-led market sequence of John K. Galbraith when:
		A)	advertising is ignored by an increasingly well educated public.
		B)	producers use advertising to unload items already produced that failed to sell on their merits.
		C)	advertising efforts cancel each other, and hence help neither consumers nor producers.
		D)	producers advertise most heavily the products for which consumers have already expressed a preference.
		E)	the products being advertised involve wants rather than needs, and have a significant fad, fashion, or positional goods component.

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