If the Profit-Maximizing Markup Factor in a 10-Firm Cournot Oligopoly

question 38

Multiple Choice

If the profit-maximizing markup factor in a 10-firm Cournot oligopoly is -2, what is the corresponding market elasticity of demand?

• A) -1.0
• B) -1.2
• C) -2.0
• D) None of the statements is correct.

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Definitions:

Weak Form

Assumes that all information contained in past price movements is fully reflected in current market prices. Thus, information about recent trends in a stock’s price is of no use in selecting a stock.

Semistrong Form

States that current market prices reflect all publicly available information. Therefore, the only way to gain abnormal returns on a stock is to possess inside information about the company’s stock.

Stock Market Efficiency

The concept that all available information is reflected in stock prices, thus making it impossible to consistently achieve higher returns than the overall market.

Nonconstant Growth Model

A valuation approach for stocks that assumes a company's dividends will grow at different rates in different periods, unlike the constant growth model.