Question 1

The second federal antitrust law was passed in 1914. This antitrust law is the

Accepted Answer

A)  Clayton Act. 
B)  Robinson-Patman Amendment. 
C)  Cellar-Kefauver Amendment. 
D)  Taft-Hartley Act. 
A)  Clayton Act. 
B)  Robinson-Patman Amendment. 
C)  Cellar-Kefauver Amendment. 
D)  Taft-Hartley Act.

Question 2

In 1986, PepsiCo announced its intention to buy 7-Up for $380 million and Coca-Cola said it would buy Dr Pepper for $470 million. Because the Herfindahl-Hirschman index for carbonated soft drinks is ________, the Federal Trade Commission ________ the mergers.

Accepted Answer

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

Question 3

Firm A  
-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. A's best strategy is to

Accepted Answer

A)  conduct R&D regardless of what B does. 
B)  not conduct R&D regardless of what B does. 
C)  conduct R&D only if B conducts R&D. 
D)  conduct R&D only if B does not conduction R&D. 
A)  conduct R&D regardless of what B does. 
B)  not conduct R&D regardless of what B does. 
C)  conduct R&D only if B conducts R&D. 
D)  conduct R&D only if B does not conduction R&D.

Question 4

Suppose the Herfindahl-Hirschman Index (HHI) in the market for chocolate is 3,200. Two companies want to merge. The FTC definitely will challenge the merger if it increases the HHI by more than

Accepted Answer

A)  150 points. 
B)  100 points. 
C)  40 points. 
D)  200 points. 
A)  150 points. 
B)  100 points. 
C)  40 points. 
D)  200 points.

Question 5

In a contestable market,

Accepted Answer

A)  two or more firms are competing. 
B)  the Herfindahl-Hirschman Index exceeds 1,800. 
C)  the four-firm concentration ratio exceeds 50 percent. 
D)  potential entry holds down prices. 
A)  two or more firms are competing. 
B)  the Herfindahl-Hirschman Index exceeds 1,800. 
C)  the four-firm concentration ratio exceeds 50 percent. 
D)  potential entry holds down prices.

Question 6

"Because firms in an oligopoly are so large, they do not need to consider each other's actions." Is the previous statement correct or incorrect? Explain your answer.

Accepted Answer

The statement is incorrect. Oligopoly is

Question 7

Consider a market in which each firm must predict the price and quantity decisions of other firms, as well as how those price and quantity decisions will affect the first firm's revenue and profit. This market is best described as

Accepted Answer

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

Question 8

"A Nash equilibrium occurs when both parties to a game end up worse off as a result of the decisions that are made." Is the previous definition of a Nash equilibrium correct or incorrect?

Accepted Answer

The definition is incorrect. A

Question 9

The iPhone 5 no longer comes pre-loaded with Google Maps and uses the Apple map application instead. Regulators might be concerned with this requirement because they might see it as an example of

Accepted Answer

A)  resale price maintenance. 
B)  a tying arrangement. 
C)  predatory pricing. 
D)  collusion to create a monopoly. 
A)  resale price maintenance. 
B)  a tying arrangement. 
C)  predatory pricing. 
D)  collusion to create a monopoly.

Question 10

________ is a group of firms that have colluded to limit their output and raise their price.

Accepted Answer

A)  A cartel 
B)  An oligopoly 
C)  A strategy 
D)  A duopoly 
A)  A cartel 
B)  An oligopoly 
C)  A strategy 
D)  A duopoly

Question 11

Which of the following statements about the Sherman Act is correct?

Accepted Answer

A)  The Sherman Act was the second federal antitrust law. 
B)  The Sherman act legalized monopolization if the company behaved "reasonably" once it became a monopoly. 
C)  The Sherman Act outlawed natural monopolies. 
D)  The Sherman Act made restriction of interstate trade illegal. 
A)  The Sherman Act was the second federal antitrust law. 
B)  The Sherman act legalized monopolization if the company behaved "reasonably" once it became a monopoly. 
C)  The Sherman Act outlawed natural monopolies. 
D)  The Sherman Act made restriction of interstate trade illegal.

Question 12

The EU's antitrust chief in November 2008 fined car glass producers Asahi, Pilkington, Saint-Gobain and Soliver more than 1.3 billion euros ($1.66 billion) for price-fixing, the largest sum ever levied by the EU for a cartel. What are the economic justifications of making price fixing illegal?

Accepted Answer

A)  Consumers suffer because of decreased consumer surplus and the outcome is inefficient because of deadweight loss. 
B)  An oligopoly cartel can maximize profit and behave like a natural monopoly. 
C)  The cartel increases quantity supplied in the market causing a shortage. 
D)  The cartel increases quantity supplied in the market causing a surplus and therefore harming other producers. 
A)  Consumers suffer because of decreased consumer surplus and the outcome is inefficient because of deadweight loss. 
B)  An oligopoly cartel can maximize profit and behave like a natural monopoly. 
C)  The cartel increases quantity supplied in the market causing a shortage. 
D)  The cartel increases quantity supplied in the market causing a surplus and therefore harming other producers.

Question 13

In part, an antitrust laws

Accepted Answer

A)  provide for strict product liability. 
B)  prohibit charging prices that customers think are too high. 
C)  require firms with profits to pay dividends. 
D)  prohibit monopolistic practices. 
A)  provide for strict product liability. 
B)  prohibit charging prices that customers think are too high. 
C)  require firms with profits to pay dividends. 
D)  prohibit monopolistic practices.

