Question 1

An oligopoly may result from:

Accepted Answer

A) increasing returns to scale. 
B) standardization of a product. 
C) low or no barriers to entry. 
D) price-taking conditions for both buyers and sellers. 
A) increasing returns to scale. 
B) standardization of a product. 
C) low or no barriers to entry. 
D) price-taking conditions for both buyers and sellers.

Question 2

Use the following to answer question:
Figure: Payoff Matrix for Gehrig and Gabriel  
-(Figure: Payoff Matrix for Gehrig and Gabriel)Use Figure: Payoff Matrix for Gehrig and Gabriel.The figure describes two people who sell handmade Davy Crockett figurines in San Antonio.Both Gehrig and Gabriel have two strategies available to them: to produce 5,000 figurines each month or to produce 7,000 figurines each month.If both follow a tit-for-tat strategy,equilibrium will be reached when Gehrig produces _____ figurines and Gabriel produces _____ figurines.

Accepted Answer

A) 5,000;5,000 
B) 7,000;7,000 
C) 7,000;5,000 
D) 5,000;7,000 
A) 5,000;5,000 
B) 7,000;7,000 
C) 7,000;5,000 
D) 5,000;7,000

Question 3

Both monopolists and cartel members will find that a drop in price leads to:

Accepted Answer

A) a quantity effect that reduces total revenue. 
B) a price effect that reduces total revenue. 
C) a quantity effect that has no effect on total revenue. 
D) neither a price nor a quantity effect. 
A) a quantity effect that reduces total revenue. 
B) a price effect that reduces total revenue. 
C) a quantity effect that has no effect on total revenue. 
D) neither a price nor a quantity effect.

Question 4

Use the following to answer question:
Figure: Monopoly Profits in Duopoly  
-(Figure: Monopoly Profits in Duopoly)Use Figure: Monopoly Profits in Duopoly.The figure shows how an industry consisting of two firms that face identical demand curves (D1)can collude to increase profits.If the firms collude to share the market demand equally,then each firm will act as if its marginal revenue curve is given by:

Accepted Answer

A) MR1. 
B) 2 × MR1. 
C) MR2. 
D) MC. 
A) MR1. 
B) 2 × MR1. 
C) MR2. 
D) MC.

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

A dominant-strategy equilibrium exists in a game when:

Accepted Answer

A) no player has a choice. 
B) every player has a clear best action that does not depend on the action of the other players. 
C) each player's choices are dependent on the actions of other players. 
D) no player is able to dictate or predict the actions of any other player. 
A) no player has a choice. 
B) every player has a clear best action that does not depend on the action of the other players. 
C) each player's choices are dependent on the actions of other players. 
D) no player is able to dictate or predict the actions of any other player.

Question 7

If the several companies in the tobacco industry produce similar products but have very different marginal costs:

Accepted Answer

A) they are less likely to engage in tacit collusion than firms with similar costs. 
B) they are more likely to engage in tacit collusion than firms with similar costs. 
C) prices for tobacco products are more likely to be near the monopoly level than in an industry whose firms have similar costs. 
D) output of tobacco products is more likely to be near the monopoly level than in an industry whose firms have similar costs. 
A) they are less likely to engage in tacit collusion than firms with similar costs. 
B) they are more likely to engage in tacit collusion than firms with similar costs. 
C) prices for tobacco products are more likely to be near the monopoly level than in an industry whose firms have similar costs. 
D) output of tobacco products is more likely to be near the monopoly level than in an industry whose firms have similar costs.

Question 8

Tacit collusion is most likely to occur if there are only a few firms in the industry.

Accepted Answer

A) True 
 B)False

Question 9

Antitrust policy refers to government:

Accepted Answer

A) attempts to prevent the acquisition of monopoly power. 
B) attempts to encourage the exercise of monopoly power. 
C) encouragement of collusion in the marketplace. 
D) attempts to limit private enterprise. 
A) attempts to prevent the acquisition of monopoly power. 
B) attempts to encourage the exercise of monopoly power. 
C) encouragement of collusion in the marketplace. 
D) attempts to limit private enterprise.

Question 10

(Figure: Payoff Matrix I for Blue Spring and Purple Rain)Use Figure: Payoff Matrix I for Blue Spring and Purple Rain.The figure refers to two producers of bottled water.Each has two strategies available to it: a high price and a low price.The dominant strategy for Purple Rain is to: Figure: Payoff Matrix I for Blue Spring and Purple Rain

Accepted Answer

A) charge a low price. 
B) charge a high price. 
C) adopt the same strategy as Blue Spring. 
D) Purple Rain does not have a dominant strategy. 
A) charge a low price. 
B) charge a high price. 
C) adopt the same strategy as Blue Spring. 
D) Purple Rain does not have a dominant strategy.

Question 11

The purpose of the Sherman Antitrust Act was to encourage the establishment of monopolies to replace trusts.

Accepted Answer

A) True 
 B)False

Question 12

Use the following to answer question:
Figure: Pricing Strategy in Cable TV Market I  
-(Figure: Pricing Strategy in Cable TV Market I)Use Figure: Pricing Strategy in Cable TV Market I.If both CableNorth and CableSouth advertise,then without any collusion:

Accepted Answer

A) CableNorth will stop advertising to maximize profits. 
B) CableSouth will stop advertising to maximize profits. 
C) there will be no incentive for either CableNorth or CableSouth to stop advertising. 
D) there is an incentive for both CableNorth and CableSouth to stop advertising. 
A) CableNorth will stop advertising to maximize profits. 
B) CableSouth will stop advertising to maximize profits. 
C) there will be no incentive for either CableNorth or CableSouth to stop advertising. 
D) there is an incentive for both CableNorth and CableSouth to stop advertising.

