Question 1

Which is not a characteristic of oligopoly?

Accepted Answer

A) Each firm faces a downward-sloping demand curve. 
B) Firms are profit-maximizers. 
C) The sales of one firm will not have a significant effect on other firms. 
D) There is more than one firm in the industry. 
E) Firms set prices. 
A) Each firm faces a downward-sloping demand curve. 
B) Firms are profit-maximizers. 
C) The sales of one firm will not have a significant effect on other firms. 
D) There is more than one firm in the industry. 
E) Firms set prices.

Question 2

In the prisoners' dilemma with players Art and Bob,each prisoner would be best off if

Accepted Answer

A) both prisoners confess. 
B) both prisoners deny. 
C) Art denies and Bob confesses. 
D) Bob denies and Art confesses. 
E) they announce the collaboration of a third accomplice. 
A) both prisoners confess. 
B) both prisoners deny. 
C) Art denies and Bob confesses. 
D) Bob denies and Art confesses. 
E) they announce the collaboration of a third accomplice.

Question 3

Which one of the following characteristics applies to oligopolistic markets?

Accepted Answer

A) There is free entry of firms. 
B) Firms are so large relative to the market that they do not have to consider the behaviour of other firms. 
C) Firms are mutually independent because there are many firms in the industry. 
D) Firms have to consider the behaviour of other firms because all firms are large relative to the size of the market. 
E) Economic profit of each firm equals zero. 
A) There is free entry of firms. 
B) Firms are so large relative to the market that they do not have to consider the behaviour of other firms. 
C) Firms are mutually independent because there are many firms in the industry. 
D) Firms have to consider the behaviour of other firms because all firms are large relative to the size of the market. 
E) Economic profit of each firm equals zero.

Question 4

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 the Nash equilibrium of the game?

Accepted Answer

A) Both Firm 1 and 2 will sell the software application at $30 a copy. 
B) Both Firm 1 and 2 will give the software application away free. 
C) Firm 1 will give the application away free and Firm 2 will sell it at $30. 
D) Firm 1 will sell the application for $30 and Firm 2 will give it away. 
E) There is no Nash equilibrium to this game. 
A) Both Firm 1 and 2 will sell the software application at $30 a copy. 
B) Both Firm 1 and 2 will give the software application away free. 
C) Firm 1 will give the application away free and Firm 2 will sell it at $30. 
D) Firm 1 will sell the application for $30 and Firm 2 will give it away. 
E) There is no Nash equilibrium to this game.

Question 5

Use the table below to answer the following questions.
Table 14.2.4  
-Refer to Table 14.2.4.The marketers of Budweiser Light beer and Miller Lite beer must decide whether or not to offer new advertising campaigns promoting their products.The payoffs in the table are the economic profit made by Bud and Miller.Which one of the following observations is correct?

Accepted Answer

A) This is a game described as a prisoners' dilemma. 
B) If Bud offers a new advertising campaign and Miller does not,Bud will earn a $100 profit. 
C) If Bud offers a new advertising campaign,then Miller will be better off by not offering a new advertising campaign. 
D) Both Bud and Miller would be better off if they could collude and agree to coordinate their new advertising campaigns. 
E) If Miller does not offer a new advertising campaign,then Bud is better off if it doesn't offer a new advertising campaign. 
A) This is a game described as a prisoners' dilemma. 
B) If Bud offers a new advertising campaign and Miller does not,Bud will earn a $100 profit. 
C) If Bud offers a new advertising campaign,then Miller will be better off by not offering a new advertising campaign. 
D) Both Bud and Miller would be better off if they could collude and agree to coordinate their new advertising campaigns. 
E) If Miller does not offer a new advertising campaign,then Bud is better off if it doesn't offer a new advertising campaign.

Question 6

In an oligopoly market,the Herfindahl-Hirschman Index is usually

Accepted Answer

A) below 2,500. 
B) zero. 
C) above 2,500. 
D) equal to 10,000. 
E) between 100 and 1,000. 
A) below 2,500. 
B) zero. 
C) above 2,500. 
D) equal to 10,000. 
E) between 100 and 1,000.

Question 7

Once a cartel determines the profit-maximizing price,

Accepted Answer

A) all members of the cartel have a strong incentive to abide by the agreed-upon price. 
B) each member will face the temptation to cheat on the cartel price to increase its sales and profit. 
C) changes in the output of any member firms will have no impact on the market price. 
D) entry into the industry of new firms will have no impact on the profit of the cartel. 
E) entry into the industry of new firms will raise cartel profit as long as the new firms join the cartel. 
A) all members of the cartel have a strong incentive to abide by the agreed-upon price. 
B) each member will face the temptation to cheat on the cartel price to increase its sales and profit. 
C) changes in the output of any member firms will have no impact on the market price. 
D) entry into the industry of new firms will have no impact on the profit of the cartel. 
E) entry into the industry of new firms will raise cartel profit as long as the new firms join the cartel.

