Question 1

An attempt by a firm to convince buyers that its product is different from the products of other firms in the industry is:

Accepted Answer

A) tacit collusion. 
B) product differentiation. 
C) antitrust policy. 
D) price leadership. 
A) tacit collusion. 
B) product differentiation. 
C) antitrust policy. 
D) price leadership.

Question 2

The purpose of the trusts established in the United States in the late 1800s was to decrease government spending and the size of the federal budget deficit.

Accepted Answer

A) True 
 B)False

Question 3

The government agency in the United States that reviews proposed mergers of firms in the same industry and prohibits mergers that it believes will reduce competition is the Office of Management and Budget.

Accepted Answer

A) True 
 B)False

Question 4

Use the following to answer question:  
-(Table: Demand for Solar Water Heaters)Use Table: Demand for Solar Water Heaters.The marginal cost of producing solar water heaters is zero,and only two firms,Rheem and Calefi,produce them.If Rheem and Calefi get into a price war,the equilibrium price in the market will be:

Accepted Answer

A) $0. 
B) $700. 
C) $800. 
D) $1,000. 
A) $0. 
B) $700. 
C) $800. 
D) $1,000.

Question 5

Use the following to answer question:  
-(Table: Demand Schedule of Gadgets)Use Table: Demand Schedule of Gadgets.The market for gadgets consists of two producers,Margaret and Ray.Each firm can produce gadgets at a marginal cost of $2 and no fixed cost.If industry output is 300 gadgets produced by Margaret and 200 gadgets produced by Ray and if Ray decides to increase output by an additional 100 gadgets,Margaret's profit will be _____,and Ray's profit will be _____.

Accepted Answer

A) $1,750;$1,250 
B) $1,250;$1,250 
C) $1,400;$1,000 
D) $600;$600 
A) $1,750;$1,250 
B) $1,250;$1,250 
C) $1,400;$1,000 
D) $600;$600

Question 6

(Scenario: Payoff Matrix for Two Firms)Use Scenario: Payoff Matrix for Two Firms.If both firms pursue their dominant strategies: Scenario: Payoff Matrix for Two Firms
The following table provides the payoff matrix for two firms,firm A and firm B.They are the only two firms in the industry and can either compete or cooperate with each other,with the following profit results reflecting their actions.

Accepted Answer

A) their joint profits are maximized. 
B) their joint profits are not maximized. 
C) their joint profits reflect an equal sharing of the total profits. 
D) neither can attain its largest possible profits since there are two dominant strategies for each firm. 
A) their joint profits are maximized. 
B) their joint profits are not maximized. 
C) their joint profits reflect an equal sharing of the total profits. 
D) neither can attain its largest possible profits since there are two dominant strategies for each firm.

Question 7

Use the following to answer question:
Figure: Payoff Matrix II for Blue Spring and Purple Rain  
-(Figure: Payoff Matrix II for Blue Spring and Purple Rain)Use Figure: Payoff Matrix II for Blue Spring and Purple Rain.The figure describes two producers of bottled water.Suppose Blue Spring charges a high price and Purple Rain does the same.In the next period,Blue Spring charges a low price and Purple Rain incurs a loss.If Purple Rain responds with a tit-for-tat strategy,it will:

Accepted Answer

A) always charge a low price-the same as its dominant strategy. 
B) make random changes in its price so that Blue Spring is left with no systematic strategy. 
C) charge a low price in the next period and thereafter charge the same price that Blue Spring charged in the previous period. 
D) always charge a high price. 
A) always charge a low price-the same as its dominant strategy. 
B) make random changes in its price so that Blue Spring is left with no systematic strategy. 
C) charge a low price in the next period and thereafter charge the same price that Blue Spring charged in the previous period. 
D) always charge a high price.

Question 8

Use the following to answer question:  
-(Table: Demand Schedule of Gadgets)Use Table: Demand Schedule of Gadgets.The market for gadgets consists of two producers,Margaret and Ray.Each firm can produce gadgets at a marginal cost of $2 and no fixed cost.Suppose that these two producers have formed a cartel,agreed to split production of output evenly,and are maximizing total industry profits.Each firm's output would be _____,and each firm's profit would be _____.

Accepted Answer

A) 500;$2,500 
B) 200;$800 
C) 1,000;$500 
D) 1,000;$10,000 
A) 500;$2,500 
B) 200;$800 
C) 1,000;$500 
D) 1,000;$10,000

Question 9

Use the following to answer question:
Figure: Pricing Strategy in Cable TV Market II  
-(Figure: Pricing Strategy in Cable TV Market II)Use Figure: Pricing Strategy in Cable TV Market II.The dominant strategy for CableNorth:

Accepted Answer

A) is to charge a high price. 
B) is to charge a low price. 
C) is to charge what CableSouth does. 
D) does not exist. 
A) is to charge a high price. 
B) is to charge a low price. 
C) is to charge what CableSouth does. 
D) does not exist.

