Question 1

Entry into a market can be deterred by practicing limit pricing.

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.The dominant strategy for firm A:

Accepted Answer

A) is to set price low. 
B) is to set price high. 
C) depends on what B does. 
D) is to do the opposite of whatever B does. 
A) is to set price low. 
B) is to set price high. 
C) depends on what B does. 
D) is to do the opposite of whatever B does.

Question 3

An arrangement in which firms conspire to fix prices is called:

Accepted Answer

A) a cartel. 
B) price-ceiling. 
C) price-fixing. 
D) a duopoly. 
A) a cartel. 
B) price-ceiling. 
C) price-fixing. 
D) a duopoly.

Question 4

-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 A is to:

Accepted Answer

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

Question 5

Limit pricing is the strategy of raising the price to deter entry.

Accepted Answer

A) True 
 B)False

Question 6

-Figure 12.2 shows the decision tree for setting price for the only two firms in a market.If both firms follow their dominant strategies:

Accepted Answer

A) both firms will set price high. 
B) both firms will set price low. 
C) only one firm will set price low. 
D) The firms' dominant strategies cannot be determined without more information. 
A) both firms will set price high. 
B) both firms will set price low. 
C) only one firm will set price low. 
D) The firms' dominant strategies cannot be determined without more information.

Question 7

-Refer to Figure 12.7.The numerical data show daily profits for each of the two firms when they choose a specific pricing strategy.If Zeta commits to charging a high price Omega can earn the largest profit by:

Accepted Answer

A) also charging a high price. 
B) charging a low price. 
C) convincing Zeta to charge a low price and then matching it. 
D) doing none of the above. 
A) also charging a high price. 
B) charging a low price. 
C) convincing Zeta to charge a low price and then matching it. 
D) doing none of the above.

Question 8

Do firms in a perfectly contestable market earn positive economic profit in the long run? Explain.

Accepted Answer

No,firms in perfectly contestable market

Question 9

Oligopoly is a market:

Accepted Answer

A) with one firm and many different products. 
B) with many firms and a homogeneous product. 
C) with a few firms and the actions of one firm have a large impact on the others. 
D) with a few firms and the actions of one firm have a small impact on the others. 
A) with one firm and many different products. 
B) with many firms and a homogeneous product. 
C) with a few firms and the actions of one firm have a large impact on the others. 
D) with a few firms and the actions of one firm have a small impact on the others.

Question 10

Which of the following is a characteristic of an oligopoly market?

Accepted Answer

A) control over price 
B) diseconomies of scale in production 
C) firms act independently without regard to each other 
D) all of the above 
A) control over price 
B) diseconomies of scale in production 
C) firms act independently without regard to each other 
D) all of the above

Question 11

Game tree is a graphical representation of the consequences of different actions in a strategic setting.

Accepted Answer

A) True 
 B)False

Question 12

Explicit price fixing was outlawed by the ________ Act.

Accepted Answer

A) Fair Labor Standards 
B) Alien and Sedition 
C) Sherman Antitrust 
D) Freedom of Information 
A) Fair Labor Standards 
B) Alien and Sedition 
C) Sherman Antitrust 
D) Freedom of Information

Question 13

An oligopoly could occur for the following reasons:

Accepted Answer

A) advertising campaigns. 
B) economics of scale in production. 
C) government barriers to entry. 
D) all of the above 
A) advertising campaigns. 
B) economics of scale in production. 
C) government barriers to entry. 
D) all of the above

Question 14

The cereal industry is an example of a oligopolistic industry.

Accepted Answer

A) True 
 B)False

Question 15

Consider four types of markets: monopoly,perfect competition,oligopoly,and monopolistic competition.If they were ranked from the lowest number of firms to the largest number of firms the ranking would be:

Accepted Answer

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

Question 16

-Refer to Figure 12.2.If A adopts a strategy of price fixing then the best choice for A is to choose the ________ price and the best choice for B is to choose the ________ price.

Accepted Answer

A) high;high 
B) high;low 
C) low;high 
D) low;low 
A) high;high 
B) high;low 
C) low;high 
D) low;low

Question 17

Which of the following is the best example of an oligopolistic industry?

