Podcast
Questions and Answers
Which of the following models are quantity-setting oligopoly models?
Which of the following models are quantity-setting oligopoly models?
- Bertrand and Cournot
- Bertrand only
- Stackelberg only
- Cournot only (correct)
Which oligopoly model involves a leader firm setting its quantity first, followed by follower firms setting their quantities?
Which oligopoly model involves a leader firm setting its quantity first, followed by follower firms setting their quantities?
- Bertrand
- Stackelberg (correct)
- Cournot
- All of the above
Which model involves firms competing on price rather than quantity?
Which model involves firms competing on price rather than quantity?
- Bertrand (correct)
- Stackelberg
- Cournot
- None of the above
Which of the following is true regarding negative externalities and monopoly?
Which of the following is true regarding negative externalities and monopoly?
What is the impact of negative externalities on the level of output produced by firms?
What is the impact of negative externalities on the level of output produced by firms?
Why is perfect competition better than monopoly from the viewpoint of society in the presence of negative externalities?
Why is perfect competition better than monopoly from the viewpoint of society in the presence of negative externalities?
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Study Notes
Oligopoly Models
- The Cournot and Stackelberg models are quantity-setting oligopoly models.
Stackelberg Model
- In the Stackelberg model, a leader firm sets its quantity first, and then follower firms set their quantities.
Bertrand Model
- The Bertrand model involves firms competing on price rather than quantity.
Negative Externalities and Monopoly
- One of the consequences of negative externalities is that monopolies produce less than the socially optimal level of output.
Impact of Negative Externalities
- Negative externalities lead to an underproduction of the good, resulting in a level of output that is lower than the socially optimal level.
Perfect Competition vs. Monopoly
- In the presence of negative externalities, perfect competition is better than monopoly from the viewpoint of society because it leads to a higher level of output and is closer to the socially optimal level.
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