Question 25 The following are key characteristics related to Oligopoly, EXCEPT:

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Question 25

The following are key characteristics related to Oligopoly, EXCEPT:

Question 25 options:

A. Only 2 to max 4 firms operating in the market.

B. Standard product.

C. If collusion, firms will behave as if they were one single monopoly.

D. If no collusion agreement, firms will compete in price.

Question 26

The following are possible characteristics related to different market structures, EXCEPT:

Question 26 options:

A. Monopoly always implies the existence of positive economic profits

B. The key characteristic for Monopolistic Competition is product differentiation.

C. Under Perfect Competition firms will compete only in price since the product is standard.

D. Collusion is a profitable but unstable strategy under oligopoly.

Question 27

Assuming perfect competition, identify the Price and Quantity in Equilibrium, mgiven the following info on Supply and Demand:

Qd = 80 - 4Px

Qs = 20 + 6Px

Question 27 options:

A. P* = 10 Q* = 80

B. P* =6 Q* = 56

C. P* = 6 Q* = 44

D. P * = 10 Q* = 40

Question 28

The following price and quantity set is the one that Maximizes the Total Revenue collected by the producer, assuming the following Demand:

Qd = 80 - 5Px

Question 28 options:

A. Q =80, P =2

B. Q=40, P=8

C. Q = 20, P=4

D. Q=40, P=10

A. Only 2 to max 4 firms operating in the market.

B. Standard product.

C. If collusion, firms will behave as if they were one single monopoly.

D. If no collusion agreement, firms will compete in price.

Question 26

The following are possible characteristics related to different market structures, EXCEPT:

Question 26 options:

A. Monopoly always implies the existence of positive economic profits

B. The key characteristic for Monopolistic Competition is product differentiation.

C. Under Perfect Competition firms will compete only in price since the product is standard.

D. Collusion is a profitable but unstable strategy under oligopoly.

Question 27

Assuming perfect competition, identify the Price and Quantity in Equilibrium, mgiven the following info on Supply and Demand:

Qd = 80 - 4Px

Qs = 20 + 6Px

Question 27 options:

A. P* = 10 Q* = 80

B. P* =6 Q* = 56

C. P* = 6 Q* = 44

D. P * = 10 Q* = 40

Question 28

The following price and quantity set is the one that Maximizes the Total Revenue collected by the producer, assuming the following Demand:

Qd = 80 - 5Px

Question 28 options:

A. Q =80, P =2

B. Q=40, P=8

C. Q = 20, P=4

D. Q=40, P=10

Explanation / Answer

25. In Oligopoly few firms are there and it is not restricted to 2 to maximum 4 firms. Oligopolist deal in standard product and if they create cartel they behave as if they're monopolist. But generally cartel does not sustain in the long run.

Hence option A is incorrect.

26. In perfect competition all the market players are price takers hence they don't have market power to influence the price.

Hence option C is incorrect.

27. Qd = 80 - 4Px

Qs = 20 +6Px

Equilibrium will there where Qd = Qs

80 - 4Px = 20 + 6 Px

80 - 20 = 4Px + 6Px

10Px = 60

Px* = $ 6 per unit

Q* = 80 - 4*6 = 80-24 = 56 units

Option B.

28. Qd = 80 - 5Px

Px = 16 - 0.2Qd

TR = 16Q - 0.2 Q 2

Maximizing TR

Diff. TR wrt Q and equate to 0

dTR/dQ = MR = 16 - 0.4Q

Equating to 0, we get

16 - 0.4Q = 0

0.4Q = 16

Q = 40

P = 16 -0.2*40 = 16 -8 = $8/unit

Again diff. MR wrt Q we get

dMR/dQ = -0.4 ( negative number)

Hence both the maximisation condition is satisfied.

Revenue maximizing output is Q=40 units

Price, P = $ 8 per unit

Option B is correct.

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