Question 1

A single firm selling its output in a contestable market will:

Accepted Answer

A) establish a monopoly. 
B) be able to maintain high prices indefinitely. 
C) be able to earn high economic profits indefinitely. 
D) be threatened constantly by the entry of new firms. 
A) establish a monopoly. 
B) be able to maintain high prices indefinitely. 
C) be able to earn high economic profits indefinitely. 
D) be threatened constantly by the entry of new firms. D

Question 2

In an oligopoly,the behavior of any one firm depends on the reaction it expects of all the others in the industry.

Accepted Answer

A) True 
 B)False  True

Question 3

An oligopolistic industry has no barriers to entry.

Accepted Answer

A) True 
 B)False  False

Question 4

What does it mean when a firm has a dominant strategy?

Accepted Answer

A dominant strategy exists whe

Question 5

-Consider the decision tree depicted in Figure 12.4 concerning a collusive agreement between firms owned by Bob and Donna.Each participant has the option of following the terms of the agreement or cheating on the terms of the agreement,but neither knows what the other will do.What is the dominant strategy for Bob? For Donna? Which strategy should player,Bob and Donna,choose to maximize the potential gain? What do you think the outcome of this game will be? Carefully explain your answers.

Accepted Answer

The dominant strategy for Bob is to chea

Question 6

In a two-person,repeated game,a tit-for-tat strategy starts with:

Accepted Answer

A) non-cooperation and then each player follows his or her own self-interest. 
B) non-cooperation and then each player cooperates only if the other player cooperates. 
C) cooperation and then each player follows his or her own self-interest. 
D) cooperation and then each player repeats the other player's previous move. 
A) non-cooperation and then each player follows his or her own self-interest. 
B) non-cooperation and then each player cooperates only if the other player cooperates. 
C) cooperation and then each player follows his or her own self-interest. 
D) cooperation and then each player repeats the other player's previous move.

Question 7

Low-price guarantees is a way to insure that other firms will choose a high price.

Accepted Answer

A) True 
 B)False

Question 8

-Refer to Figure 12.5.Section   of the demand curve assumes that competing firms will:

Accepted Answer

A) lower their price in response to this firm's price reduction. 
B) increase their price in response to this firm's price reduction. 
C) not change their price in response to this firm's price reduction. 
D) raise their price in response to this firm's price increase. 
A) lower their price in response to this firm's price reduction. 
B) increase their price in response to this firm's price reduction. 
C) not change their price in response to this firm's price reduction. 
D) raise their price in response to this firm's price increase.

Question 9

Assume six firms comprising an industry have market shares of 30,30,10,10,10,and 10 percent.The Herfindahl-Hirschman Index for this industry is ________.

Accepted Answer

A) 80 
B) 2,200 
C) 1,600 
D) 2000 
A) 80 
B) 2,200 
C) 1,600 
D) 2000

Question 10

-A duopolists' dilemma occurs when two firms in a market would be better off if:

Accepted Answer

A) both choose the high price but instead each chooses the low price. 
B) both firms act jointly as a cartel and chooses the best price. 
C) one firm refuses to participate in the cartel. 
D) both firms adopt price matching. 
A) both choose the high price but instead each chooses the low price. 
B) both firms act jointly as a cartel and chooses the best price. 
C) one firm refuses to participate in the cartel. 
D) both firms adopt price matching.

Question 11

-Refer to Figure 12.3.The decision tree shows the payoffs for two firms based on the strategies they choose.If they agree to collude and hold prices at $10,and both stand by the agreement,each will earn profits of $5 million.If one firm cheats and the other does not,the firm that cheats will earn profits of $8 million and the other firm will have losses of $2 million.If they both cheat and cut prices,they will each earn profits of only $2 million.If both firms follow their dominant strategies,Firm B's profits will be:

Accepted Answer

A) -$2 million. 
B) $ 2 million. 
C) $5 million. 
D) $ 8 million. 
A) -$2 million. 
B) $ 2 million. 
C) $5 million. 
D) $ 8 million.