Question 13

Tacit collusion is relatively less likely to occur in an industry with 3 firms than it is in an industry with 10 firms.

Accepted Answer

A) True 
 B)False

Question 14

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.If industry output is 350 gadgets produced by Margaret and 250 gadgets produced by Ray and if Ray decides to increase output by an additional 100 gadgets,industry price will be:

Accepted Answer

A) $3. 
B) $2. 
C) $1. 
D) $0. 
A) $3. 
B) $2. 
C) $1. 
D) $0.

Question 15

Oligopolists will earn zero profits unless they can collude.

Accepted Answer

A) True 
 B)False

Question 16

The airline industry often engages in price wars.This means that firms often _____ prices until profits _____.

Accepted Answer

A) raise;are maximized 
B) lower;are maximized 
C) lower;approach zero 
D) raise;approach zero 
A) raise;are maximized 
B) lower;are maximized 
C) lower;approach zero 
D) raise;approach zero

Question 17

One of the earliest actions of antitrust policy was the breakup of:

Accepted Answer

A) the Standard Oil Company. 
B) Bell Telephone. 
C) Microsoft. 
D) IBM. 
A) the Standard Oil Company. 
B) Bell Telephone. 
C) Microsoft. 
D) IBM.

Question 18

To calculate the Herfindahl-Hirschman index (HHI),one must _____ market share(s)of _____ in the industry.

Accepted Answer

A) sum the;the four largest firms 
B) sum the;all of the firms 
C) divide the;the largest firm by the sum of the four largest firms 
D) sum the squared;all of the firms 
A) sum the;the four largest firms 
B) sum the;all of the firms 
C) divide the;the largest firm by the sum of the four largest firms 
D) sum the squared;all of the firms

Question 19

Use the following to answer question:
Figure: Monopoly Profits in Duopoly  
-(Figure: Monopoly Profits in Duopoly)Use Figure: Monopoly Profits in Duopoly.The figure shows how an industry consisting of two firms that face identical demand curves (D1)can collude to increase profits.If the firms collude to share the market demand equally,then each firm will act as if its demand curve is given by _____,while the market demand curve is given by _____.

Accepted Answer

A) D1;MR2 
B) D2;D1 
C) D1;D2 
D) MR1;MR2 
A) D1;MR2 
B) D2;D1 
C) D1;D2 
D) MR1;MR2

Question 20

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.If Margaret decides to cheat on the agreement and sell 100 more gadgets,Margaret's price effect will be a(n)_____ in profit of _____.

Accepted Answer

A) decrease;$400 
B) increase;$400 
C) increase;$200 
D) decrease;$200 
A) decrease;$400 
B) increase;$400 
C) increase;$200 
D) decrease;$200

An oligopoly may result from:

Both monopolists and cartel members will find that a drop in price leads to:

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

A dominant-strategy equilibrium exists in a game when:

If the several companies in the tobacco industry produce similar products but have very different marginal costs:

Tacit collusion is most likely to occur if there are only a few firms in the industry.

Antitrust policy refers to government:

The purpose of the Sherman Antitrust Act was to encourage the establishment of monopolies to replace trusts.

Use the following to answer question: Figure: Pricing Strategy in Cable TV Market I -(Figure: Pricing Strategy in Cable TV Market I)Use Figure: Pricing Strategy in Cable TV Market I.If both CableNorth and CableSouth advertise,then without any collusion:

Tacit collusion is relatively less likely to occur in an industry with 3 firms than it is in an industry with 10 firms.

Oligopolists will earn zero profits unless they can collude.

The airline industry often engages in price wars.This means that firms often _ prices until profits _.

One of the earliest actions of antitrust policy was the breakup of:

To calculate the Herfindahl-Hirschman index (HHI),one must _ market share(s)of _ in the 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 oligopoly may result from:

Both monopolists and cartel members will find that a drop in price leads to:

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

A dominant-strategy equilibrium exists in a game when:

If the several companies in the tobacco industry produce similar products but have very different marginal costs:

Tacit collusion is most likely to occur if there are only a few firms in the industry.

Antitrust policy refers to government:

The purpose of the Sherman Antitrust Act was to encourage the establishment of monopolies to replace trusts.

Use the following to answer question: Figure: Pricing Strategy in Cable TV Market I -(Figure: Pricing Strategy in Cable TV Market I)Use Figure: Pricing Strategy in Cable TV Market I.If both CableNorth and CableSouth advertise,then without any collusion:

Tacit collusion is relatively less likely to occur in an industry with 3 firms than it is in an industry with 10 firms.

Oligopolists will earn zero profits unless they can collude.

The airline industry often engages in price wars.This means that firms often _____ prices until profits _____.

One of the earliest actions of antitrust policy was the breakup of:

To calculate the Herfindahl-Hirschman index (HHI),one must _____ market share(s)of _____ in the 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

The airline industry often engages in price wars.This means that firms often _ prices until profits _.

To calculate the Herfindahl-Hirschman index (HHI),one must _ market share(s)of _ in the industry.