Question 1

A market with a single firm but no barriers to entry is known as

Accepted Answer

A) a natural monopoly. 
B) a contestable market. 
C) a perfectly competitive market. 
D) monopolistic competition. 
E) an oligopoly. 
A) a natural monopoly. 
B) a contestable market. 
C) a perfectly competitive market. 
D) monopolistic competition. 
E) an oligopoly.

Question 2

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.The Nash equilibrium

Accepted Answer

A) occurs when both A and B conduct R&D. 
B) occurs when only A conducts R&D. 
C) occurs when only B conducts R&D. 
D) occurs when neither A nor B conduct R&D. 
E) does not occur. 
A) occurs when both A and B conduct R&D. 
B) occurs when only A conducts R&D. 
C) occurs when only B conducts R&D. 
D) occurs when neither A nor B conduct R&D. 
E) does not occur.

Question 3

The price in a contestable market is similar to that in a perfectly competitive market because

Accepted Answer

A) firms in the market make an economic profit in the long run. 
B) there are no barriers to entry. 
C) there are many firms in the market. 
D) the Nash equilibrium is that all firms cheat. 
E) collusion is possible. 
A) firms in the market make an economic profit in the long run. 
B) there are no barriers to entry. 
C) there are many firms in the market. 
D) the Nash equilibrium is that all firms cheat. 
E) collusion is possible.

Question 4

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 game has no dominant strategies. 
B) This game has no Nash equilibrium. 
C) Miller has a dominant strategy but Bud does not. 
D) Bud has a dominant strategy but Miller does not. 
E) Bud and Miller each have a dominant strategy. 
A) This game has no dominant strategies. 
B) This game has no Nash equilibrium. 
C) Miller has a dominant strategy but Bud does not. 
D) Bud has a dominant strategy but Miller does not. 
E) Bud and Miller each have a dominant strategy.

Question 5

A duopoly occurs when

Accepted Answer

A) there are only two producers of a particular good competing in the same market. 
B) there are two producers of two goods competing in an oligopoly market. 
C) there are numerous producers of two goods competing in a competitive market. 
D) the one producer of two goods sells the goods in a monopoly market. 
E) a competitive market produces two goods. 
A) there are only two producers of a particular good competing in the same market. 
B) there are two producers of two goods competing in an oligopoly market. 
C) there are numerous producers of two goods competing in a competitive market. 
D) the one producer of two goods sells the goods in a monopoly market. 
E) a competitive market produces two goods.

Question 6

Two firms are trying to decide how much to budget for research and development.Once a new discovery is made,each firm benefits regardless of which firm developed the innovation.In this R&D game of chicken,the Nash equilibrium is that

Accepted Answer

A) both firms conduct R&D. 
B) neither firm conducts R&D. 
C) only one firm conducts R&D but which firm conducts the R&D cannot be determined. 
D) the larger firm conducts the R&D. 
E) the smaller firm conducts the R&D. 
A) both firms conduct R&D. 
B) neither firm conducts R&D. 
C) only one firm conducts R&D but which firm conducts the R&D cannot be determined. 
D) the larger firm conducts the R&D. 
E) the smaller firm conducts the R&D.

Question 7

Use the information below to answer the following question.
Fact 14.4.1
Apple conspired with five publishers to undercut Amazon's 90 percent share of the e-book market,which caused e-book prices to rise to $12.99 or $14.99 from the $9.99 that Amazon charged.
-Refer to Fact 14.4.1.This conspiracy to raise prices violates the anti-combine law because

Accepted Answer

A) Apple is merging with the five publishers. 
B) Apple is telling the publishers the price at which they must sell e-books. 
C) Apple is refusing to deal with Amazon. 
D) it substantially lessens competition in the e-book market. 
E) it is creating a monopoly. 
A) Apple is merging with the five publishers. 
B) Apple is telling the publishers the price at which they must sell e-books. 
C) Apple is refusing to deal with Amazon. 
D) it substantially lessens competition in the e-book market. 
E) it is creating a monopoly.

Question 8

Because an oligopoly has a small number of firms,

Accepted Answer

A) each firm can act like a monopoly. 
B) the firms may legally form a cartel. 
C) the HHI for the industry is small. 
D) the four-firm concentration ratio for the industry is small. 
E) the firms are interdependent. 
A) each firm can act like a monopoly. 
B) the firms may legally form a cartel. 
C) the HHI for the industry is small. 
D) the four-firm concentration ratio for the industry is small. 
E) the firms are interdependent.

