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Exam 10: Oligopoly and Firm Architecture

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Question 41

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The demand function for a laptops sold by an oligopolist is given below: QD = 500 - 10P The firm's marginal cost function of producing and selling a laptop is given below: MC = 30 + 0.8Q Calculate the equilibrium price and quantity.

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Question 42

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The sources of oligopoly are generally the same as for monopoly, that is, barriers to entry.

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Question 43

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Oligopolist A is considering a price reduction. The payoff from this strategy depends on the behavior of Oligopolist B. If Oligopolist B also reduces price, then Oligopolist A will earn a profit of $50,000. If Oligopolist B does not reduce price, then Oligopolist A will earn a profit of $100,000. The situation is symmetrical; that is, if Oligopolist B reduces price and Oligopolist A doesn't, then Oligopolist B will earn a profit of $100,000, and if both oligopolists reduce their prices, then Oligopolist B will earn a profit of $50,000. If neither oligopolist reduces price, then both will continue to earn profits of $75,000. What can Oligopolist A and Oligopolist B be expected to do in the absence of collusion?

If a firm with marginal cost equal to $2 faces a demand curve defined as QD = 10 - 2P, then revenue is at a maximum when price is $6.

Assume that 2 identical firms in a purely oligopolistic industry form a centralized cartel. The total market demand function facing the cartel is and each of the firm's marginal cost function is given by . Find the best level of output and price for this centralized cartel.

European airplane manufacturer is currently charging a price of $10,000,000 and is selling 1,000 units of output per quarter. If the firm increases price above $10,000,000, then quantity demanded will decline by 1 unit for every $100,000 increase in price. If the firm reduces price below $10,000,000, then the quantity demanded will increase by 2 units for every $100,000 decrease in price. If the airplane producer's marginal cost curve is horizontal, within what range could marginal cost vary without giving the firm an incentive to change price or quantity?

Porter's strategic framework describes a structure based on five forces.

The most innovative firms are mostly from

Oligopolists prefer to avoid engaging in nonprice competition.

If a firm with marginal cost equal to $2 faces a demand curve defined as QD = 14 - 2P, then profit is at a maximum when price is 7$.

A duopoly is an oligopoly in which several firms duel for consumer demand.

If an oligopolist is attempting to maximize revenue, it should produce a quantity of output where marginal revenue is

Two firms have formed a centralized cartel in order to maximize profit on the market. Their marginal cost curves are: MC_A = 2Q_A and MC_B = 3Q_B. If the marginal revenue curve of the market is MR = 100-0.8Q, what quantity should Firm A produce?

Use the following to answer questions below : -Refer to the kinked demand graph. If an oligopolistic firm with constant unit cost equal to $60 faces this demand curve, then the firm will

If a monopolistically competitive firm is earning profits in the short run, then in the long run the behavior of competing firms

Under the dominant-firm price leadership model,

The kinked demand curve model describes a monopolistically competitive market.

Cartels tend to self-destruct because each member has an incentive to cheat.

Limit pricing refers to the oligopolistic practice of charging a price so low that new firms are discouraged from entering the industry.

An American car manufacturer is currently charging a price of $60,000 and is selling 500 units of output per day. If the firm increases price above $60,000, then quantity demanded will decline by 30 units for every $100 increase in price. If the firm reduces price below $60,000, then the quantity demanded will increase by 15 units for every $100 decrease in price. If the automobile producer's marginal cost curve is horizontal, within what range could marginal cost vary without giving the firm an incentive to change price or quantity?