Question 1

In an oligopoly with a collusive agreement, the total industry profits will be smallest when

Accepted Answer

A)  all firms comply with the agreement. 
B)  one firm cheats on the agreement and the other firms do not cheat. 
C)  all firms cheat on the agreement. 
D)  the firms act as a monopoly. 
A)  all firms comply with the agreement. 
B)  one firm cheats on the agreement and the other firms do not cheat. 
C)  all firms cheat on the agreement. 
D)  the firms act as a monopoly.

Question 2

In the United States, why are cartels among firms usually kept secret?

Accepted Answer

Cartels are typically kept secret becaus

Question 3

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 cheat on the agreement so the market is the same as a competitive market,

Accepted Answer

A)  they will operate in a way indistinguishable from a monopoly. 
B)  each firm will make zero economic profit. 
C)  each firm will increase its economic profit. 
D)  the price of a hard drive will be above marginal cost. 
A)  they will operate in a way indistinguishable from a monopoly. 
B)  each firm will make zero economic profit. 
C)  each firm will increase its economic profit. 
D)  the price of a hard drive will be above marginal cost.

Question 4

With barriers to the entry of new firms,

Accepted Answer

A)  a cartel is guaranteed to earn an economic profit. 
B)  a cartel's members have no incentive to cheat. 
C)  the cartel might earn an economic profit. 
D)  industry supply will expand if the firms form a cartel. 
A)  a cartel is guaranteed to earn an economic profit. 
B)  a cartel's members have no incentive to cheat. 
C)  the cartel might earn an economic profit. 
D)  industry supply will expand if the firms form a cartel.

Question 5

The maximum economic profit that can be made by a duopoly that colludes is equal to the ________.

Accepted Answer

A)  economic profit made by duopolists who cheat 
B)  normal profit made by an oligopoly 
C)  economic profit made by a monopoly 
D)  normal profit made by firms in perfect competition 
A)  economic profit made by duopolists who cheat 
B)  normal profit made by an oligopoly 
C)  economic profit made by a monopoly 
D)  normal profit made by firms in perfect competition

Question 6

What is resale price maintenance? Is resale price maintenance legal in the United States?

Accepted Answer

Resale price maintenance occurs when a m

Question 7

Which of the following is always a violation of the antitrust law?

Accepted Answer

A)  price fixing among competitors 
B)  resale price maintenance 
C)  tying arrangements 
D)  predatory pricing 
A)  price fixing among competitors 
B)  resale price maintenance 
C)  tying arrangements 
D)  predatory pricing

Question 8

The Sherman Act of 1890 was passed to prohibit

Accepted Answer

A)  combinations, trusts, or conspiracies to restrict interstate or international trade. 
B)  monopolization or attempts to monopolize interstate or international trade. 
C)  Both of the above. 
D)  Neither of the above. 
A)  combinations, trusts, or conspiracies to restrict interstate or international trade. 
B)  monopolization or attempts to monopolize interstate or international trade. 
C)  Both of the above. 
D)  Neither of the above.

Question 9

If the Herfindahl-Hirschman index (HHI) among the firms in the long distance telecommunications market were equal to 1755, when would the Federal Trade Commission probably challenge a proposed merger between any two of the firms?

Accepted Answer

A)  It would challenge if the HHI would increase by more than 50 points. 
B)  It would challenge if the HHI would increase by more than 100 points. 
C)  It would challenge no matter what happened to the HHI because the market has so few firms. 
D)  It would not challenge because the HHI is less than 1800. 
A)  It would challenge if the HHI would increase by more than 50 points. 
B)  It would challenge if the HHI would increase by more than 100 points. 
C)  It would challenge no matter what happened to the HHI because the market has so few firms. 
D)  It would not challenge because the HHI is less than 1800.

Question 10

In a cartel,

Accepted Answer

A)  each firm has an incentive to decrease its own production below the level set by the cartel. 
B)  the firms' marginal cost equals the price set by the cartel. 
C)  each firm has an incentive to lower its price below the level set by the cartel. 
D)  each firm has an incentive to raise its price above the level set by the cartel. 
A)  each firm has an incentive to decrease its own production below the level set by the cartel. 
B)  the firms' marginal cost equals the price set by the cartel. 
C)  each firm has an incentive to lower its price below the level set by the cartel. 
D)  each firm has an incentive to raise its price above the level set by the cartel.

Question 11

Player A  
-The problem for the prisoners in the prisoners' dilemma game in the above table is that

Accepted Answer

A)  the Nash equilibrium is not the best outcome. 
B)  there is no equilibrium outcome. 
C)  neither prisoner has a workable strategy. 
D)  None of the above answers is correct. 
A)  the Nash equilibrium is not the best outcome. 
B)  there is no equilibrium outcome. 
C)  neither prisoner has a workable strategy. 
D)  None of the above answers is correct.

Question 12

In a prisoners' dilemma game, which of the following strategies gives the best outcome for both prisoners?

Accepted Answer

A)  Both deny (collusion). 
B)  Both confess (not collude). 
C)  One confesses while the other denies. 
D)  none of the above 
A)  Both deny (collusion). 
B)  Both confess (not collude). 
C)  One confesses while the other denies. 
D)  none of the above

Question 13

Gateway  
-Dell and Gateway must decide whether to lower their prices, based on the potential economic profits shown in the payoff matrix above. (The profits are in millions of dollars.) If the firms collude and don't cheat, Dell's profit is ________ million and Gateway's profit is ________ million.

