Question 1

A contestable market has low entry and high exist costs.

Accepted Answer

A) True 
 B)False

Question 2

-Figure 12.2 shows the decision tree for setting price for the only two firms in a market.How many dominant strategies are there for firm A?

Accepted Answer

A) 0 
B) 1 
C) 2 
D) It cannot be determined without knowing what firm B does. 
A) 0 
B) 1 
C) 2 
D) It cannot be determined without knowing what firm B does.

Question 3

In this article on airlines,when the firms experienced an increase in demand,their price ________.

Accepted Answer

A) increased 
B) decreased 
C) did not change 
D) change was ambiguous 
A) increased 
B) decreased 
C) did not change 
D) change was ambiguous

Question 4

The market structure in which the behavior of any given firm depends on the behavior of the other firms in the industry is:

Accepted Answer

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

Question 5

A single firm selling its output in a contestable market can raise its prices and:

Accepted Answer

A) insure higher profits. 
B) guarantee monopoly profits. 
C) give other firms the incentive to enter that market. 
D) keep other firms out of the industry with its market power. 
A) insure higher profits. 
B) guarantee monopoly profits. 
C) give other firms the incentive to enter that market. 
D) keep other firms out of the industry with its market power.

Question 6

A profit-maximizing firm will choose the level of advertisements such that:

Accepted Answer

A) the marginal cost of advertising is equal to the marginal benefit from advertising. 
B) the marginal benefit from advertising exceeds the marginal cost of advertising. 
C) the marginal cost of advertising exceeds the marginal benefit from advertising. 
D) the firm receives the greatest marginal benefit from advertising. 
A) the marginal cost of advertising is equal to the marginal benefit from advertising. 
B) the marginal benefit from advertising exceeds the marginal cost of advertising. 
C) the marginal cost of advertising exceeds the marginal benefit from advertising. 
D) the firm receives the greatest marginal benefit from advertising.

Question 7

How do we know when a market is contestable?

Accepted Answer

A market is contestable when barriers to

Question 8

A cartel is:

Accepted Answer

A) a group of firms that coordinate their pricing and quantity decisions. 
B) a type of oligopoly in which the demand curve is "kinked." 
C) a duopoly market where firms have the exact product. 
D) a group of firms that all produce the same level of output. 
A) a group of firms that coordinate their pricing and quantity decisions. 
B) a type of oligopoly in which the demand curve is "kinked." 
C) a duopoly market where firms have the exact product. 
D) a group of firms that all produce the same level of output.

Question 9

Explain what a "perfectly contestable" market means.Explain why the outcome in a perfectly contestable market is that firms produce efficiently.

Accepted Answer

A perfectly contestable market

Question 10

-Refer to Figure 12.10.The data in the boxes are the annual profits for each company whether they choose to advertise or not.If Big Box follows its dominant strategy it will:

Accepted Answer

A) earn$ 6 million. 
B) earn $4 million. 
C) earn $10 million. 
D) earn $5 million. 
A) earn$ 6 million. 
B) earn $4 million. 
C) earn $10 million. 
D) earn $5 million.

Question 11

Explain the underlying assumptions of the price leadership model.What conclusions can be made about the price charged and the output produced in an industry that has an implicit price leader?

Accepted Answer

The industry is made up of one large fir

Question 12

Recall the application about cheating on the final exam,three students were caught cheating on their final exam.Did the three students confess when the professor put them through the prisoners' dilemma?

Accepted Answer

A) one student confessed. 
B) two students confessed. 
C) three students confessed. 
D) none of the students confessed. 
A) one student confessed. 
B) two students confessed. 
C) three students confessed. 
D) none of the students confessed.

Question 13

The limit price is just low enough to deter entry.

Accepted Answer

A) True 
 B)False

Question 14

Recall the application about the Got Milk? advertising.the generic,non-brand advertising campaign is benefits all the milk firms so they share the cost and the benefits of the Got Milk? campaign.

Accepted Answer

A) True 
 B)False

Question 15

The small number of firms is what differentiates oligopoly markets from the other three market structure types (perfect competition,monopoly,and monopolistic competition).

Accepted Answer

A) True 
 B)False

Question 16

-Refer to Figure 12.9.If both firms follow their dominant strategies,Firm X will earn profits equal to:

Accepted Answer

A) $300. 
B) $400. 
C) $200. 
D) $600. 
A) $300. 
B) $400. 
C) $200. 
D) $600.

