TEST BANK
TEST BANKFOR CHAPTER
FOR CHAPTER 12:12 : IMPERFECT
Imperfect COMPETITION
Competition
MULTIPLE CHOICE
1. Suppose there are two firms, Boors and Cudweiser, each selling identical-tasting
nonalcoholic beer. Consumers of this beer have no brand loyalty so market demand can be
expressed as . Boors marginal revenue function can be written MRB =
5 - .001(2QB + QC) (and symmetrically for Cudweiser). Boors operates with out of date
technology and has constant cost of (MC = AC) $2 per unit where as Cudweiser has constant
cost of $1 per unit. Assuming the firms behave as Cournot competitors, Boor’s best-response
function is
a.
b.
c.
d.
ANS: b
2. Consider the same market for nonalcoholic beer as in the previous question. Cudweiser’s
response function is
a.
b.
c.
d.
ANS: c
3. Consider the same market for nonalcoholic beer as in the previous question. How many
“units” of beer will Boors produce in the Nash equilibrium?
a. 667
b. 1,667
c. 2,333
d. 3,000
ANS: a
4. Consider the same market for nonalcoholic beer as in the previous question. How many
“units” of beer will Cudweiser produce?
a. 667
b. 1,667
c. 2,333
d. 3,000
ANS: b
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, 2 Chapter 12: Imperfect Competition
5. Suppose there are two firms, Boors and Cudweiser, each selling identical-tasting
nonalcoholic beer. Consumers of this beer have no brand loyalty so market demand can be
expressed as . Boors operates with out of date technology and has
constant cost of (MC = AC) $4 per unit where as Cudweiser has constant cost of $2 per unit.
Assuming the firms behave as Cournot competitors, in the Nash equilibrium, Cudweiser will
produce
a. 1,333
b. 2,333
c. 3,333
d. 4,333
ANS: c
6. Consider the same market for nonalcoholic beer as in the previous question. How many units
will Boors produce in the Nash equilibrium?
a. 1,333
b. 2,333
c. 3,333
d. 4,333
ANS: a
7. Suppose there are two firms, Boors and Cudweiser, each selling nonalcoholic beer. Suppose
Boors and Cudweiser are not viewed as perfect substitutes but rather demand for Boors is
and demand for Cudweiser is .
For simplicity, assume zero marginal costs. Which is the more preferred beer?
a. Boor’s
b. Cudweiser
c. they are equally preferred
d. neither are preferred
ANS: a
8. Consider the market for nonalcoholic beers from the previous question. Which of the
following is the Bertrand reaction function for Boors?
a. PB = -2.5 + .05PC
b. PB = 2.5 + .05PC
c. PC = 2.5 - .05PB
d. PB = 2.5 - .15PC
ANS: b
9. Consider the market for nonalcoholic beers from the previous question. Which of the
following is the Bertrand reaction function for Cudweiser?
a. PC = 1 + .033PB
b. PC = 1 - .033PB
c. PC = 1.5 + .075PB
d. PB = 1.5 + .075PC
ANS: a
This study source was downloaded by 100000841341657 from CourseHero.com on 03-23-2022 10:19:40 GMT -05:00
https://www.coursehero.com/file/12388261/TEST-BANK-FOR-CHAPTER-12/
TEST BANKFOR CHAPTER
FOR CHAPTER 12:12 : IMPERFECT
Imperfect COMPETITION
Competition
MULTIPLE CHOICE
1. Suppose there are two firms, Boors and Cudweiser, each selling identical-tasting
nonalcoholic beer. Consumers of this beer have no brand loyalty so market demand can be
expressed as . Boors marginal revenue function can be written MRB =
5 - .001(2QB + QC) (and symmetrically for Cudweiser). Boors operates with out of date
technology and has constant cost of (MC = AC) $2 per unit where as Cudweiser has constant
cost of $1 per unit. Assuming the firms behave as Cournot competitors, Boor’s best-response
function is
a.
b.
c.
d.
ANS: b
2. Consider the same market for nonalcoholic beer as in the previous question. Cudweiser’s
response function is
a.
b.
c.
d.
ANS: c
3. Consider the same market for nonalcoholic beer as in the previous question. How many
“units” of beer will Boors produce in the Nash equilibrium?
a. 667
b. 1,667
c. 2,333
d. 3,000
ANS: a
4. Consider the same market for nonalcoholic beer as in the previous question. How many
“units” of beer will Cudweiser produce?
a. 667
b. 1,667
c. 2,333
d. 3,000
ANS: b
This study source was downloaded by 100000841341657 from CourseHero.com on 03-23-2022 10:19:40 GMT -05:00
1
https://www.coursehero.com/file/12388261/TEST-BANK-FOR-CHAPTER-12/
, 2 Chapter 12: Imperfect Competition
5. Suppose there are two firms, Boors and Cudweiser, each selling identical-tasting
nonalcoholic beer. Consumers of this beer have no brand loyalty so market demand can be
expressed as . Boors operates with out of date technology and has
constant cost of (MC = AC) $4 per unit where as Cudweiser has constant cost of $2 per unit.
Assuming the firms behave as Cournot competitors, in the Nash equilibrium, Cudweiser will
produce
a. 1,333
b. 2,333
c. 3,333
d. 4,333
ANS: c
6. Consider the same market for nonalcoholic beer as in the previous question. How many units
will Boors produce in the Nash equilibrium?
a. 1,333
b. 2,333
c. 3,333
d. 4,333
ANS: a
7. Suppose there are two firms, Boors and Cudweiser, each selling nonalcoholic beer. Suppose
Boors and Cudweiser are not viewed as perfect substitutes but rather demand for Boors is
and demand for Cudweiser is .
For simplicity, assume zero marginal costs. Which is the more preferred beer?
a. Boor’s
b. Cudweiser
c. they are equally preferred
d. neither are preferred
ANS: a
8. Consider the market for nonalcoholic beers from the previous question. Which of the
following is the Bertrand reaction function for Boors?
a. PB = -2.5 + .05PC
b. PB = 2.5 + .05PC
c. PC = 2.5 - .05PB
d. PB = 2.5 - .15PC
ANS: b
9. Consider the market for nonalcoholic beers from the previous question. Which of the
following is the Bertrand reaction function for Cudweiser?
a. PC = 1 + .033PB
b. PC = 1 - .033PB
c. PC = 1.5 + .075PB
d. PB = 1.5 + .075PC
ANS: a
This study source was downloaded by 100000841341657 from CourseHero.com on 03-23-2022 10:19:40 GMT -05:00
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