Question 14

What is a cartel?

Accepted Answer

A cartel is a group of firms acting toge

Question 15

What is meant by the term "exclusive dealing"? Give an example of an exclusive deal. When is it illegal?

Accepted Answer

Exclusive dealing is a contract that pre

Question 16

A market in which firms can enter and leave so easily that firms in the market face competition from potential entrants is called a

Accepted Answer

A)  contestable market. 
B)  cartel. 
C)  limit pricing market. 
D)  monopolistic competition market. 
A)  contestable market. 
B)  cartel. 
C)  limit pricing market. 
D)  monopolistic competition market.

Question 17

In a small town the level of demand is capable of supporting only two gas stations. This market is

Accepted Answer

A)  a natural duopoly. 
B)  perfectly competitive because a homogeneous good is being sold. 
C)  operating as if it was a monopoly. 
D)  an example of monopolistic competition. 
A)  a natural duopoly. 
B)  perfectly competitive because a homogeneous good is being sold. 
C)  operating as if it was a monopoly. 
D)  an example of monopolistic competition.

Question 18

When only a small number of producers compete with each other is a defining characteristic of

Accepted Answer

A)  inelastic supply. 
B)  monopolistic competition. 
C)  efficient competition. 
D)  oligopoly. 
A)  inelastic supply. 
B)  monopolistic competition. 
C)  efficient competition. 
D)  oligopoly.

Question 19

Jane  
-The payoff matrix of economic profits above displays the possible outcomes for Bob and Jane who are involved in game of whether or not to advertise. After each player chooses his or her best strategy and sees the result,

Accepted Answer

A)  only Bob would like to change his decision. 
B)  neither player would be willing to change his or her decision unless the other player also changes his or her decision. 
C)  if Jane does not change her decision, Bob would like to change his. 
D)  if Bob does not change his decision, Jane would like to change hers. 
A)  only Bob would like to change his decision. 
B)  neither player would be willing to change his or her decision unless the other player also changes his or her decision. 
C)  if Jane does not change her decision, Bob would like to change his. 
D)  if Bob does not change his decision, Jane would like to change hers.

Question 20

In 2008, a former Intel engineer has been charged with stealing trade secrets worth $1 billion. Intel owns 80 percent of the worldwide market for microprocessors, AMD has the rest. Conducting R&D is very expensive so suppose that each of these firms can either steal R&D or develop their own R&D. If both firms develop their own R&D, economic profit will be $50 million each. If one company steals R&D, that firm earns $100 million in economic profit while the other firm earns $10 million. If both firms steal R&D, each firm breaks even. What is NOT true about this game?

Accepted Answer

A)  The outcome will not be a dominant strategy equilibrium. 
B)  A strategy is to steal R&D. 
C)  A firm will make more profit if it steals R&D. 
D)  A strategy is to conduct R&D. 
A)  The outcome will not be a dominant strategy equilibrium. 
B)  A strategy is to steal R&D. 
C)  A firm will make more profit if it steals R&D. 
D)  A strategy is to conduct R&D.

Exam 15: Oligopoly

The second federal antitrust law was passed in 1914. This antitrust law is the

In 1986, PepsiCo announced its intention to buy 7-Up for $380 million and Coca-Cola said it would buy Dr Pepper for $470 million. Because the Herfindahl-Hirschman index for carbonated soft drinks is ________, the Federal Trade Commission ________ the mergers.

Suppose the Herfindahl-Hirschman Index (HHI) in the market for chocolate is 3,200. Two companies want to merge. The FTC definitely will challenge the merger if it increases the HHI by more than

In a contestable market,

"Because firms in an oligopoly are so large, they do not need to consider each other's actions." Is the previous statement correct or incorrect? Explain your answer.

Consider a market in which each firm must predict the price and quantity decisions of other firms, as well as how those price and quantity decisions will affect the first firm's revenue and profit. This market is best described as

"A Nash equilibrium occurs when both parties to a game end up worse off as a result of the decisions that are made." Is the previous definition of a Nash equilibrium correct or incorrect?

The iPhone 5 no longer comes pre-loaded with Google Maps and uses the Apple map application instead. Regulators might be concerned with this requirement because they might see it as an example of

________ is a group of firms that have colluded to limit their output and raise their price.

Which of the following statements about the Sherman Act is correct?

The EU's antitrust chief in November 2008 fined car glass producers Asahi, Pilkington, Saint-Gobain and Soliver more than 1.3 billion euros ($1.66 billion) for price-fixing, the largest sum ever levied by the EU for a cartel. What are the economic justifications of making price fixing illegal?

In part, an antitrust laws

What is a cartel?

What is meant by the term "exclusive dealing"? Give an example of an exclusive deal. When is it illegal?

A market in which firms can enter and leave so easily that firms in the market face competition from potential entrants is called a

In a small town the level of demand is capable of supporting only two gas stations. This market is

When only a small number of producers compete with each other is a defining characteristic of

Jane -The payoff matrix of economic profits above displays the possible outcomes for Bob and Jane who are involved in game of whether or not to advertise. After each player chooses his or her best strategy and sees the result,

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

In 1986, PepsiCo announced its intention to buy 7-Up for $380 million and Coca-Cola said it would buy Dr Pepper for $470 million. Because the Herfindahl-Hirschman index for carbonated soft drinks is , the Federal Trade Commission the mergers.