Question 17

In perfectly contestable markets,large oligopolistic firms end up pricing like:

Accepted Answer

A) monopolistically competitive firms. 
B) a monopoly. 
C) competitive firms. 
D) a cartel. 
A) monopolistically competitive firms. 
B) a monopoly. 
C) competitive firms. 
D) a cartel.

Question 18

If firms in an oligopoly form a cartel,the outcome is the same as it would be under monopolistic competition.

Accepted Answer

A) True 
 B)False

Question 19

Low-price guarantees in a duopoly:

Accepted Answer

A) lead to higher prices. 
B) lead to lower prices. 
C) make cartel pricing possible. 
D) A and C are correct. 
A) lead to higher prices. 
B) lead to lower prices. 
C) make cartel pricing possible. 
D) A and C are correct.

Question 20

What is the advertisers' dilemma?

Accepted Answer

The advertisers' dilemma occurs in marke

A contestable market has low entry and high exist costs.

-Figure 12.2 shows the decision tree for setting price for the only two firms in a market.How many dominant strategies are there for firm A?

In this article on airlines,when the firms experienced an increase in demand,their price ________.

The market structure in which the behavior of any given firm depends on the behavior of the other firms in the industry is:

A single firm selling its output in a contestable market can raise its prices and:

A profit-maximizing firm will choose the level of advertisements such that:

How do we know when a market is contestable?

A cartel is:

Explain what a "perfectly contestable" market means.Explain why the outcome in a perfectly contestable market is that firms produce efficiently.

-Refer to Figure 12.10.The data in the boxes are the annual profits for each company whether they choose to advertise or not.If Big Box follows its dominant strategy it will:

Explain the underlying assumptions of the price leadership model.What conclusions can be made about the price charged and the output produced in an industry that has an implicit price leader?

Recall the application about cheating on the final exam,three students were caught cheating on their final exam.Did the three students confess when the professor put them through the prisoners' dilemma?

The limit price is just low enough to deter entry.

Recall the application about the Got Milk? advertising.the generic,non-brand advertising campaign is benefits all the milk firms so they share the cost and the benefits of the Got Milk? campaign.

The small number of firms is what differentiates oligopoly markets from the other three market structure types (perfect competition,monopoly,and monopolistic competition).

-Refer to Figure 12.9.If both firms follow their dominant strategies,Firm X will earn profits equal to:

In perfectly contestable markets,large oligopolistic firms end up pricing like:

If firms in an oligopoly form a cartel,the outcome is the same as it would be under monopolistic competition.

Low-price guarantees in a duopoly:

What is the advertisers' dilemma?

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 contestable market has low entry and high exist costs.

-Figure 12.2 shows the decision tree for setting price for the only two firms in a market.How many dominant strategies are there for firm A?

In this article on airlines,when the firms experienced an increase in demand,their price ________.

The market structure in which the behavior of any given firm depends on the behavior of the other firms in the industry is:

A single firm selling its output in a contestable market can raise its prices and:

A profit-maximizing firm will choose the level of advertisements such that:

How do we know when a market is contestable?

A cartel is:

Explain what a "perfectly contestable" market means.Explain why the outcome in a perfectly contestable market is that firms produce efficiently.

-Refer to Figure 12.10.The data in the boxes are the annual profits for each company whether they choose to advertise or not.If Big Box follows its dominant strategy it will:

Explain the underlying assumptions of the price leadership model.What conclusions can be made about the price charged and the output produced in an industry that has an implicit price leader?

Recall the application about cheating on the final exam,three students were caught cheating on their final exam.Did the three students confess when the professor put them through the prisoners' dilemma?

The limit price is just low enough to deter entry.

Recall the application about the Got Milk? advertising.the generic,non-brand advertising campaign is benefits all the milk firms so they share the cost and the benefits of the Got Milk? campaign.

The small number of firms is what differentiates oligopoly markets from the other three market structure types (perfect competition,monopoly,and monopolistic competition).

-Refer to Figure 12.9.If both firms follow their dominant strategies,Firm X will earn profits equal to:

In perfectly contestable markets,large oligopolistic firms end up pricing like:

If firms in an oligopoly form a cartel,the outcome is the same as it would be under monopolistic competition.

Low-price guarantees in a duopoly:

What is the advertisers' dilemma?

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