Question 8

Oligopoly is similar to

Accepted Answer

A) perfect competition because both market types produce identical goods. 
B) perfect competition because both firms in both market types make zero economic profit in the long run. 
C) monopoly because both market types have barriers to entry. 
D) monopoly because both market types have a single firm. 
E) monopolistic competition because firms in both markets face a perfectly elastic demand. 
A) perfect competition because both market types produce identical goods. 
B) perfect competition because both firms in both market types make zero economic profit in the long run. 
C) monopoly because both market types have barriers to entry. 
D) monopoly because both market types have a single firm. 
E) monopolistic competition because firms in both markets face a perfectly elastic demand.

Question 9

Use the table below to answer the following questions.
Table 14.2.4  
-Refer to Table 14.2.4 The marketers of Budweiser Light beer and Miller Lite beer must decide whether or not to offer new advertising campaigns promoting their products.The payoffs in the table are the economic profit made by Bud and Miller.Which one of the following observations is correct?

Accepted Answer

A) This is not a game described as a prisoners' dilemma. 
B) If Bud offers a new advertising campaign and Miller does not,Bud will make a $200 profit. 
C) Miller has a dominant strategy but Bud does not. 
D) Both Bud and Miller would be better off if they could collude and both offer new ads. 
E) If Miller offers a new advertising campaign and Bud does not,Bud will make a $100 profit. 
A) This is not a game described as a prisoners' dilemma. 
B) If Bud offers a new advertising campaign and Miller does not,Bud will make a $200 profit. 
C) Miller has a dominant strategy but Bud does not. 
D) Both Bud and Miller would be better off if they could collude and both offer new ads. 
E) If Miller offers a new advertising campaign and Bud does not,Bud will make a $100 profit.

Question 10

If there is a successful collusive agreement in a duopoly to maximize profit,

Accepted Answer

A) the market price will equal the marginal cost of production. 
B) the market price will equal the average total cost of production. 
C) the price will be the same as the price in a perfectly competitive market. 
D) the price will be the monopoly price. 
E) the market marginal revenue will be the same as the demand curve. 
A) the market price will equal the marginal cost of production. 
B) the market price will equal the average total cost of production. 
C) the price will be the same as the price in a perfectly competitive market. 
D) the price will be the monopoly price. 
E) the market marginal revenue will be the same as the demand curve.

Question 11

The Competition Act distinguishes between business practices that are criminal and noncriminal.Which of the following is noncriminal?

Accepted Answer

A) conspiracy to fix prices 
B) bid-rigging 
C) resale price maintenance 
D) false advertising 
E) refusal to deal 
A) conspiracy to fix prices 
B) bid-rigging 
C) resale price maintenance 
D) false advertising 
E) refusal to deal

Question 12

In a prisoners' dilemma game,which of the following strategies gives the best outcome for both prisoners?

Accepted Answer

A) Both prisoners deny. 
B) Both prisoners confess. 
C) One prisoner confesses and the other player denies. 
D) Both prisoners hire good lawyers. 
E) The person with the more significant criminal record denies and the other prisoner confesses. 
A) Both prisoners deny. 
B) Both prisoners confess. 
C) One prisoner confesses and the other player denies. 
D) Both prisoners hire good lawyers. 
E) The person with the more significant criminal record denies and the other prisoner confesses.

Question 13

A Nash equilibrium occurs when

Accepted Answer

A) there is a clear strategy for each player independent of the other player's actions. 
B) each player takes the best possible action given the other player's action. 
C) each player complies with the collusive agreement. 
D) you cooperate until the other player cheats,and then you cheat forever. 
E) jail time is minimized. 
A) there is a clear strategy for each player independent of the other player's actions. 
B) each player takes the best possible action given the other player's action. 
C) each player complies with the collusive agreement. 
D) you cooperate until the other player cheats,and then you cheat forever. 
E) jail time is minimized.

Question 14

In a contestable market with one firm,the existing firm

Accepted Answer

A) sets its price lower than the monopoly price. 
B) sets its price equal to the monopoly price. 
C) sets its price above the monopoly price. 
D) has no competition. 
E) sets its price so that other firms will enter the market. 
A) sets its price lower than the monopoly price. 
B) sets its price equal to the monopoly price. 
C) sets its price above the monopoly price. 
D) has no competition. 
E) sets its price so that other firms will enter the market.

Question 15

Which of the following quotes shows a contestable market in the widget industry?

Accepted Answer

A) "I am producing extra widgets,even though it costs me short-run profits,to stop Wally's Widgets from expanding into my market." 
B) "I am producing more widgets than Wally and I agreed to in our talk last week." 
C) "If only Wally and I could agree on a higher price,we could make more profits." 
D) "I have been spending extra on research and development of my new two-way widget." 
E) "Wally's Widgets should charge a higher price." 
A) "I am producing extra widgets,even though it costs me short-run profits,to stop Wally's Widgets from expanding into my market." 
B) "I am producing more widgets than Wally and I agreed to in our talk last week." 
C) "If only Wally and I could agree on a higher price,we could make more profits." 
D) "I have been spending extra on research and development of my new two-way widget." 
E) "Wally's Widgets should charge a higher price."