Question 9

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 comply with the agreement,

Accepted Answer

A) together they will produce the monopoly quantity and make the monopoly economic profit. 
B) the price of a hard drive will equal marginal cost. 
C) each firm will make zero economic profit. 
D) the oligopoly will produce more hard drives than a profit-maximizing monopoly would produce. 
E) the oligopoly will produce fewer hard drives than a profit-maximizing monopoly would produce. 
A) together they will produce the monopoly quantity and make the monopoly economic profit. 
B) the price of a hard drive will equal marginal cost. 
C) each firm will make zero economic profit. 
D) the oligopoly will produce more hard drives than a profit-maximizing monopoly would produce. 
E) the oligopoly will produce fewer hard drives than a profit-maximizing monopoly would produce.

Question 10

Canada's anti-combine law dates from the

Accepted Answer

A) 1880s. 
B) 1910s. 
C) 1930s. 
D) 1960s. 
E) 1980s. 
A) 1880s. 
B) 1910s. 
C) 1930s. 
D) 1960s. 
E) 1980s.

Question 11

A cartel is a group of firms that agree to

Accepted Answer

A) behave competitively. 
B) limit output,raise prices,and increase economic profit. 
C) lower the price of their products to increase consumer surplus. 
D) increase the amount they produce. 
E) produce the efficient quantity. 
A) behave competitively. 
B) limit output,raise prices,and increase economic profit. 
C) lower the price of their products to increase consumer surplus. 
D) increase the amount they produce. 
E) produce the efficient quantity.

Question 12

Consider a cartel consisting of several firms that is maximizing economic profit.If one firm cheats on the cartel agreement by cutting its price and increasing its output,the best response of the other firms is to

Accepted Answer

A) cancel the cheating firm's membership in the cartel. 
B) continue to sell at the agreed-upon price. 
C) raise their price to recapture lost profit. 
D) cut their prices also. 
E) cut output to keep total cartel output at its original level. 
A) cancel the cheating firm's membership in the cartel. 
B) continue to sell at the agreed-upon price. 
C) raise their price to recapture lost profit. 
D) cut their prices also. 
E) cut output to keep total cartel output at its original level.

Question 13

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 result if both firms cheat on the agreement?

Accepted Answer

A) Both firms make an economic profit that is less than if they had both complied with the agreement. 
B) Economic profit of both firms is maximized. 
C) Both firms are playing a game of chicken. 
D) Only one firm is playing a game of chicken. 
E) Market output decreases. 
A) Both firms make an economic profit that is less than if they had both complied with the agreement. 
B) Economic profit of both firms is maximized. 
C) Both firms are playing a game of chicken. 
D) Only one firm is playing a game of chicken. 
E) Market output decreases.

Question 14

Consider a "prisoners' dilemma" game consisting of two firms in collusion to maximize profit.The game is repeated indefinitely and each player employs a tit-for-tat strategy.The equilibrium when the two firms share the monopoly profit is called a

Accepted Answer

A) credible strategy equilibrium. 
B) dominant player equilibrium. 
C) duopoly equilibrium. 
D) trigger strategy equilibrium. 
E) cooperative equilibrium. 
A) credible strategy equilibrium. 
B) dominant player equilibrium. 
C) duopoly equilibrium. 
D) trigger strategy equilibrium. 
E) cooperative equilibrium.

Question 15

Consider the cartel of Trick and Gear.The game is repeated indefinitely and each firm employs a tit-for-tat strategy.The equilibrium is

Accepted Answer

A) both firms cheat on the agreement. 
B) both firms comply with the agreement. 
C) Trick cheats and Gear complies with the agreement. 
D) Gear cheats and Trick complies with the agreement. 
E) one of the firms exits the market. 
A) both firms cheat on the agreement. 
B) both firms comply with the agreement. 
C) Trick cheats and Gear complies with the agreement. 
D) Gear cheats and Trick complies with the agreement. 
E) one of the firms exits the market.

Question 16

Use the table below to answer the following questions.
Table 14.2.1  
-Refer to Table 14.2.1.This table shows the sentences that Bob and Joe will receive if convicted.They have been apprehended by the police under the suspicion of committing armed robbery.The two are immediately separated and questioned about the case.Which one of the following observations is correct?

Accepted Answer

A) Bob would be smart to confess no matter what Joe does. 
B) Joe would be smart not to confess no matter what Bob does. 
C) Both Bob and Joe would be better off not confessing if they both do not confess. 
D) Both Bob and Joe would be better off "coming clean" and confessing to their crime. 
E) Both Bob and Joe have a dominant strategy of not confessing. 
A) Bob would be smart to confess no matter what Joe does. 
B) Joe would be smart not to confess no matter what Bob does. 
C) Both Bob and Joe would be better off not confessing if they both do not confess. 
D) Both Bob and Joe would be better off "coming clean" and confessing to their crime. 
E) Both Bob and Joe have a dominant strategy of not confessing.

