What factor would not help resolve the Bertrand paradox (that a perfectly competitive outcome can emerge with as few as two firms in the market) if the basic Bertrand model were extended to include it?
a. Repeated interaction
b. Search costs
c. Sequential moves
d. Product differentiation
QUESTION 2Potential solutions to sell a high-quality used car include
a. offering a warranty
b. selling through a reputable dealer
c. documenting the complete repair history
d. all of the above
QUESTION 3In the Hotelling model, what effect would an increase in the transportation cost t have on, in the first instance, a monopoly firm and, in the second instance, two firms located at the extremes of the line segment who compete over the marginal consumer?
a. The monopolist's profit would decrease but the duopolists' would increase.
b. Both monopolist's and duopolists' profits would increase.
c. Both monopolist's and duopolists' profits would decrease.
d. The monopolist's profit would increase but the duopolists' would decrease.
QUESTION 4The lemons problem is that
a. cars of verifiable high quality are withheld from the used car market
b. cars of verifiable low quality are withheld from the used car market
c. cars of unverifiable high quality are withheld from the used car market
d. cars of unverifiable low quality are withheld from the used car market
QUESTION 5In the Hotelling model of spatial competition, profits arise from:
a. monopoly power.
b. rents based on locational advantage.
c. the ability to price discriminate.
d. increasing returns to scale.
QUESTION 6Which firm is not dealing with adverse selection
a. a manufacturer requires a 90 day probationary period for new employees
b. a temporary clerical agency requires a typing test
c. a manufacturer requires suppliers to be ISO 900 . certified
d. Smokers get the same life insurance rates as non-smokers
QUESTION 7Product differentiation complicates the study of oligopolies because such markets may not:
a. be efficient.
b. have prices equal to marginal cost.
c. have free entry and exit.
d. obey the law of one price.
QUESTION 8Which firm is not dealing with adverse selection
a. a manufacturer requires a 90 day probationary period for new employees
b. a temporary clerical agency requires a typing test
c. a manufacturer contracts with suppliers regardless of ISO 900 . status
d. Smokers get the worse life insurance rates as non-smokers
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