Accepted Answer

A) cleaning services 
B) airline services 
C) local water utility 
D) designer shoes 
A) cleaning services 
B) airline services 
C) local water utility 
D) designer shoes

Question 18

In the U.S. ,price leadership,as in the article above,is ________.

Accepted Answer

A) illegal 
B) unprofitable 
C) seldom used 
D) legal 
A) illegal 
B) unprofitable 
C) seldom used 
D) legal

Question 19

-Refer to Figure 12.7.The numerical data show daily profits for each of the two firms when they choose a specific pricing strategy.If both firms choose a high-price strategy:

Accepted Answer

A) Omega will earn $300 daily profit and Zeta will earn $100 daily profit. 
B) Omega will earn $100 daily profit and Zeta will earn $300 daily profit. 
C) Both will earn $200 daily profit. 
D) Both will earn $150 daily profit. 
A) Omega will earn $300 daily profit and Zeta will earn $100 daily profit. 
B) Omega will earn $100 daily profit and Zeta will earn $300 daily profit. 
C) Both will earn $200 daily profit. 
D) Both will earn $150 daily profit.

Question 20

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

Accepted Answer

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

Entry into a market can be deterred by practicing limit pricing.

-Figure 12.2 shows the decision tree for setting price for the only two firms in a market.The dominant strategy for firm A:

An arrangement in which firms conspire to fix prices is called:

Limit pricing is the strategy of raising the price to deter entry.

-Figure 12.2 shows the decision tree for setting price for the only two firms in a market.If both firms follow their dominant strategies:

-Refer to Figure 12.7.The numerical data show daily profits for each of the two firms when they choose a specific pricing strategy.If Zeta commits to charging a high price Omega can earn the largest profit by:

Do firms in a perfectly contestable market earn positive economic profit in the long run? Explain.

Oligopoly is a market:

Which of the following is a characteristic of an oligopoly market?

Game tree is a graphical representation of the consequences of different actions in a strategic setting.

Explicit price fixing was outlawed by the ________ Act.

An oligopoly could occur for the following reasons:

The cereal industry is an example of a oligopolistic industry.

Consider four types of markets: monopoly,perfect competition,oligopoly,and monopolistic competition.If they were ranked from the lowest number of firms to the largest number of firms the ranking would be:

-Refer to Figure 12.2.If A adopts a strategy of price fixing then the best choice for A is to choose the price and the best choice for B is to choose the price.

Which of the following is the best example of an oligopolistic industry?

In the U.S. ,price leadership,as in the article above,is ________.

-Refer to Figure 12.7.The numerical data show daily profits for each of the two firms when they choose a specific pricing strategy.If both firms choose a high-price strategy:

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

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

Entry into a market can be deterred by practicing limit pricing.

-Figure 12.2 shows the decision tree for setting price for the only two firms in a market.The dominant strategy for firm A:

An arrangement in which firms conspire to fix prices is called:

Limit pricing is the strategy of raising the price to deter entry.

-Figure 12.2 shows the decision tree for setting price for the only two firms in a market.If both firms follow their dominant strategies:

-Refer to Figure 12.7.The numerical data show daily profits for each of the two firms when they choose a specific pricing strategy.If Zeta commits to charging a high price Omega can earn the largest profit by:

Do firms in a perfectly contestable market earn positive economic profit in the long run? Explain.

Oligopoly is a market:

Which of the following is a characteristic of an oligopoly market?

Game tree is a graphical representation of the consequences of different actions in a strategic setting.

Explicit price fixing was outlawed by the ________ Act.

An oligopoly could occur for the following reasons:

The cereal industry is an example of a oligopolistic industry.

Consider four types of markets: monopoly,perfect competition,oligopoly,and monopolistic competition.If they were ranked from the lowest number of firms to the largest number of firms the ranking would be:

-Refer to Figure 12.2.If A adopts a strategy of price fixing then the best choice for A is to choose the ________ price and the best choice for B is to choose the ________ price.

Which of the following is the best example of an oligopolistic industry?

In the U.S. ,price leadership,as in the article above,is ________.

-Refer to Figure 12.7.The numerical data show daily profits for each of the two firms when they choose a specific pricing strategy.If both firms choose a high-price strategy:

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

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

-Refer to Figure 12.2.If A adopts a strategy of price fixing then the best choice for A is to choose the price and the best choice for B is to choose the price.