Question 17

Use the table below to answer the following questions.
Table 14.2.1  
-Refer to Table 14.2.1.This table shows the sentences that Bob and Joe will receive if convicted.They have been apprehended by the police under the suspicion of committing armed robbery.The two are immediately separated and questioned about the case.Which one of the following observations is correct?

Accepted Answer

A) If Joe confesses,Bob would be better off not confessing. 
B) If Bob confesses,Joe would be better off confessing. 
C) The outcome of the game,assuming Joe and Bob cannot collude,is they will both go free. 
D) If Joe does not confess,Bob would be better off confessing. 
E) The outcome of the game,assuming Joe and Bob cannot collude,is they will both confess. 
A) If Joe confesses,Bob would be better off not confessing. 
B) If Bob confesses,Joe would be better off confessing. 
C) The outcome of the game,assuming Joe and Bob cannot collude,is they will both go free. 
D) If Joe does not confess,Bob would be better off confessing. 
E) The outcome of the game,assuming Joe and Bob cannot collude,is they will both confess.

Question 18

Choose the statement below that is incorrect.

Accepted Answer

A) The Competition Act distinguishes between practices that are criminal and practices that are noncriminal. 
B) The Director of the Competition Bureau sends alleged violations of a noncriminal nature to Parliament for examination. 
C) The Competition Act of 1986 established a Competition Bureau. 
D) The Competition Act of 1986 established a Competition Tribunal. 
E) Canada's anti-combine law dates from 1889. 
A) The Competition Act distinguishes between practices that are criminal and practices that are noncriminal. 
B) The Director of the Competition Bureau sends alleged violations of a noncriminal nature to Parliament for examination. 
C) The Competition Act of 1986 established a Competition Bureau. 
D) The Competition Act of 1986 established a Competition Tribunal. 
E) Canada's anti-combine law dates from 1889.

Question 19

Anti-combine law attempts to

Accepted Answer

A) support prices. 
B) establish Crown corporations. 
C) prevent monopoly behaviour. 
D) establish fair trade laws. 
E) deregulate monopolies. 
A) support prices. 
B) establish Crown corporations. 
C) prevent monopoly behaviour. 
D) establish fair trade laws. 
E) deregulate monopolies.

Question 20

Use the table below to answer the following questions.
Table 14.2.2  
-Table 14.2.2 gives the payoff matrix in terms of economic profit for firms A and B when there are two strategies facing each firm: (1)charge a low price,or (2)charge a high price.In Nash equilibrium,firm A makes an economic profit of

Accepted Answer

A) -$10. 
B) $2. 
C) $10. 
D) $20. 
E) $5. 
A) -$10. 
B) $2. 
C) $10. 
D) $20. 
E) $5.

A market with a single firm but no barriers to entry is known as

The price in a contestable market is similar to that in a perfectly competitive market because

A duopoly occurs when

Two firms are trying to decide how much to budget for research and development.Once a new discovery is made,each firm benefits regardless of which firm developed the innovation.In this R&D game of chicken,the Nash equilibrium is that

Because an oligopoly has a small number of firms,

Canada's anti-combine law dates from the

A cartel is a group of firms that agree to

Consider a cartel consisting of several firms that is maximizing economic profit.If one firm cheats on the cartel agreement by cutting its price and increasing its output,the best response of the other firms is to

Consider a "prisoners' dilemma" game consisting of two firms in collusion to maximize profit.The game is repeated indefinitely and each player employs a tit-for-tat strategy.The equilibrium when the two firms share the monopoly profit is called a

Consider the cartel of Trick and Gear.The game is repeated indefinitely and each firm employs a tit-for-tat strategy.The equilibrium is

Choose the statement below that is incorrect.

Anti-combine law attempts to

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

A market with a single firm but no barriers to entry is known as

The price in a contestable market is similar to that in a perfectly competitive market because

A duopoly occurs when

Two firms are trying to decide how much to budget for research and development.Once a new discovery is made,each firm benefits regardless of which firm developed the innovation.In this R&D game of chicken,the Nash equilibrium is that

Because an oligopoly has a small number of firms,

Canada's anti-combine law dates from the

A cartel is a group of firms that agree to

Consider a cartel consisting of several firms that is maximizing economic profit.If one firm cheats on the cartel agreement by cutting its price and increasing its output,the best response of the other firms is to

Consider a "prisoners' dilemma" game consisting of two firms in collusion to maximize profit.The game is repeated indefinitely and each player employs a tit-for-tat strategy.The equilibrium when the two firms share the monopoly profit is called a

Consider the cartel of Trick and Gear.The game is repeated indefinitely and each firm employs a tit-for-tat strategy.The equilibrium is

Choose the statement below that is incorrect.

Anti-combine law attempts to

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