Question 1

Consider a duopoly with collusion.If the duopoly maximizes profit,

Accepted Answer

A) each firm will produce the same amount. 
B) each firm will produce its maximum output possible. 
C) industry marginal revenue will equal industry marginal cost at the level of total output. 
D) industry demand will equal industry marginal cost at the level of total output. 
E) price equals average total cost. 
A) each firm will produce the same amount. 
B) each firm will produce its maximum output possible. 
C) industry marginal revenue will equal industry marginal cost at the level of total output. 
D) industry demand will equal industry marginal cost at the level of total output. 
E) price equals average total cost.

Question 2

Anti-combine law

Accepted Answer

A) can work in the public interest to maximize total surplus or in the self-interest of producers to maximize producer surpluses. 
B) always works in the self-interest of producers to maximize producer surpluses. 
C) always works in the public interest to maximize total surplus. 
D) encourages oligopolies to exhibit more monopolistic behaviours. 
E) is always prosecuted in Canada's criminal courts. 
A) can work in the public interest to maximize total surplus or in the self-interest of producers to maximize producer surpluses. 
B) always works in the self-interest of producers to maximize producer surpluses. 
C) always works in the public interest to maximize total surplus. 
D) encourages oligopolies to exhibit more monopolistic behaviours. 
E) is always prosecuted in Canada's criminal courts.

Question 3

Why might only a few firms dominate an oligopolistic industry?

Accepted Answer

A) A natural or legal barrier to entry exists. 
B) Perfectly elastic demand makes small-scale operation economically inefficient. 
C) Decreasing returns to scale may make small-scale firms more advantageous. 
D) Inelastic market demand leads to the domination of the industry by a few firms. 
E) It is due to the outcome of the prisoners' dilemma. 
A) A natural or legal barrier to entry exists. 
B) Perfectly elastic demand makes small-scale operation economically inefficient. 
C) Decreasing returns to scale may make small-scale firms more advantageous. 
D) Inelastic market demand leads to the domination of the industry by a few firms. 
E) It is due to the outcome of the prisoners' dilemma.

Question 4

A contestable market exists whenever

Accepted Answer

A) two or more firms are competing. 
B) the Herfindahl-Hirschman Index exceeds 1,800. 
C) the four-firm concentration ratio exceeds 50 percent. 
D) a monopoly contests entry into its markets. 
E) potential entry holds down prices. 
A) two or more firms are competing. 
B) the Herfindahl-Hirschman Index exceeds 1,800. 
C) the four-firm concentration ratio exceeds 50 percent. 
D) a monopoly contests entry into its markets. 
E) potential entry holds down prices.

Question 5

The market structure in which natural or legal barriers prevent the entry of new firms and a small number of firms compete is

Accepted Answer

A) monopoly. 
B) monopolistic competition. 
C) perfect competition. 
D) oligopoly. 
E) imperfect monopoly. 
A) monopoly. 
B) monopolistic competition. 
C) perfect competition. 
D) oligopoly. 
E) imperfect monopoly.

Question 6

There exists an incentive to cheat on a collusive agreement as long as

Accepted Answer

A) price equals marginal cost. 
B) price equals marginal revenue. 
C) price exceeds marginal cost. 
D) price is above minimum average total cost. 
E) the market is perfectly competitive. 
A) price equals marginal cost. 
B) price equals marginal revenue. 
C) price exceeds marginal cost. 
D) price is above minimum average total cost. 
E) the market is perfectly competitive.

Question 7

A strategy in which a player cooperates in the current period if the other player cooperated in the previous period,but the player cheats in the current period if the other player cheated in the previous period is called a

Accepted Answer

A) tit-for-tat strategy. 
B) trigger strategy. 
C) duopoly strategy. 
D) dominant firm strategy. 
E) Nash strategy. 
A) tit-for-tat strategy. 
B) trigger strategy. 
C) duopoly strategy. 
D) dominant firm strategy. 
E) Nash strategy.

Question 8

Refer to the table below to answer the following questions.
Table 14.2.7  
-Refer to Table 14.2.7.Disney and Fox must decide when to release their next films.The revenues received by each studio depend in part on when the other studio releases its film.Each studio can release its film at Thanksgiving or at Christmas.The revenues received by each studio,in millions of dollars,are given in the payoff matrix above.Which of the following statements correctly describes Fox's strategy given what Disney's release choice may be?

Accepted Answer

A) If Disney chooses a Thanksgiving release,Fox should choose a Christmas release. 
B) If Disney chooses a Christmas release,Fox should choose a Thanksgiving release. 
C) Fox should release on Christmas regardless of what Disney does. 
D) Fox should release on Thanksgiving regardless of what Disney does. 
E) Both answers A and B are correct. 
A) If Disney chooses a Thanksgiving release,Fox should choose a Christmas release. 
B) If Disney chooses a Christmas release,Fox should choose a Thanksgiving release. 
C) Fox should release on Christmas regardless of what Disney does. 
D) Fox should release on Thanksgiving regardless of what Disney does. 
E) Both answers A and B are correct.

