Exam3 - 1) Bridge Coal Company is the only employer in a...

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1) Bridge Coal Company is the only employer in a remote and mountainous region of the country, so the firm is the monophony buyer of labor in the market. If the price of coal increases, then the firms: B) ME curve shifts leftward. 2) An amusement park charges an entrance fee of $75 per person plus $2.50 per ride. This is an example of D) a two- part tariff. 3) In the __________, two duopolists compete by simultaneously selecting price. B) Bertrand model 4) In the Stackelberg model, there is an advantage A) to waiting until your competitor has committed herself to a particular output level before deciding on your output level. C) to being the first competitor to commit to an output level. 5) Under the kinked demand curve model, an increase in marginal cost will lead to A) neither a change in output level nor a change in price. 6) A situation in which each firm selects its best action, given what its rivals are doing, is called a D) Nash equilibrium. 7) The kinked demand curve model is based on the assumption that each firm E) none of the above 8) 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? D) Luxury yachts 9) Suppose that three oligopolistic firms are currently charging $12 for their product. The three firms are about the same size. Firm A decides to raise its price to $18, and announces to the press that it is doing so because higher prices are needed to restore economic vitality to the industry. Firms B and C go along with Firm A and raise their prices as well. This is an example of A) price leadership. Scenario 12.3: Suppose a stream is discovered whose water has remarkable healing powers. You decide to bottle the liquid and sell it. The market demand curve is linear and is given as follows: P = 30 – Q The marginal cost to produce this new drink is $3. 10) Refer to Scenario 12.3. What will be the price of this new drink in the long run if the industry is a Cournot duopoly? D) $9 11) Which of the following is true in the Stackelberg model? B) The first firm produces more than its rival. 12) Under the kinked demand model, suppose the firm s ʹ demand curve shifts rightward but the price at which the kink occurs remains the same. In this case, the firm: C) increases output. 13) The key disadvantage of the kinked-demand model is that it: C) does not explain why prices may be rigid in an oligopoly. 14) Which of the following is true about the demand curve facing the dominant firm? D) It equals market demand minus fringe firms supply curve.
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This note was uploaded on 07/27/2009 for the course FIN 470 taught by Professor Kamath during the Spring '09 term at Cleveland State.

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Exam3 - 1) Bridge Coal Company is the only employer in a...

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