An oligopolist is currently charging a price of $100 and is selling 400 units of
ID: 1124740 • Letter: A
Question
An oligopolist is currently charging a price of $100 and is selling 400 units of output per day. If the firm increases price above $100, the demand curve is P = 1 10-0025) If the firm reduces price below $100, the demand curve becomes P 140-0.1 Q. If the firm's marginal cost curve is horizontal, within what range could marginal cost vary without giving the firm an incentive to change the current price or quantity? a. (110, 140). b. (55, 70) C. (60, 90) d. (80, 120) In a Cournot equilibrium each firm chooses an output level which a. b. maximizes the price received c. maximizes profits given the level of output produced by other firms. d. maximizes revenue given the level of output produced by other firms. maximizes joint profits. 3 A profit-maximizing firm should spend an additional dollar on advertising so long as this expenditure results in more than one dollar of: a. dditional sales b. reduced costs c. increased profits. d. demand. 4 Each firm in a cartel has an incentive to chisel because market price exceeds a. marginal cost. b. average cost. c. average variable cost. d. average fixed cost. 5 The Stackelberg outcome differs from the Cournot equilibrium because a. the games involve different strategic variables b. the first mover can commit to an output off of its best-response function c. antity supplied is not equal to quantity demanded at the prevailing price d. s not a perfectly competitive outcomeExplanation / Answer
1)
2) In a cournot equilibrium each firm chooses an output level which maximizes profits given the level of output produced by other firms.
3) A profit mazimizing firm should spend an additional dollar on advertising so long as this expenditure results in more than one dollar of increased profits.
4) Each firm in a cartel has an incentive to chisel because market price exceeds marginal cost.
5) The stackelberg outcome differs from cournot equilibrium because the first mover can commit to an output off of its best response function.
6) A dominant strategy can be best described as a strategy that is optimal for a player no matter what the opponent does.