Question 12

Recall the application about low-price guarantee with tire prices in Florida,what happen to the prices of the tires after the low-price guarantee advertising was included in the newspaper ad?

Accepted Answer

A) The prices soar. 
B) The prices decrease 
C) The prices stayed the same. 
D) Some tire companies exit the market. 
A) The prices soar. 
B) The prices decrease 
C) The prices stayed the same. 
D) Some tire companies exit the market.

Question 13

If an insecure monopolist needs to determine what strategy will be best to prevent a second firm from entering the market,what could be the key variable to use when determining the best strategy?

Accepted Answer

A) minimum entry quantity 
B) minimum exit quantity 
C) maximum entry quantity 
D) maximum exit quantity 
A) minimum entry quantity 
B) minimum exit quantity 
C) maximum entry quantity 
D) maximum exit quantity

Question 14

The low-price guarantee results in an outcome equivalent to perfect competition.

Accepted Answer

A) True 
 B)False

Question 15

-Refer to Figure 12.3.The decision tree shows the payoffs for two firms based on the strategies they choose.If they agree to collude and hold prices at $10,and both stand by the agreement,each will earn profits of $5 million.If one firm cheats and the other does not,the firm that cheats will earn profits of $8 million and the other firm will have losses of $2 million.If they both cheat and cut prices,they will each earn profits of only $2 million.In this game the dominant strategy for B is to:

Accepted Answer

A) cheat. 
B) stand by the agreement. 
C) cheat only if A cheats. 
D) maximize the maximum losses. 
A) cheat. 
B) stand by the agreement. 
C) cheat only if A cheats. 
D) maximize the maximum losses.

Question 16

If a firm in a monopolistically competitive market uses advertising to lower the price elasticity of demand for its product:

Accepted Answer

A) it will likely increase its price. 
B) it will likely lead to a monopoly,as other firms exit the market. 
C) it will increase the level of competition in the market. 
D) none of the above 
A) it will likely increase its price. 
B) it will likely lead to a monopoly,as other firms exit the market. 
C) it will increase the level of competition in the market. 
D) none of the above

Question 17

Under what conditions does an oligopoly market result in the same outcome as monopoly? What does this imply for the oligopoly's long-run profits?

Accepted Answer

Oligopoly results in the monop

Question 18

Which of the following best defines the advertisers' dilemma?

Accepted Answer

A) Firms A and B will be better off spending money on advertising,however each firm decides not to advertise. 
B) Firms A and B will be better off not spending money on advertising,however each firm decides to advertise. 
C) Firm A advertises,but firm B does not advertise. 
D) Firm B advertises,but firm A does not advertise. 
A) Firms A and B will be better off spending money on advertising,however each firm decides not to advertise. 
B) Firms A and B will be better off not spending money on advertising,however each firm decides to advertise. 
C) Firm A advertises,but firm B does not advertise. 
D) Firm B advertises,but firm A does not advertise.

Question 19

The prisoners' dilemma shows that the players' dominant strategies often lead them to less than optimal outcomes.Explain the Nash equilibrium and why both prisoners confessing is the Nash equilibrium.

Accepted Answer

The Nash equilibrium occurs when each pr

Question 20

In game theory,a strategy that represents the best choice for a firm no matter what the other firm does is termed:

Accepted Answer

A) a dominant strategy. 
B) a Nash equilibrium. 
C) a prisoners' dilemma. 
D) a duopolists' dilemma. 
A) a dominant strategy. 
B) a Nash equilibrium. 
C) a prisoners' dilemma. 
D) a duopolists' dilemma.

A single firm selling its output in a contestable market will:

In an oligopoly,the behavior of any one firm depends on the reaction it expects of all the others in the industry.

An oligopolistic industry has no barriers to entry.

What does it mean when a firm has a dominant strategy?

In a two-person,repeated game,a tit-for-tat strategy starts with:

Low-price guarantees is a way to insure that other firms will choose a high price.

