Question 1

A dominant strategy equilibrium occurs when

Accepted Answer

A) there is a clear strategy for each player independent of the other player's actions. 
B) each player takes the best possible action given the other player's action. 
C) each player complies with the collusive agreement. 
D) you cooperate until the other player cheats, and then you cheat forever. 
E) none of the above. 
A) there is a clear strategy for each player independent of the other player's actions. 
B) each player takes the best possible action given the other player's action. 
C) each player complies with the collusive agreement. 
D) you cooperate until the other player cheats, and then you cheat forever. 
E) none of the above.

Question 2

Caven and John have been arrested by the police,who have evidence that will convict them of robbing a bank.If convicted,each will receive a sentence of 6 years for the robbery.During questioning,the police suspect that Caven and John are responsible for a series of bank robberies.If both confess to the series,each will receive 12 years in jail.If only one confesses,he will receive 4 years and the one who does not confess will receive 14 years.What is the equilibrium for this game?

Accepted Answer

A) Both deny. 
B) Caven confesses and John denies. 
C) John confesses and Caven denies. 
D) Both confess. 
E) None of the above 
A) Both deny. 
B) Caven confesses and John denies. 
C) John confesses and Caven denies. 
D) Both confess. 
E) None of the above

Question 3

All of the following except ________ are noncriminal offences under the Competition Act.

Accepted Answer

A) refusal to deal 
B) mergers 
C) false advertising 
D) abuse of a dominant market position 
E) exclusive dealing 
A) refusal to deal 
B) mergers 
C) false advertising 
D) abuse of a dominant market position 
E) exclusive dealing

Question 4

Table 15.2.9
   
Refer to the table below to answer the following question.
-Refer to Table 15.2.9.Two students are assigned a group project.Each has the option to work or not work to achieve a high grade.The payoffs are shown in the above table.Student 1

Accepted Answer

A) works only if student 2 works. 
B) works regardless of the decision made by student 2. 
C) does not work if student 2 works. 
D) does not work regardless of what student 2 decides. 
E) works only if student 2 does not work. 
A) works only if student 2 works. 
B) works regardless of the decision made by student 2. 
C) does not work if student 2 works. 
D) does not work regardless of what student 2 decides. 
E) works only if student 2 does not work.

Question 5

The distinguishing features of oligopoly are ________ and ________ in the industry.

Accepted Answer

A) no barriers to entry;a small number of firms 
B) barriers to entry;a large number of firms 
C) no barriers to entry;a large number of firms 
D) barriers to entry;one firm 
E) barriers to entry;a small number of firms 
A) no barriers to entry;a small number of firms 
B) barriers to entry;a large number of firms 
C) no barriers to entry;a large number of firms 
D) barriers to entry;one firm 
E) barriers to entry;a small number of firms

Question 6

A Nash equilibrium occurs when

Accepted Answer

A) there is a clear strategy for each player independent of the other player's actions. 
B) each player takes the best possible action given the other player's action. 
C) each player complies with the collusive agreement. 
D) you cooperate until the other player cheats, and then you cheat forever. 
E) none of the above. 
A) there is a clear strategy for each player independent of the other player's actions. 
B) each player takes the best possible action given the other player's action. 
C) each player complies with the collusive agreement. 
D) you cooperate until the other player cheats, and then you cheat forever. 
E) none of the above.

Question 7

A strategy in which a player cooperates in the current period if the other player cooperated in the previous period,but the player cheats in the current period if the other player cheated in the previous period is called a

Accepted Answer

A) tit-for-tat strategy. 
B) trigger strategy. 
C) duopoly strategy. 
D) dominant firm strategy. 
E) Nash strategy. 
A) tit-for-tat strategy. 
B) trigger strategy. 
C) duopoly strategy. 
D) dominant firm strategy. 
E) Nash strategy.

Question 8

If there is a successful collusive agreement in a duopoly to maximize profit,

Accepted Answer

A) the market price will equal the marginal cost of production. 
B) the market price will equal the average total cost of production. 
C) the price will be the same as the price in a perfectly competitive market. 
D) the price will be the monopoly price. 
E) the market marginal revenue will be the same as the demand curve. 
A) the market price will equal the marginal cost of production. 
B) the market price will equal the average total cost of production. 
C) the price will be the same as the price in a perfectly competitive market. 
D) the price will be the monopoly price. 
E) the market marginal revenue will be the same as the demand curve.

