Test II for the Course Microeconomics II

Jigjiga University
Collage of Business and Economics
Department of Economics
Final Exam for the Course Microeconomics II
Exam Weight: 50 %
Time devoted: 1:50
Name of the student………………….
Follow up
 students must attempt all the questions
 be to the point(don’t write around the bush)
 the Exam have three parts and four pages including the answer sheet
Part I: Choose (2% each)
1. Which of the following statement correctly describes an oligopoly?
a) Firms are interdependent so that each firm takes in to account the action of its rival.
b) Since the number of firms is few competitions is scarcely out of domain.
c) There is no Barriers to entry so no firm may earn economic profit in the long run.
d) All of the above.
2. is a special case of oligopoly in which there are only two firms in the industry is
a) Duopoly
c) low cost price leadership model
b) monopoly
d) price leadership
3. Identify the odd one.
a) Chamberlin oligopoly model.
b) Stackelberg duopoly model
c) Cartel model
d) Cournot duopoly model.
4. If the firms that have a good knowledge of the prevailing conditions in the market and
and can forecast better than others in the future development of the market are choosen as
a leader
a) Barometric price leadership.
b) Metric price leadership.
c) Economic thought price leadership.
d) All of the above.
5. Pick out the wrong statement.
a) Cartel agency maximizes joint profits by intersecting the MC = MR.
b) The central agency will act like a multiplant monopoly.
c) The central agency will have the power to determine price, output and the allocation
of the profits among the participating members.
d) In practice the central agency/cartel achieve the maximum joint profit.
6. In the cournot duopoly model, if the numbers of firms in the market are 4 what is the
share of each firm in the market?
a) 2/5
b) 1/5
c) 4/5
d) ¼
7. Which of the following is not true about an oligopoly market structure?
a) Firms know there interdependence.
b) Firms sell homogenous or differentiated products.
c) Presence of monopoly power
d) Excessive expenditure on advertisement
e) None of the above
8. It is the type of agreement in which firms cannot sell at lower price but they can use
different kinds of selling (e.g. changing style, package, etc).
a) Non-price comprtition
b) Price competition
c) Cartel aiming at Sharing the market
d) None of the above
9. In which duopolist model that the sophisticated Duopolists determine the reaction curve
of his rival and incorporate it in his own profit function which he then proceeds to
maximize like a monopolist.
a) Bertrand Duopoly Model
b) Stackelbergs Duopoly Model
c) Cournot Duopoly Model
d) Chamberlin Duopoly Model
e) None of the above
10. It’s the types of market structure when many sellers and buyers producing homogenous
and heterogeneous product exist in the market
a) Duopoly
b) Monopoly.
c) Monopolistic competitive.
d) Perfectly competitive market structure.
e) None of the above.
11. It is the form of coordination when one firm sets the price and the other follows it.
a) Price discrimination
b) Excess capacity.
c) Multi plant monopoly.
d) Price leadership
e) None of the above.
12. The final return to the players of a game at its conclusion is called
a) Payoff
c) Nash strategy
b) Strategies
d) mixed strategy
13. It is the type of game over which the players can negotiate binding contracts that allow
them to plan joint strategies.
a) Non cooperative game
b) Cooperative game
c) Prisoners dilemma
d) Pure strategy
14. Is that strategy that is optimal for a player no matter what an opponent does.
a) Nash strategy
b) Dominant strategy
c) Strategy
d) Payoff
15. It is a direct agreements among the competing oligopolist with the aim of reducing the
uncertainty arising from their mutual interdependence.
a) Non-collusive oligopoly
b) Collusive oligopoly
c) Non-price competition
d) cartel
Part II: Short Discussions (select two question, 5% each)
1) Discuss in detail the difference between collusive oligopoly and non-collusive oligopoly?
2) List and explain the basic elements of game?
3) List and explain the characteristics of oligopoly market structure?
Part III: Work out (10%)
1. Assume that Player 1 and player 2 are in a game, and their payoff are as follow in the
below figure
Player 2
a. Dominant strategy for player 1? (5%)
b. Dominant strategy for player 2? (5%)
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