Identify the Truthfulness of the Following Statements

question 16

Multiple Choice

Identify the truthfulness of the following statements.
I. Cournot competitors behave less aggressively than Bertrand competitors because a Cournot firm cannot expect to "steal" customers from a rival whereas a Bertrand firm can.
II. Two firms are enough to replicate perfectly competitive outcomes in a Bertrand market, whereas a Cournot market only approaches perfectly competitive outcomes when the number of competitors becomes large.

• A) Both I and II are true.
• B) Both I and II are false.
• C) I is true; II is false.
• D) I is false; II is true.

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Definitions:

Bid-rigging

A form of fraud where competitors conspire to determine the winner of a bidding process, undermining fair competition.

English Auctions

A method of sale in which the price ascends and participants bid openly against each other, with the item being sold to the highest bidder.

Sealed-bid Auctions

Auctions in which all bidders simultaneously submit their bids in sealed envelopes, with no bidder knowing the bid of the others.

Common-value Auction

An auction format where the item for sale has the same value for everyone, but bidders have different information about that value.