Question 9

Limit pricing is the practice of

Accepted Answer

A) limiting the amount that can be purchased to drive up prices. 
B) threatening to go to the limit in a price war if someone enters your market. 
C) charging a monopoly price, but producing a quantity greater than the quantity at which MC = MR. 
D) setting the price at the highest level that inflicts a loss on the entrant. 
E) charging a price higher than the monopoly price, but producing a quantity greater than the quantity at which MC = MR. 
A) limiting the amount that can be purchased to drive up prices. 
B) threatening to go to the limit in a price war if someone enters your market. 
C) charging a monopoly price, but producing a quantity greater than the quantity at which MC = MR. 
D) setting the price at the highest level that inflicts a loss on the entrant. 
E) charging a price higher than the monopoly price, but producing a quantity greater than the quantity at which MC = MR.

Question 10

Use the table below to answer the following questions.
Table 15.2.2
  
-Table 15.2.2 gives the payoff matrix in terms of economic profit for firms A and B when there are two strategies facing each firm: (1)charge a low price,or (2)charge a high price.Refer to the nonrepeated game in the table.If both firms could successfully collude,what would be firm A's economic profit?

Accepted Answer

A) -$10 
B) $2 
C) $10 
D) $20 
E) $5 
A) -$10 
B) $2 
C) $10 
D) $20 
E) $5

Question 11

Complete the following sentence.A duopoly is

Accepted Answer

A) a market where three dominant firms collude to decide the profit-maximizing price. 
B) a market where two firms compete for profit and market share. 
C) the same as a monopoly. 
D) not an oligopoly. 
E) a market with two distinct products. 
A) a market where three dominant firms collude to decide the profit-maximizing price. 
B) a market where two firms compete for profit and market share. 
C) the same as a monopoly. 
D) not an oligopoly. 
E) a market with two distinct products.

Question 12

Consider the cartel of Trick and Gear.The game is repeated indefinitely and each firm employs a tit-for-tat strategy.The equilibrium is called

Accepted Answer

A) a credible strategy equilibrium. 
B) a dominant player equilibrium. 
C) a duopoly equilibrium. 
D) a trigger strategy equilibrium. 
E) a cooperative equilibrium. 
A) a credible strategy equilibrium. 
B) a dominant player equilibrium. 
C) a duopoly equilibrium. 
D) a trigger strategy equilibrium. 
E) a cooperative equilibrium.

Question 13

In the research and development game of chicken

Accepted Answer

A) the best strategy for each player is to undertake research and development. 
B) the best strategy is for neither player to undertake research and development. 
C) the equilibrium is for only one firm to undertake research and development. 
D) the equilibrium is unique. 
E) no solution can be found. 
A) the best strategy for each player is to undertake research and development. 
B) the best strategy is for neither player to undertake research and development. 
C) the equilibrium is for only one firm to undertake research and development. 
D) the equilibrium is unique. 
E) no solution can be found.

Question 14

Table 15.2.8
   
Refer to the table below to answer the following questions.
-Refer to Table 15.2.8.Libertyville has two optometrists,Dr.Smith and Dr.Jones.Each optometrist can choose to advertise his service or not.The incomes of each optometrist,in thousands of dollars,are given in the payoff matrix above.Which of the following statements correctly describes Dr.Smith's strategy given what Dr.Jones may do?

Accepted Answer

A) Dr.Smith advertises no matter what Dr.Jones does. 
B) Dr.Smith does not advertise no matter what Dr.Jones does. 
C) Dr.Smith advertises only if Dr.Jones doesn't advertise. 
D) Dr.Smith advertises only if Dr.Jones advertises. 
E) Dr.Smith does not advertise if Dr.Jones advertises. 
A) Dr.Smith advertises no matter what Dr.Jones does. 
B) Dr.Smith does not advertise no matter what Dr.Jones does. 
C) Dr.Smith advertises only if Dr.Jones doesn't advertise. 
D) Dr.Smith advertises only if Dr.Jones advertises. 
E) Dr.Smith does not advertise if Dr.Jones advertises.