Question 10

Use the following to answer question:
Figure: Pricing Strategy in Cable TV Market II  
-(Figure: Pricing Strategy in Cable TV Market II)Use Figure: Pricing Strategy in Cable TV Market II.The Nash equilibrium in the cable TV market occurs when:

Accepted Answer

A) both firms set a low price and each earns $90,000. 
B) both firms set a high price and each earns $100,000. 
C) CableNorth sets a high price and earns $80,000,and CableSouth sets a low price and earns $130,000. 
D) CableNorth sets a low price and earns $130,000,and CableSouth sets a high price and earns $80,000. 
A) both firms set a low price and each earns $90,000. 
B) both firms set a high price and each earns $100,000. 
C) CableNorth sets a high price and earns $80,000,and CableSouth sets a low price and earns $130,000. 
D) CableNorth sets a low price and earns $130,000,and CableSouth sets a high price and earns $80,000.

Question 11

Use the following to answer question:  
-(Table: Demand Schedule of Gadgets)Use Table: Demand Schedule of Gadgets.The market for gadgets consists of two producers,Margaret and Ray.Each firm can produce gadgets with no marginal cost or fixed cost.Suppose that these two producers have formed a cartel,agreed to split production of output evenly,and are maximizing total industry profits.If Margaret decides to cheat on the agreement and sell 100 more gadgets,Margaret's profit will be _____,and Ray's profit will be _____.

Accepted Answer

A) $1,250;$1,250 
B) $500;$500 
C) $1,400;$1,000 
D) $1,000;$1,400 
A) $1,250;$1,250 
B) $500;$500 
C) $1,400;$1,000 
D) $1,000;$1,400

Question 12

OPEC is a(n)_____ cartel that includes _____ national governments.

Accepted Answer

A) illegal;12 
B) legal;12 
C) illegal;11 
D) legal;8 
A) illegal;12 
B) legal;12 
C) illegal;11 
D) legal;8

Question 13

The first trust in the United States was established in 1881 by lawyers at John D.Rockefeller's Standard Oil Company.

Accepted Answer

A) True 
 B)False

Question 14

Use the following to answer question:  
-(Table: Demand for Crude Oil)Use Table: Demand for Crude Oil.Assume that the crude oil industry is a duopoly and the marginal cost of producing crude oil is zero.If the two firms collude to share the market equally,the price of crude oil will be _____,firm 1 will produce _____ barrels,firm 2 will produce _____ barrels,and each firm will earn revenue equal to _____.

Accepted Answer

A) $80;80;80;$6,400 
B) $80;40;40;$3,200 
C) $60;50;50;$3,000 
D) $40;60;60;$2,400 
A) $80;80;80;$6,400 
B) $80;40;40;$3,200 
C) $60;50;50;$3,000 
D) $40;60;60;$2,400

Question 15

Use the following to answer question:  
-(Table: Demand for Crude Oil)Use Table: Demand for Crude Oil.Assume that the crude oil industry is a duopoly and the marginal cost of producing crude oil is zero.Suppose that the two firms are maximizing industry profit and splitting the profit evenly.If firm 1 decides to cheat and increase production by 10 more barrels,the price of crude oil will be:

Accepted Answer

A) $0. 
B) $70. 
C) $80. 
D) $160. 
A) $0. 
B) $70. 
C) $80. 
D) $160.

Question 16

The effect of product differentiation is to increase the firm's market power.

Accepted Answer

A) True 
 B)False

Question 17

The fact that the price effect for an oligopolist is less than the price effect for a monopolist helps explain why firms are likely to cheat on a cartel agreement.

Accepted Answer

A) True 
 B)False

Question 18

Given the large amount of interdependence among them,cooperation with one's competitors is the most profitable strategy for:

Accepted Answer

A) perfect competitors. 
B) monopolistic competitors. 
C) oligopolists. 
D) monopolists. 
A) perfect competitors. 
B) monopolistic competitors. 
C) oligopolists. 
D) monopolists.

Question 19

Use the following to answer question:
Figure: Payoff Matrix for Ajinomoto and ADM  
-(Figure: Payoff Matrix for Ajinomoto and ADM)Use Figure: Payoff Matrix for Ajinomoto and ADM.The Nash equilibrium combination occurs when ADM produces _____ million pounds and Ajinomoto produces _____ million pounds.

Accepted Answer

A) 30;30 
B) 40;40 
C) 30;40 
D) 40;30 
A) 30;30 
B) 40;40 
C) 30;40 
D) 40;30

Question 20

(Scenario: Payoff Matrix for Firms X and Y)Payoff Matrix for Firms X and Y.If firm X were to choose its dominant strategy,it would: Scenario: Payoff Matrix for Firms X and Y
The following payoff matrix depicts the profits for the only two firms in this oligopolistic industry.

Accepted Answer

A) choose a low price. 
B) choose a high price. 
C) encounter a dilemma since there are two dominant strategies. 
D) allow firm Y to dominate the industry. 
A) choose a low price. 
B) choose a high price. 
C) encounter a dilemma since there are two dominant strategies. 
D) allow firm Y to dominate the industry.

