chap009

Managerial Economics and Business Strategy with Data Disk

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Chapter 9: Test Bank Multiple Choice Questions 1. The Cournot theory of oligopoly assumes a) rivals will keep their output constant. b) rivals will increase their output whenever a firm increases its output. c) rivals will decrease output whenever a firm increases its output . d) rivals will follow the learning curve. Answer: A Difficulty: Easy 2. Which of the following is true? a) In Bertrand oligopoly each firm believes that their rivals will hold their output constant if it changes its output. b) In Cournot oligopoly firms produce an identical product at a constant marginal cost and engage in price competition. c) In oligopoly a change in marginal cost never has an affect on output or price. d) None of the above are true. Answer: D Difficulty: Med 3. In a Sweezy Oligopoly, a decrease in a firm's marginal cost generally: a) leads to reduced output and a higher price. b) leads to increased output and a lower price. c) leads to higher output and a higher price. d) none of the above. Answer: D Difficulty: Easy 4. Bertrand model of oligopoly reveals that a) capacity constraints are not important in determining market performance. b) perfectly competitive prices can arise in markets with only a few firms. c) changes in marginal cost do not affect prices. d) all of the above. Answer: B Difficulty: Easy 5. Which of the following are quantity setting oligopoly models? a) Stackelberg. b) Cournot. c) Bertrand. d) a and b. Answer: D Difficulty: Easy Managerial Economics and Business Strategy, 5e Page 1
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6. Which of the following are price setting oligopoly models? a) Stackelberg. b) Cournot. c) Bertrand. d) a and b. Answer: C Difficulty: Easy 7. Both firms in a Cournot duopoly would enjoy higher profits if a) the firms simultaneously reduced output below the Nash equilibrium level. b) each firm simultaneously increased output above the Nash equilibrium level. c) one firm reduced output below the Cournot Nash equilibrium level, while the other firm continued to produce its Cournot Nash equilibrium output. d) a. and c. Answer: A Difficulty: Hard 8. Which of the following is not a feature of Sweezy oligopoly? a) There are two firms in the market serving many consumers. b) The firms produce homogenous products. c) Each firm believes that rivals will cut their prices in response to a price reduction, but will not raise their prices in response to a price increase. d) Barriers to entry exist. Answer: B Difficulty: Med 9. Which of the following is a profit-maximizing condition for a Cournot oligopolist? a) MR = MC. b) Q 1 = Q 2 = . .. = Q n. c) P = MR. d) all of the above. Answer: A Difficulty: Med 10. A new firm enters a market which is initially serviced by a Bertrand duopoly charging a price of $20. What will the new price be should the three firms co-exist after the entry? a)
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chap009 - Chapter 9: Test Bank Multiple Choice Questions 1....

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