Question 15

Firm X is competing in an oligopolistic industry.When firm X increases its price

Accepted Answer

A) then rival firm Y will always increase its price. 
B) then rival firm Y will increase its market share if firm Y also increases its price. 
C) then the behaviour of rival firm Y will have no impact on the market share of firm X. 
D) the market as a whole will become less profitable. 
E) the rival firm Y will increase its market share if firm Y keeps a constant price. 
A) then rival firm Y will always increase its price. 
B) then rival firm Y will increase its market share if firm Y also increases its price. 
C) then the behaviour of rival firm Y will have no impact on the market share of firm X. 
D) the market as a whole will become less profitable. 
E) the rival firm Y will increase its market share if firm Y keeps a constant price.

Question 16

Use the table below to answer the following question.
Table 15.3.1
  
-Consider the game shown in Table 15.3.1 based on potential gas prices between two competitors.The game is played repeatedly and the result is a cooperative equilibrium.The payoffs in the table show the economic profit of the firms.The most likely outcome is

Accepted Answer

A) a cycle of first $0.95/litre, then $1.15/litre, etc. 
B) Hare sets her prices at $1.15/litre, and Turtle sets his at $0.95/litre. 
C) Hare sets her prices at $0.95/litre, and Turtle sets his at $1.15/litre. 
D) both set their prices at $1.15/litre. 
E) both set their prices at $0.95/litre. 
A) a cycle of first $0.95/litre, then $1.15/litre, etc. 
B) Hare sets her prices at $1.15/litre, and Turtle sets his at $0.95/litre. 
C) Hare sets her prices at $0.95/litre, and Turtle sets his at $1.15/litre. 
D) both set their prices at $1.15/litre. 
E) both set their prices at $0.95/litre.

Question 17

Use the table below to answer the following questions.
Table 15.2.4
  
-Refer to Table 15.2.4.The marketers of Budweiser Light beer and Miller Lite beer must decide whether or not to offer new advertising campaigns promoting their products.The payoffs in the table are the economic profit made by Bud and Miller.Which one of the following observations is correct?

Accepted Answer

A) This is a game described as a prisoners' dilemma. 
B) If Bud offers a new advertising campaign and Miller does not, Bud will earn a $100 profit. 
C) If Bud offers a new advertising campaign, then Miller will be better off by not offering a new advertising campaign. 
D) Both Bud and Miller would be better off if they could collude and agree to coordinate their new advertising campaigns. 
E) If Miller does not offer a new advertising campaign, then Bud is better off if it doesn't offer a new advertising campaign. 
A) This is a game described as a prisoners' dilemma. 
B) If Bud offers a new advertising campaign and Miller does not, Bud will earn a $100 profit. 
C) If Bud offers a new advertising campaign, then Miller will be better off by not offering a new advertising campaign. 
D) Both Bud and Miller would be better off if they could collude and agree to coordinate their new advertising campaigns. 
E) If Miller does not offer a new advertising campaign, then Bud is better off if it doesn't offer a new advertising campaign.

Exam 15: Oligopoly

A dominant strategy equilibrium occurs when

All of the following except ________ are noncriminal offences under the Competition Act.

Table 15.2.9 Refer to the table below to answer the following question. -Refer to Table 15.2.9.Two students are assigned a group project.Each has the option to work or not work to achieve a high grade.The payoffs are shown in the above table.Student 1

The distinguishing features of oligopoly are ________ and ________ in the industry.

A Nash equilibrium occurs when

A strategy in which a player cooperates in the current period if the other player cooperated in the previous period,but the player cheats in the current period if the other player cheated in the previous period is called a

If there is a successful collusive agreement in a duopoly to maximize profit,

Limit pricing is the practice of

Complete the following sentence.A duopoly is

Consider the cartel of Trick and Gear.The game is repeated indefinitely and each firm employs a tit-for-tat strategy.The equilibrium is called

In the research and development game of chicken

Firm X is competing in an oligopolistic industry.When firm X increases its price

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

Externalities

Public Goods and Common Resources

Markets for Factors of Production

Economic Inequality

Measuring GDP and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers: The Keynesian Model

Canadian Inflation, Unemployment, and Business Cycle

Fiscal Policy

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Filters

The distinguishing features of oligopoly are and in the industry.