Question 9

Which one of the following industries is the best example of an oligopoly?

Accepted Answer

A) the battery industry 
B) the sporting goods industry 
C) the footwear industry 
D) the cosmetics industry 
E) the power industry 
A) the battery industry 
B) the sporting goods industry 
C) the footwear industry 
D) the cosmetics industry 
E) the power industry

Question 10

Refer to the table below to answer the following questions.
Table 14.2.6  
-Refer to Table 14.2.6.Firms A and B can conduct research and development (R&D)or not conduct it.R&D is costly but can increase the quality of the product and increase sales.The payoff matrix is the economic profits of the two firms and is given above,where the numbers are millions of dollars.A's best strategy is to

Accepted Answer

A) conduct R&D regardless of what B does. 
B) not conduct R&D regardless of what B does. 
C) conduct R&D only if B conducts R&D. 
D) conduct R&D only if B does not conduct R&D. 
E) do whatever B does. 
A) conduct R&D regardless of what B does. 
B) not conduct R&D regardless of what B does. 
C) conduct R&D only if B conducts R&D. 
D) conduct R&D only if B does not conduct R&D. 
E) do whatever B does.

Question 11

In the prisoners' dilemma,with players Art and Bob,the dominant strategy equilibrium is that

Accepted Answer

A) both prisoners confess. 
B) neither prisoner confesses. 
C) Art denies and Bob confesses. 
D) Art denies if Bob denies,and Art confesses if Bob confesses. 
E) Bob denies and Art confesses. 
A) both prisoners confess. 
B) neither prisoner confesses. 
C) Art denies and Bob confesses. 
D) Art denies if Bob denies,and Art confesses if Bob confesses. 
E) Bob denies and Art confesses.

Question 12

The distinguishing features of oligopoly are ________ and ________ in the industry.

Accepted Answer

A) no barriers to entry;a small number of firms 
B) barriers to entry;a large number of firms 
C) no barriers to entry;a large number of firms 
D) barriers to entry;one firm 
E) barriers to entry;a small number of firms 
A) no barriers to entry;a small number of firms 
B) barriers to entry;a large number of firms 
C) no barriers to entry;a large number of firms 
D) barriers to entry;one firm 
E) barriers to entry;a small number of firms

Question 13

Suppose that industry A consists of four firms who collectively control 96 percent of total sales in the market.We can conclude that industry A is

Accepted Answer

A) perfectly competitive. 
B) a duopoly. 
C) monopolistically competitive. 
D) an oligopoly. 
E) a monopoly. 
A) perfectly competitive. 
B) a duopoly. 
C) monopolistically competitive. 
D) an oligopoly. 
E) a monopoly.

Question 14

Which of the following statements is TRUE about contestable markets?

Accepted Answer

A) There are significant barriers to entry. 
B) Firms earn large economic profits. 
C) Each firm faces a perfectly elastic demand. 
D) There are few firms in the industry. 
E) The Herfindahl-Hirschman Index is close to zero. 
A) There are significant barriers to entry. 
B) Firms earn large economic profits. 
C) Each firm faces a perfectly elastic demand. 
D) There are few firms in the industry. 
E) The Herfindahl-Hirschman Index is close to zero.

Question 15

A market in which firms can enter and leave so easily that firms in the market face competition from potential entrants is called a

Accepted Answer

A) contestable market. 
B) cartel. 
C) limit pricing market. 
D) monopolistic competition market. 
E) natural oligopoly. 
A) contestable market. 
B) cartel. 
C) limit pricing market. 
D) monopolistic competition market. 
E) natural oligopoly.

Question 16

Two firms,Alpha and Beta,produce identical computer hard drives.They have identical costs,and the hard drives they produce are identical.The industry is a natural duopoly.Alpha and Beta enter into a collusive agreement,according to which they split the market equally.If both firms cheat on the agreement so the market is the same as a competitive market,

Accepted Answer

A) each firm makes zero economic profit in the long run. 
B) each firm makes the monopoly profit. 
C) the oligopoly will produce fewer hard drives than a profit-maximizing monopoly would produce. 
D) the oligopoly will produce the same number of hard drives as a profit-maximizing monopoly would produce. 
E) each firm incurs an economic loss and exits the market in the long run. 
A) each firm makes zero economic profit in the long run. 
B) each firm makes the monopoly profit. 
C) the oligopoly will produce fewer hard drives than a profit-maximizing monopoly would produce. 
D) the oligopoly will produce the same number of hard drives as a profit-maximizing monopoly would produce. 
E) each firm incurs an economic loss and exits the market in the long run.

Question 17

Use the table below to answer the following questions.
Table 14.2.5  
-Refer to Table 14.2.5.Two software firms have developed an identical new software application.They are debating whether to give the new application away free and then sell add-ons or sell the application at $30 a copy.The payoff matrix is above and the payoffs are profits in millions of dollars.What is Firm 1's best strategy?

