Exercise 1Are the following statements true, false, or uncertain? Provide a brief explanation.(a) Some consumers strongly prefer Coke and some strongly prefer Pepsi. Statement: this means thatCoke and Pepsi are not in the same market.(b) Consider a Cournot duopoly: demand is P(91-92)=40-91-92, marginal costs are constant at c = 10for both firms. Statement: for any player, choosing a quantity q = 12 is a dominated strategy.(c) Consider an oligopoly. Suppose that one of the firms has the option to move before its opponents(instead of the firms deciding simultaneously). Statement: the firm will never strictly prefer to forgothis option.(d) It is optimal for a monopolist to choose a quantity such that Ed < 1.(e) The elasticity of demand for petrol is d= -2.4. The price of petrol is £5 per gallon and sales are 1million gallons (per month). Statement: if the price of petrol falls by 1 percent, sales revenue will fall.

If the preferences over two products are made relative to each other, it is not necessary for those…

Answered: a) Some consumers strongly prefer Coke…

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter12: Price And Output Determination: Oligopoly

Section: Chapter Questions

Problem 1E

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Exercise 1
Are the following statements true, false, or uncertain? Provide a brief explanation.
(a) Some consumers strongly prefer Coke and some strongly prefer Pepsi. Statement: this means that
Coke and Pepsi are not in the same market.
(b) Consider a Cournot duopoly: demand is P(91-92)=40-91-92, marginal costs are constant at c = 10
for both firms. Statement: for any player, choosing a quantity q = 12 is a dominated strategy.
(c) Consider an oligopoly. Suppose that one of the firms has the option to move before its opponents
(instead of the firms deciding simultaneously). Statement: the firm will never strictly prefer to forgo
this option.
(d) It is optimal for a monopolist to choose a quantity such that Ed < 1.
(e) The elasticity of demand for petrol is d= -2.4. The price of petrol is £5 per gallon and sales are 1
million gallons (per month). Statement: if the price of petrol falls by 1 percent, sales revenue will fall.

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Consider an oligopoly. Suppose that one of the firms has the option to move before its opponents (instead of the firms deciding simultaneously). Statement: the firm will never strictly prefer to forgo this option.

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