Question 1

In a contestable market the Herfindahl-Hirschman Index is ________ and the market behaves as if it is ________.

Accepted Answer

A) low;perfectly competitive 
B) low;a monopoly 
C) high;perfectly competitive 
D) high;a monopoly 
E) zero;perfectly competitive 
A) low;perfectly competitive 
B) low;a monopoly 
C) high;perfectly competitive 
D) high;a monopoly 
E) zero;perfectly competitive

Question 2

Which one of the following is not a feature common to all games?

Accepted Answer

A) rules 
B) collusion 
C) strategies 
D) payoffs 
E) an outcome 
A) rules 
B) collusion 
C) strategies 
D) payoffs 
E) an outcome

Question 3

Limit pricing refers to

Accepted Answer

A) the highest price a monopolist can set. 
B) the highest price that just inflicts a loss on a potential entrant. 
C) a strategy used by entering firms in contestable markets. 
D) the lowest price a duopoly can set. 
E) the price set in a perfectly competitive market. 
A) the highest price a monopolist can set. 
B) the highest price that just inflicts a loss on a potential entrant. 
C) a strategy used by entering firms in contestable markets. 
D) the lowest price a duopoly can set. 
E) the price set in a perfectly competitive market.

Question 4

A tit-for-tat 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 repeated game nor a single-play 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 repeated game nor a single-play game. 
E) only when there is no Nash equilibrium.

Question 5

If the efficient scale of production only allows three firms to supply a market,the market is a

Accepted Answer

A) three-firm monopoly. 
B) cost-based oligopoly. 
C) natural oligopoly. 
D) monopolistic competition. 
E) competitive monopoly. 
A) three-firm monopoly. 
B) cost-based oligopoly. 
C) natural oligopoly. 
D) monopolistic competition. 
E) competitive monopoly.

Question 6

Which of the following quotes shows cheating on a cartel in the widget industry?

Accepted Answer

A) "I am producing extra widgets,even though it costs me short-run profit,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 profit." 
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 profit,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 profit." 
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 7

Use the figure below to answer the following question.   Figure 14.1.1
In the figure,D is the demand curve for taxi rides in a town,and ATC is the average total cost curve of a taxi company.
-Refer to Figure 14.1.1.In the scenario above,the market is

Accepted Answer

A) a natural duopoly. 
B) a natural oligopoly with three firms. 
C) a natural monopoly. 
D) monopolistically competitive. 
E) perfectly competitive. 
A) a natural duopoly. 
B) a natural oligopoly with three firms. 
C) a natural monopoly. 
D) monopolistically competitive. 
E) perfectly competitive.

Question 8

In a repeated game,punishments that result in heavy damages are an incentive for players to adopt the strategies that result in a ________ equilibrium.

Accepted Answer

A) contestable 
B) strategic 
C) complementary 
D) cooperative 
E) satisfying 
A) contestable 
B) strategic 
C) complementary 
D) cooperative 
E) satisfying

Question 9

The maximum total economic profit that can be made by colluding duopolists

Accepted Answer

A) equals the economic profit made by a monopoly. 
B) exceeds the economic profit made by a monopoly. 
C) is less than the economic profit made by a monopoly. 
D) is zero. 
E) cannot be determined. 
A) equals the economic profit made by a monopoly. 
B) exceeds the economic profit made by a monopoly. 
C) is less than the economic profit made by a monopoly. 
D) is zero. 
E) cannot be determined.

Question 10

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 Disney's strategy given what Fox's release choice may be?

Accepted Answer

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

Question 11

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 categorizes the Nash equilibrium for the game?

Accepted Answer

A) The game has a Nash equilibrium in which both optometrists advertise. 
B) The game has a Nash equilibrium in which both optometrists do not advertise. 
C) The game has a Nash equilibrium in which Dr.Smith advertises and Dr.Jones does not advertise. 
D) The game has a Nash equilibrium in which Dr.Smith does not advertise and Dr.Jones does advertise. 
E) The game has no Nash equilibrium. 
A) The game has a Nash equilibrium in which both optometrists advertise. 
B) The game has a Nash equilibrium in which both optometrists do not advertise. 
C) The game has a Nash equilibrium in which Dr.Smith advertises and Dr.Jones does not advertise. 
D) The game has a Nash equilibrium in which Dr.Smith does not advertise and Dr.Jones does advertise. 
E) The game has no Nash equilibrium.