An attempt by a firm to convince buyers that its product is different from the products of other firms in the industry is:

The purpose of the trusts established in the United States in the late 1800s was to decrease government spending and the size of the federal budget deficit.

The government agency in the United States that reviews proposed mergers of firms in the same industry and prohibits mergers that it believes will reduce competition is the Office of Management and Budget.

Use the following to answer question: Figure: Pricing Strategy in Cable TV Market II -(Figure: Pricing Strategy in Cable TV Market II)Use Figure: Pricing Strategy in Cable TV Market II.The dominant strategy for CableNorth:

Use the following to answer question: Figure: Pricing Strategy in Cable TV Market II -(Figure: Pricing Strategy in Cable TV Market II)Use Figure: Pricing Strategy in Cable TV Market II.The Nash equilibrium in the cable TV market occurs when:

OPEC is a(n)_ cartel that includes _ national governments.

The first trust in the United States was established in 1881 by lawyers at John D.Rockefeller's Standard Oil Company.

The effect of product differentiation is to increase the firm's market power.

The fact that the price effect for an oligopolist is less than the price effect for a monopolist helps explain why firms are likely to cheat on a cartel agreement.

Given the large amount of interdependence among them,cooperation with one's competitors is the most profitable strategy for:

Use the following to answer question: Figure: Payoff Matrix for Ajinomoto and ADM -(Figure: Payoff Matrix for Ajinomoto and ADM)Use Figure: Payoff Matrix for Ajinomoto and ADM.The Nash equilibrium combination occurs when ADM produces _ million pounds and Ajinomoto produces _ million pounds.

(Scenario: Payoff Matrix for Firms X and Y)Payoff Matrix for Firms X and Y.If firm X were to choose its dominant strategy,it would: Scenario: Payoff Matrix for Firms X and Y The following payoff matrix depicts the profits for the only two firms in this oligopolistic industry.

First Principles

Economic Models: Trade-Offs and Trade

Consumer and Producer Surplus

Supply and Demand

Price Controls and Quotas: Meddling With Markets

Elasticity

Taxes

International Trade

Decision Making by Individuals and Firms

The Rational Consumer

Behind the Supply Curve: Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Monopolistic Competition and Product Differentiation

Externalities

Public Goods and Common Resources

The Economics of the Welfare State

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Graphs in Economics

Consumer Preferences and Consumer Choice

Filters

Exam 14: Oligopoly

An attempt by a firm to convince buyers that its product is different from the products of other firms in the industry is:

The purpose of the trusts established in the United States in the late 1800s was to decrease government spending and the size of the federal budget deficit.

The government agency in the United States that reviews proposed mergers of firms in the same industry and prohibits mergers that it believes will reduce competition is the Office of Management and Budget.

Use the following to answer question: Figure: Pricing Strategy in Cable TV Market II -(Figure: Pricing Strategy in Cable TV Market II)Use Figure: Pricing Strategy in Cable TV Market II.The dominant strategy for CableNorth:

Use the following to answer question: Figure: Pricing Strategy in Cable TV Market II -(Figure: Pricing Strategy in Cable TV Market II)Use Figure: Pricing Strategy in Cable TV Market II.The Nash equilibrium in the cable TV market occurs when:

OPEC is a(n)_____ cartel that includes _____ national governments.

The first trust in the United States was established in 1881 by lawyers at John D.Rockefeller's Standard Oil Company.

The effect of product differentiation is to increase the firm's market power.

The fact that the price effect for an oligopolist is less than the price effect for a monopolist helps explain why firms are likely to cheat on a cartel agreement.

Given the large amount of interdependence among them,cooperation with one's competitors is the most profitable strategy for:

Use the following to answer question: Figure: Payoff Matrix for Ajinomoto and ADM -(Figure: Payoff Matrix for Ajinomoto and ADM)Use Figure: Payoff Matrix for Ajinomoto and ADM.The Nash equilibrium combination occurs when ADM produces _____ million pounds and Ajinomoto produces _____ million pounds.

(Scenario: Payoff Matrix for Firms X and Y)Payoff Matrix for Firms X and Y.If firm X were to choose its dominant strategy,it would: Scenario: Payoff Matrix for Firms X and Y The following payoff matrix depicts the profits for the only two firms in this oligopolistic industry.

First Principles

Economic Models: Trade-Offs and Trade

Consumer and Producer Surplus

Supply and Demand

Price Controls and Quotas: Meddling With Markets

Elasticity

Taxes

International Trade

Decision Making by Individuals and Firms

The Rational Consumer

Behind the Supply Curve: Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Monopolistic Competition and Product Differentiation

Externalities

Public Goods and Common Resources

The Economics of the Welfare State

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Graphs in Economics

Consumer Preferences and Consumer Choice

Filters

OPEC is a(n)_ cartel that includes _ national governments.

Use the following to answer question: Figure: Payoff Matrix for Ajinomoto and ADM -(Figure: Payoff Matrix for Ajinomoto and ADM)Use Figure: Payoff Matrix for Ajinomoto and ADM.The Nash equilibrium combination occurs when ADM produces _ million pounds and Ajinomoto produces _ million pounds.