Question 16

Limit pricing is the practice of

Accepted Answer

A) limiting the amount that can be purchased to drive up prices. 
B) threatening to go to the limit in a price war if someone enters your market. 
C) charging a monopoly price,but producing a quantity greater than the quantity at which MC = MR. 
D) setting the price at the highest level that inflicts a loss on the entrant. 
E) charging a price higher than the monopoly price,but producing a quantity greater than the quantity at which MC = MR. 
A) limiting the amount that can be purchased to drive up prices. 
B) threatening to go to the limit in a price war if someone enters your market. 
C) charging a monopoly price,but producing a quantity greater than the quantity at which MC = MR. 
D) setting the price at the highest level that inflicts a loss on the entrant. 
E) charging a price higher than the monopoly price,but producing a quantity greater than the quantity at which MC = MR.

Question 17

Sarah's Soothing Diapers,Inc.and Orville's Odorless Diapers,Inc.are duopolists,who have agreed to collude.Orville has decided that he will comply with the collusive agreement as long as Sarah cooperated in the previous period.But if Sarah cheated in the previous period,Orville will punish Sarah by cheating in the current period.Orville's strategy is referred to as a

Accepted Answer

A) Nash strategy. 
B) tit-for-tat strategy. 
C) trigger strategy. 
D) monkey-see,monkey-do strategy. 
E) dominant firm strategy. 
A) Nash strategy. 
B) tit-for-tat strategy. 
C) trigger strategy. 
D) monkey-see,monkey-do strategy. 
E) dominant firm strategy.

Question 18

A duopoly is

Accepted Answer

A) a market where three dominant firms collude to decide the profit-maximizing price. 
B) a market where two firms compete for profit and market share. 
C) the same as a monopoly. 
D) not an oligopoly. 
E) a market with two distinct products. 
A) a market where three dominant firms collude to decide the profit-maximizing price. 
B) a market where two firms compete for profit and market share. 
C) the same as a monopoly. 
D) not an oligopoly. 
E) a market with two distinct products.

Question 19

A contestable market is similar to a perfectly competitive market in that there

Accepted Answer

A) are barriers to entry. 
B) are no barriers to entry. 
C) can be only one firm in the market. 
D) will be no entry if the existing firm makes an economic profit. 
E) is a perfectly elastic demand. 
A) are barriers to entry. 
B) are no barriers to entry. 
C) can be only one firm in the market. 
D) will be no entry if the existing firm makes an economic profit. 
E) is a perfectly elastic demand.

Question 20

A trigger strategy can be used

Accepted Answer

A) in a single-play game or a repeated game. 
B) in a single-play game but not a repeated game. 
C) in a repeated game but not a single-play game. 
D) in neither a single-play game nor a repeated game. 
E) only when there is no Nash equilibrium. 
A) in a single-play game or a repeated game. 
B) in a single-play game but not a repeated game. 
C) in a repeated game but not a single-play game. 
D) in neither a single-play game nor a repeated game. 
E) only when there is no Nash equilibrium.

Which is not a characteristic of oligopoly?

In the prisoners' dilemma with players Art and Bob,each prisoner would be best off if

Which one of the following characteristics applies to oligopolistic markets?

In an oligopoly market,the Herfindahl-Hirschman Index is usually

Once a cartel determines the profit-maximizing price,

Oligopoly is similar to

If there is a successful collusive agreement in a duopoly to maximize profit,

The Competition Act distinguishes between business practices that are criminal and noncriminal.Which of the following is noncriminal?

In a prisoners' dilemma game,which of the following strategies gives the best outcome for both prisoners?

A Nash equilibrium occurs when

In a contestable market with one firm,the existing firm

Which of the following quotes shows a contestable market in the widget industry?

Limit pricing is the practice of

A duopoly is

A contestable market is similar to a perfectly competitive market in that there

A trigger strategy can be used

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

Which is not a characteristic of oligopoly?

In the prisoners' dilemma with players Art and Bob,each prisoner would be best off if

Which one of the following characteristics applies to oligopolistic markets?

In an oligopoly market,the Herfindahl-Hirschman Index is usually

Once a cartel determines the profit-maximizing price,

Oligopoly is similar to

If there is a successful collusive agreement in a duopoly to maximize profit,

The Competition Act distinguishes between business practices that are criminal and noncriminal.Which of the following is noncriminal?

In a prisoners' dilemma game,which of the following strategies gives the best outcome for both prisoners?

A Nash equilibrium occurs when

In a contestable market with one firm,the existing firm

Which of the following quotes shows a contestable market in the widget industry?

Limit pricing is the practice of

A duopoly is

A contestable market is similar to a perfectly competitive market in that there

A trigger strategy can be used

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