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Questions and Answers
Which of the following models are quantity-setting oligopoly models?
Which oligopoly model involves a leader firm setting its quantity first, followed by follower firms setting their quantities?
Which model involves firms competing on price rather than quantity?
Which of the following is true regarding negative externalities and monopoly?
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What is the impact of negative externalities on the level of output produced by firms?
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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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Description
Test your knowledge of quantity-setting oligopoly models with this quiz. Determine which of the provided models fall under this category, including Cournot only, Stackelberg and Cournot, and Stackelberg only. See if you can identify the key features and differences between each model.