Question 12

Use the information below to answer the following questions.
Fact 14.2.1
Two firms,FastNet and SmartCast are the only Internet providers in a city.They have identical costs and one firm's service is a perfect substitute for the other firm's service.The industry is a natural duopoly.FastNet and SmartCast decide to collude and agree to share the market equally.
-Refer to Fact 14.2.1.What is the Nash equilibrium?

Accepted Answer

A) Both firms cheat on the agreement. 
B) One firm cheats and one firm complies. 
C) Both firms comply with the agreement. 
D) New firms enter the market. 
E) Both firms charge the price that would exist in a perfectly competitive market. 
A) Both firms cheat on the agreement. 
B) One firm cheats and one firm complies. 
C) Both firms comply with the agreement. 
D) New firms enter the market. 
E) Both firms charge the price that would exist in a perfectly competitive market.

Question 13

If a duopoly collusive agreement is made that maximizes joint profit,

Accepted Answer

A) each of the duopolists has no incentive to cheat on the agreement. 
B) each duopolist has the incentive to cheat on the duopoly agreement by lowering the price. 
C) each duopolist has the incentive to cheat on the agreement by increasing the price to make monopoly profit. 
D) there is no concern over the entrance of new firms because they cannot decrease the duopolists' profit. 
E) the dominant strategy is to collude. 
A) each of the duopolists has no incentive to cheat on the agreement. 
B) each duopolist has the incentive to cheat on the duopoly agreement by lowering the price. 
C) each duopolist has the incentive to cheat on the agreement by increasing the price to make monopoly profit. 
D) there is no concern over the entrance of new firms because they cannot decrease the duopolists' profit. 
E) the dominant strategy is to collude.

Question 14

A monopolistically competitive firm is like an oligopolistic firm insofar as

Accepted Answer

A) both face perfectly elastic demand. 
B) both can earn an economic profit in the long run. 
C) both have MR curves that lie beneath their demand curves. 
D) neither is protected by high barriers to entry. 
E) both are price takers. 
A) both face perfectly elastic demand. 
B) both can earn an economic profit in the long run. 
C) both have MR curves that lie beneath their demand curves. 
D) neither is protected by high barriers to entry. 
E) both are price takers.

Question 15

An oligopoly is a market structure in which there

Accepted Answer

A) are few buyers but many sellers. 
B) are no barriers to entry. 
C) are many independent sellers. 
D) are a few goods sold by many sellers. 
E) is a temptation to collude. 
A) are few buyers but many sellers. 
B) are no barriers to entry. 
C) are many independent sellers. 
D) are a few goods sold by many sellers. 
E) is a temptation to collude.

Question 16

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) The equilibrium of the game is that both firms will conduct new advertising campaigns. 
B) The equilibrium of the game is that neither firm will conduct a new advertising campaign. 
C) The equilibrium solution has Bud conducting a new advertising campaign,but not Miller. 
D) The equilibrium solution has Miller conducting a new advertising campaign,but not Bud. 
E) There is no equilibrium to this game-the industry will have alternating cycles of advertising and no advertising. 
A) The equilibrium of the game is that both firms will conduct new advertising campaigns. 
B) The equilibrium of the game is that neither firm will conduct a new advertising campaign. 
C) The equilibrium solution has Bud conducting a new advertising campaign,but not Miller. 
D) The equilibrium solution has Miller conducting a new advertising campaign,but not Bud. 
E) There is no equilibrium to this game-the industry will have alternating cycles of advertising and no advertising.

Question 17

Use the table below to answer the following question.
Table 14.2.3  
-Refer to Table 14.2.3.Store X and Store Y must decide whether or not to lower their prices.The table gives the economic profit made by Store X and Store Y.Which one of the following observations is correct?

Accepted Answer

A) Both Store X and Store Y have a dominant strategy of raising their prices. 
B) If Store X lowers its prices and Store Y does not,Store X will earn a $20 profit. 
C) If Store Y lowers its prices,Store X will be better off not lowering its prices. 
D) Both Store X and Store Y would be better off if they could collude and agree to not lower prices. 
E) Both Store X and Store Y have a dominant strategy of lowering their prices. 
A) Both Store X and Store Y have a dominant strategy of raising their prices. 
B) If Store X lowers its prices and Store Y does not,Store X will earn a $20 profit. 
C) If Store Y lowers its prices,Store X will be better off not lowering its prices. 
D) Both Store X and Store Y would be better off if they could collude and agree to not lower prices. 
E) Both Store X and Store Y have a dominant strategy of lowering their prices.