Accepted Answer

A)  $10; $10 
B)  $15; $15 
C)  $5; $20 
D)  $20; $5 
A)  $10; $10 
B)  $15; $15 
C)  $5; $20 
D)  $20; $5

Question 14

An industry is made up of 8 firms with the following percent market shares: 29, 20, 11, 10, 9, 8, 7, 6. What is the Herfindahl-Hirschman index in this industry?

Accepted Answer

A)  70 
B)  100 
C)  1462 
D)  1692 
A)  70 
B)  100 
C)  1462 
D)  1692

Question 15

OPEC, the Organization of Petroleum Exporting Countries, was formed in Baghdad in 1960. Since its formation, this cartel has suffered from a major problem with respect to the quota (limit) of output it assigns each member nation. What is OPEC's goal and what sort of quota do you think the cartel assigns? How and why do nations cheat on their quota? What happens when a nation cheats on its quota?

Accepted Answer

In order to keep oil prices high, as has

Question 16

Of the following, the best example of oligopoly is

Accepted Answer

A)  wheat farming. 
B)  the restaurant industry. 
C)  the cigarette industry. 
D)  the clothing industry. 
A)  wheat farming. 
B)  the restaurant industry. 
C)  the cigarette industry. 
D)  the clothing industry.

Question 17

Describe the characteristics of an oligopoly.

Accepted Answer

There are a small number of firms that a

Question 18

The Hirschman-Herfindahl index (HHI) in an industry is 50. A merger is proposed that will raise the HHI to 100. In this case, the

Accepted Answer

A)  Sherman Act will prohibit the merger. 
B)  Federal Trade Commission will challenge the merger. 
C)  Federal Trade Commission will not challenge the merger. 
D)  rule of reason will prevent the merger if it represents a horizontal merger. 
A)  Sherman Act will prohibit the merger. 
B)  Federal Trade Commission will challenge the merger. 
C)  Federal Trade Commission will not challenge the merger. 
D)  rule of reason will prevent the merger if it represents a horizontal merger.

Question 19

A merger will be challenged by the FTC in a market where the Herfindahl-Hirschman Index (HHI) is ________, and the merger would increase it to ________.

Accepted Answer

A)  2,900; 3,100. 
B)  1,700; 1,760 
C)  800; 950 
D)  2,000; 2,040 
A)  2,900; 3,100. 
B)  1,700; 1,760 
C)  800; 950 
D)  2,000; 2,040

Question 20

The prisoners' dilemma has an equilibrium that is

Accepted Answer

A)  a Nash equilibrium and both players confess. 
B)  not a Nash equilibrium and both players confess. 
C)  a Nash equilibrium and both players deny. 
D)  not a Nash equilibrium and both players deny. 
A)  a Nash equilibrium and both players confess. 
B)  not a Nash equilibrium and both players confess. 
C)  a Nash equilibrium and both players deny. 
D)  not a Nash equilibrium and both players deny.

Exam 15: Oligopoly

In an oligopoly with a collusive agreement, the total industry profits will be smallest when

In the United States, why are cartels among firms usually kept secret?

With barriers to the entry of new firms,

The maximum economic profit that can be made by a duopoly that colludes is equal to the ________.

What is resale price maintenance? Is resale price maintenance legal in the United States?

Which of the following is always a violation of the antitrust law?

The Sherman Act of 1890 was passed to prohibit

If the Herfindahl-Hirschman index (HHI) among the firms in the long distance telecommunications market were equal to 1755, when would the Federal Trade Commission probably challenge a proposed merger between any two of the firms?

In a cartel,

Player A -The problem for the prisoners in the prisoners' dilemma game in the above table is that

In a prisoners' dilemma game, which of the following strategies gives the best outcome for both prisoners?

Gateway -Dell and Gateway must decide whether to lower their prices, based on the potential economic profits shown in the payoff matrix above. (The profits are in millions of dollars.) If the firms collude and don't cheat, Dell's profit is ________ million and Gateway's profit is ________ million.

An industry is made up of 8 firms with the following percent market shares: 29, 20, 11, 10, 9, 8, 7, 6. What is the Herfindahl-Hirschman index in this industry?

Of the following, the best example of oligopoly is

Describe the characteristics of an oligopoly.

The Hirschman-Herfindahl index (HHI) in an industry is 50. A merger is proposed that will raise the HHI to 100. In this case, the

A merger will be challenged by the FTC in a market where the Herfindahl-Hirschman Index (HHI) is ________, and the merger would increase it to ________.

The prisoners' dilemma has an equilibrium that is

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

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Public Choices and Public Goods

Externalities and the Environment

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Extension A: Review

Extension B: Review

Extension C: Review

Extension D: Review

Extension E: Review

Extension F: Review

Filters

Gateway -Dell and Gateway must decide whether to lower their prices, based on the potential economic profits shown in the payoff matrix above. (The profits are in millions of dollars.) If the firms collude and don't cheat, Dell's profit is million and Gateway's profit is million.

A merger will be challenged by the FTC in a market where the Herfindahl-Hirschman Index (HHI) is , and the merger would increase it to .