Question 1

Which of the following best describes the Cournot model of oligopoly?

Accepted Answer

Firms choose output levels simultaneously, treating competitors' output as fixed.

Question 2

Suppose the market demand is $$Q(p) = 1000 - 2p$$ and each firm in a competitive market has cost $$C(q) = 200q. $$What is the competitive equilibrium price?

Accepted Answer

$$p = 200$$

Question 3

In the Cournot duopoly equilibrium with $$Q(p) = 1000 - 2p$$ and $$C_1$$($$q_1) = 200q_1$, C_2$(q_2$) = 200q_2$$, what is the equilibrium output for each firm?

Accepted Answer

$$q_1$$ = $$q_2 = 200$

Question 4

Given the same market and cost functions as above, what is the equilibrium price in the Cournot duopoly?

Accepted Answer

$$p = 300$$

Question 5

Which of the following statements about the comparison between monopoly and Cournot duopoly is correct?

Accepted Answer

Monopoly results in a higher total profit and higher price than Cournot duopoly.

Question 6

If two firms in a Cournot duopoly collude perfectly, what output and price will they choose?

Accepted Answer

They will jointly produce the monopoly output and set the monopoly price.

Question 7

Suppose the market demand is $$Q(p) = 1000 - 2p$$ and a monopoly faces cost $$C(q) = 200q. $$What is the monopoly's profit-maximizing output?

Accepted Answer

$$q^* = 300$$

Question 8

In the context of the European natural gas market, why are the profits of Russia, Norway, and other suppliers interconnected?

Accepted Answer

Because the market price is determined by the total quantity supplied by all countries.

Question 9

Which of the following is a key feature of Subgame Perfect Nash Equilibrium (SPNE) in sequential-move games?

Accepted Answer

Each player's strategy constitutes a Nash Equilibrium in every subgame.

Question 10

Suppose in a Cournot duopoly, Firm 1's reaction function is $$q_1 = 300 - 0.5q_2$ and Firm 2's reaction function is q_2$ = 300 - 0.5q_1. $$What is the total market output at equilibrium?

Accepted Answer

$$q = 400$$

Question 11

In the competitive equilibrium with $$Q(p) = 1000 - 2p$$ and $$C(q) = 200q$$, what is the profit for each firm?

Accepted Answer

$$0$$

Question 12

Which of the following best explains why cartels, such as OPEC, are considered illegal in the United States?

Accepted Answer

Because they restrict competition and act like monopolies.

Question 13

If the market demand is $$Q(p) = 1000 - 2p$$ and the cost function is $$C(q) = 200q$$, what is the equilibrium price and quantity in a perfectly competitive market?

Accepted Answer

$$p = 200$$, $$q = 600$$

Question 14

Which of the following is true about the relationship between total output and price in monopoly, Cournot duopoly, and perfect competition?

Accepted Answer

Competitive output $$\u003e$$ Cournot output $$\u003e$$ Monopoly output

Question 15

A duopoly market is characterized by:

Accepted Answer

Two sellers, each with partial influence on market price.

Question 16

If a monopoly produces $$q^* = 300$$ units at $$p^* = 350$$ with cost $$C(q) = 200q$$, what is its profit?

Accepted Answer

$$45,000$$

Question 17

In the Cournot model, what is a firm's reaction function?

Accepted Answer

A function showing the firm's optimal output as a function of its rival's output.

Question 18

Which of the following is NOT a feature of the Cournot equilibrium compared to perfect competition?

Accepted Answer

Zero profit for each firm.

Question 19

Suppose two firms in a duopoly are considering whether to collude or compete. According to the Prisoners’ Dilemma, what is the likely outcome if collusion is not enforceable?

Accepted Answer

Both firms will compete, leading to lower profits than collusion.

Question 20

In the context of the European energy crisis, what economic effect did the reduction of Russian gas supply have on Norway?

Accepted Answer

Norway's profits from gas exports increased due to higher prices.

Oligopoly, Monopoly, and Competitive Markets: Models and Comparisons

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