-Refer to Figure 12.5.Section of the demand curve assumes that competing firms will:

Assume six firms comprising an industry have market shares of 30,30,10,10,10,and 10 percent.The Herfindahl-Hirschman Index for this industry is ________.

-A duopolists' dilemma occurs when two firms in a market would be better off if:

Recall the application about low-price guarantee with tire prices in Florida,what happen to the prices of the tires after the low-price guarantee advertising was included in the newspaper ad?

If an insecure monopolist needs to determine what strategy will be best to prevent a second firm from entering the market,what could be the key variable to use when determining the best strategy?

The low-price guarantee results in an outcome equivalent to perfect competition.

If a firm in a monopolistically competitive market uses advertising to lower the price elasticity of demand for its product:

Under what conditions does an oligopoly market result in the same outcome as monopoly? What does this imply for the oligopoly's long-run profits?

Which of the following best defines the advertisers' dilemma?

The prisoners' dilemma shows that the players' dominant strategies often lead them to less than optimal outcomes.Explain the Nash equilibrium and why both prisoners confessing is the Nash equilibrium.

In game theory,a strategy that represents the best choice for a firm no matter what the other firm does is termed:

Introduction: What Is Economics

The Key Principles of Economics

Exchange and Markets

Demand, supply, and Market Equilibrium

Elasticity: a Measure of Responsiveness

Market Efficiency and Government Intervention

Consumer Choice: Utility Theory and Insights From Neuroscience

Production Technology and Cost

Perfect Competition

Monopoly and Price Discrimination

Market Entry and Monopolistic Competition

Controlling Market Power: Antitrust and Regulation

Imperfect Information: Adverse Selection and Moral Hazard

Public Goods and Public Choice

External Costs and Environmental Policy

The Labor Market and the Distribution of Income

International Trade and Public Policy

Filters

Exam 12: Oligopoly and Strategic Behavior

A single firm selling its output in a contestable market will:

In an oligopoly,the behavior of any one firm depends on the reaction it expects of all the others in the industry.

An oligopolistic industry has no barriers to entry.

What does it mean when a firm has a dominant strategy?

In a two-person,repeated game,a tit-for-tat strategy starts with:

Low-price guarantees is a way to insure that other firms will choose a high price.

-Refer to Figure 12.5.Section of the demand curve assumes that competing firms will:

Assume six firms comprising an industry have market shares of 30,30,10,10,10,and 10 percent.The Herfindahl-Hirschman Index for this industry is ________.

-A duopolists' dilemma occurs when two firms in a market would be better off if:

Recall the application about low-price guarantee with tire prices in Florida,what happen to the prices of the tires after the low-price guarantee advertising was included in the newspaper ad?

If an insecure monopolist needs to determine what strategy will be best to prevent a second firm from entering the market,what could be the key variable to use when determining the best strategy?

The low-price guarantee results in an outcome equivalent to perfect competition.

If a firm in a monopolistically competitive market uses advertising to lower the price elasticity of demand for its product:

Under what conditions does an oligopoly market result in the same outcome as monopoly? What does this imply for the oligopoly's long-run profits?

Which of the following best defines the advertisers' dilemma?

The prisoners' dilemma shows that the players' dominant strategies often lead them to less than optimal outcomes.Explain the Nash equilibrium and why both prisoners confessing is the Nash equilibrium.

In game theory,a strategy that represents the best choice for a firm no matter what the other firm does is termed:

Introduction: What Is Economics

The Key Principles of Economics

Exchange and Markets

Demand, supply, and Market Equilibrium

Elasticity: a Measure of Responsiveness

Market Efficiency and Government Intervention

Consumer Choice: Utility Theory and Insights From Neuroscience

Production Technology and Cost

Perfect Competition

Monopoly and Price Discrimination

Market Entry and Monopolistic Competition

Controlling Market Power: Antitrust and Regulation

Imperfect Information: Adverse Selection and Moral Hazard

Public Goods and Public Choice

External Costs and Environmental Policy

The Labor Market and the Distribution of Income

International Trade and Public Policy

Filters