Accepted Answer

A) Give away the application regardless of what Firm 2 does. 
B) Sell the application at $30 a copy regardless of what Firm 2 does. 
C) Give away the application only if Firm 2 sells the application. 
D) Give away the application only if Firm 2 gives away the application. 
E) Sell the application only if Firm 2 sells the application. 
A) Give away the application regardless of what Firm 2 does. 
B) Sell the application at $30 a copy regardless of what Firm 2 does. 
C) Give away the application only if Firm 2 sells the application. 
D) Give away the application only if Firm 2 gives away the application. 
E) Sell the application only if Firm 2 sells the application.

Question 18

When a firm cooperates if the other cooperates,but plays the Nash equilibrium strategy forever if the other cheats,the strategy is a

Accepted Answer

A) dominant strategy. 
B) trigger strategy. 
C) tit-for-tat strategy. 
D) wimp's strategy. 
E) cooperative strategy. 
A) dominant strategy. 
B) trigger strategy. 
C) tit-for-tat strategy. 
D) wimp's strategy. 
E) cooperative strategy.

Question 19

Refer to the table below to answer the following questions.
Table 14.2.8  
-Refer to Table 14.2.8.Libertyville has two optometrists,Dr.Smith and Dr.Jones.Each optometrist can choose to advertise his service or not.The incomes of each optometrist,in thousands of dollars,are given in the payoff matrix above.Which of the following statements correctly describes Dr.Jones' strategy given what Dr.Smith may do?

Accepted Answer

A) Dr.Jones advertises no matter what Dr.Smith does. 
B) Dr.Jones does not advertise no matter what Dr.Smith does. 
C) Dr.Jones advertises only if Dr.Smith doesn't advertise. 
D) Dr.Jones advertises only if Dr.Smith advertises. 
E) Dr.Jones does not advertise if Dr.Smith advertises. 
A) Dr.Jones advertises no matter what Dr.Smith does. 
B) Dr.Jones does not advertise no matter what Dr.Smith does. 
C) Dr.Jones advertises only if Dr.Smith doesn't advertise. 
D) Dr.Jones advertises only if Dr.Smith advertises. 
E) Dr.Jones does not advertise if Dr.Smith advertises.

Question 20

In the research and development game of chicken,

Accepted Answer

A) the best strategy for each player is to undertake research and development. 
B) the best strategy is for neither player to undertake research and development. 
C) the equilibrium is for only one firm to undertake research and development. 
D) the equilibrium is unique. 
E) no solution can be found. 
A) the best strategy for each player is to undertake research and development. 
B) the best strategy is for neither player to undertake research and development. 
C) the equilibrium is for only one firm to undertake research and development. 
D) the equilibrium is unique. 
E) no solution can be found.

Consider a duopoly with collusion.If the duopoly maximizes profit,

Anti-combine law

Why might only a few firms dominate an oligopolistic industry?

A contestable market exists whenever

The market structure in which natural or legal barriers prevent the entry of new firms and a small number of firms compete is

There exists an incentive to cheat on a collusive agreement as long as

A strategy in which a player cooperates in the current period if the other player cooperated in the previous period,but the player cheats in the current period if the other player cheated in the previous period is called a

Which one of the following industries is the best example of an oligopoly?

In the prisoners' dilemma,with players Art and Bob,the dominant strategy equilibrium is that

The distinguishing features of oligopoly are and in the industry.

Suppose that industry A consists of four firms who collectively control 96 percent of total sales in the market.We can conclude that industry A is

Which of the following statements is TRUE about contestable markets?

A market in which firms can enter and leave so easily that firms in the market face competition from potential entrants is called a

When a firm cooperates if the other cooperates,but plays the Nash equilibrium strategy forever if the other cheats,the strategy is a

In the research and development game of chicken,

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, preferences, and Choices

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Externalities

Public Goods and Common Resources

Markets for Factors of Production

Economic Inequality

Filters

Exam 14: Oligopoly

Consider a duopoly with collusion.If the duopoly maximizes profit,

Anti-combine law

Why might only a few firms dominate an oligopolistic industry?

A contestable market exists whenever

The market structure in which natural or legal barriers prevent the entry of new firms and a small number of firms compete is

There exists an incentive to cheat on a collusive agreement as long as

A strategy in which a player cooperates in the current period if the other player cooperated in the previous period,but the player cheats in the current period if the other player cheated in the previous period is called a

Which one of the following industries is the best example of an oligopoly?

In the prisoners' dilemma,with players Art and Bob,the dominant strategy equilibrium is that

The distinguishing features of oligopoly are ________ and ________ in the industry.

Suppose that industry A consists of four firms who collectively control 96 percent of total sales in the market.We can conclude that industry A is

Which of the following statements is TRUE about contestable markets?

A market in which firms can enter and leave so easily that firms in the market face competition from potential entrants is called a

When a firm cooperates if the other cooperates,but plays the Nash equilibrium strategy forever if the other cheats,the strategy is a

In the research and development game of chicken,

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, preferences, and Choices

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Externalities

Public Goods and Common Resources

Markets for Factors of Production

Economic Inequality

Filters

The distinguishing features of oligopoly are and in the industry.