Question 18

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

Accepted Answer

A) the market for wheat 
B) the fast-food industry 
C) the motor vehicle industry 
D) the clothing industry 
E) the restaurant industry 
A) the market for wheat 
B) the fast-food industry 
C) the motor vehicle industry 
D) the clothing industry 
E) the restaurant industry

Question 19

All games share four common features.They are

Accepted Answer

A) costs,prices,profit,and strategies. 
B) revenues,elasticity,profit,and payoffs. 
C) rules,strategies,profit,and outcome. 
D) patents,copyrights,barriers to entry,and rules. 
E) rules,strategies,payoffs,and outcome. 
A) costs,prices,profit,and strategies. 
B) revenues,elasticity,profit,and payoffs. 
C) rules,strategies,profit,and outcome. 
D) patents,copyrights,barriers to entry,and rules. 
E) rules,strategies,payoffs,and outcome.

Question 20

Refer to the table below to answer the following question.
Table 14.2.9  
-Refer to Table 14.2.9.Two students are assigned a group project.Each has the option to work or not work to achieve a high grade.The payoffs are shown in the above table.Student 1

Accepted Answer

A) works only if student 2 works. 
B) works regardless of the decision made by student 2. 
C) does not work if student 2 works. 
D) does not work regardless of what student 2 decides. 
E) works only if student 2 does not work. 
A) works only if student 2 works. 
B) works regardless of the decision made by student 2. 
C) does not work if student 2 works. 
D) does not work regardless of what student 2 decides. 
E) works only if student 2 does not work.

In a contestable market the Herfindahl-Hirschman Index is and the market behaves as if it is .

Which one of the following is not a feature common to all games?

Limit pricing refers to

A tit-for-tat strategy can be used

If the efficient scale of production only allows three firms to supply a market,the market is a

Which of the following quotes shows cheating on a cartel in the widget industry?

Use the figure below to answer the following question. Figure 14.1.1 In the figure,D is the demand curve for taxi rides in a town,and ATC is the average total cost curve of a taxi company. -Refer to Figure 14.1.1.In the scenario above,the market is

In a repeated game,punishments that result in heavy damages are an incentive for players to adopt the strategies that result in a ________ equilibrium.

The maximum total economic profit that can be made by colluding duopolists

If a duopoly collusive agreement is made that maximizes joint profit,

A monopolistically competitive firm is like an oligopolistic firm insofar as

An oligopoly is a market structure in which there

Use the table below to answer the following question. Table 14.2.3 -Refer to Table 14.2.3.Store X and Store Y must decide whether or not to lower their prices.The table gives the economic profit made by Store X and Store Y.Which one of the following observations is correct?

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

All games share four common features.They are

Refer to the table below to answer the following question. Table 14.2.9 -Refer to Table 14.2.9.Two students are assigned a group project.Each has the option to work or not work to achieve a high grade.The payoffs are shown in the above table.Student 1

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

In a contestable market the Herfindahl-Hirschman Index is ________ and the market behaves as if it is ________.

Which one of the following is not a feature common to all games?

Limit pricing refers to

A tit-for-tat strategy can be used

If the efficient scale of production only allows three firms to supply a market,the market is a

Which of the following quotes shows cheating on a cartel in the widget industry?

Use the figure below to answer the following question. Figure 14.1.1 In the figure,D is the demand curve for taxi rides in a town,and ATC is the average total cost curve of a taxi company. -Refer to Figure 14.1.1.In the scenario above,the market is

In a repeated game,punishments that result in heavy damages are an incentive for players to adopt the strategies that result in a ________ equilibrium.

The maximum total economic profit that can be made by colluding duopolists

If a duopoly collusive agreement is made that maximizes joint profit,

A monopolistically competitive firm is like an oligopolistic firm insofar as

An oligopoly is a market structure in which there

Use the table below to answer the following question. Table 14.2.3 -Refer to Table 14.2.3.Store X and Store Y must decide whether or not to lower their prices.The table gives the economic profit made by Store X and Store Y.Which one of the following observations is correct?

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

All games share four common features.They are

Refer to the table below to answer the following question. Table 14.2.9 -Refer to Table 14.2.9.Two students are assigned a group project.Each has the option to work or not work to achieve a high grade.The payoffs are shown in the above table.Student 1

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

In a contestable market the Herfindahl-Hirschman Index is and the market behaves as if it is .