In this exercise, we will focus on oligopoly markets. Select all the correct answers.Question 2Answera.Consumers may be better-off if firms compete on price rather than quantity.b.Equilibrium in simultaneous games can be found by looking for an intersection of players' best responses.c.Cournot model is particularly suitable to study industries with a well-established incumbent and fresh entrants.d.The best response function describes the optimal levels of firm's choice variable (price or quantity) in response to specific levels of choice variable of their competitor.

The correct answers are:

a. Consumers may be better-off if firms compete on price rather than quantity. This is true because price competition can lead to lower prices for consumers, which can increase consumer surplus.

b. Equilibrium in simultaneous games can be found by looking for an intersection of players' best responses. This is also true. In game theory, the equilibrium is often found where the strategies of all players intersect, meaning that no player has an incentive to change their strategy given the strategies of the other players.

c. Cournot model is particularly suitable to study industries with a well-established incumbent and fresh entrants. This is not necessarily true. The Cournot model is a model of oligopoly in which firms decide on the quantity to produce, taking into account the quantity decisions of their rivals. It doesn't specifically focus on industries with a well-established incumbent and fresh entrants.

d. The best response function describes the optimal levels of firm's choice variable (price or quantity) in response to specific levels of choice variable of their competitor. This is true. The best response function in game theory describes how a player's optimal strategy (in this case, the firm's choice of price or quantity) depends on the strategies of its competitors.