Question 1

Economists claim that a resale price maintenance agreement is not anti-competitive because

Accepted Answer

A) suppliers are never able to exercise noncompetitive market power. 
B) if a supplier has market power, it will be likely to exert that power through wholesale price rather than retail price. 
C) retail markets are inherently noncompetitive. 
D) retail cartel agreements cannot increase retail profits. 
A) suppliers are never able to exercise noncompetitive market power. 
B) if a supplier has market power, it will be likely to exert that power through wholesale price rather than retail price. 
C) retail markets are inherently noncompetitive. 
D) retail cartel agreements cannot increase retail profits.

Question 2

If a certain market were a monopoly, then the monopolist would maximize its profit by producing 4,000 units of output. If, instead, that market were a duopoly, then which of the following outcomes would be most likely if the duopolists successfully collude?

Accepted Answer

A) Each duopolist produces 4,000 units of output. 
B) Each duopolist produces 1,500 units of output. 
C) One duopolist produces 2,400 units of output and the other produces 1,600 units of output. 
D) One duopolist produces 3,000 units of output and the other produces 1,500 units of output. 
A) Each duopolist produces 4,000 units of output. 
B) Each duopolist produces 1,500 units of output. 
C) One duopolist produces 2,400 units of output and the other produces 1,600 units of output. 
D) One duopolist produces 3,000 units of output and the other produces 1,500 units of output.

Question 3

​A Nash Equilibrium always results in the highest total profit for the firms in an oligopoly market.

Accepted Answer

A) True 
 B)False

Question 4

If four firms comprise the entire golf club industry, the market would be

Accepted Answer

A) competitive. 
B) characterized by interdependence of firms. 
C) a duopoly. 
D) a monopoly. 
A) competitive. 
B) characterized by interdependence of firms. 
C) a duopoly. 
D) a monopoly.

Question 5

Hot dog vendors on the beach fail to cooperate with one another on the quantity of hot dogs they should sell to earn monopoly profits. A consequence of their failure is that, relative to the outcome the vendors would like,
(i)the quantity of hot dogs supplied is closer to the socially optimal level.
(ii)the price of hot dogs is closer to marginal cost.
(iii)the hot dog market at the beach is less competitive.

Accepted Answer

A) (i) and (ii) 
B) (ii) and (iii) 
C) (i) and (iii) 
D) (iii) only 
A) (i) and (ii) 
B) (ii) and (iii) 
C) (i) and (iii) 
D) (iii) only

Question 6

Table 17-3
Imagine a small town in a remote area where only two residents, Maria and Miguel, own dairies that produce milk that is safe to drink. Each week Maria and Miguel work together to decide how many gallons of milk to produce. They bring milk to town and sell it at whatever price the market will bear. To keep things simple, suppose that Maria and Miguel can produce as much milk as they want without cost so that the marginal cost is zero. The weekly town demand schedule and total revenue schedule for milk is shown in the table below:  
-Refer to Table 17-3. Suppose that Maria and Miguel work together in order to operate as a profit-maximizing monopolist. How many gallons of milk will be produced and sold?

Accepted Answer

A) 5 gallons 
B) 6 gallons 
C) 7 gallons 
D) 8 gallons 
A) 5 gallons 
B) 6 gallons 
C) 7 gallons 
D) 8 gallons

Question 7

Table 17-12
The table shows the town of Driveaway's demand schedule for gasoline. Assume the town's gasoline seller(s) incurs a cost of $2 for each gallon sold, with no fixed cost.  
-Refer to Table 17-12. Suppose we observe that the price of a gallon of gasoline in Driveaway is $5; we observe as well that a particular seller's profit is $150. Given this observation, which of the following scenarios is most likely?

Accepted Answer

A) The market for gasoline in Driveaway is a monopoly. 
B) There are two identical sellers of gasoline in Driveaway, and the sellers collude. 
C) There are two identical sellers of gasoline in Driveaway, and the sellers do not collude. 
D) There are three identical sellers of gasoline in Driveaway, and the sellers collude. 
A) The market for gasoline in Driveaway is a monopoly. 
B) There are two identical sellers of gasoline in Driveaway, and the sellers collude. 
C) There are two identical sellers of gasoline in Driveaway, and the sellers do not collude. 
D) There are three identical sellers of gasoline in Driveaway, and the sellers collude.

Question 8

Table 17-22
Brian and Matt own the only two bicycle repair shops in town. Each must choose between a low price for repair work and a high price. The annual economic profit from each strategy is indicated in the table. The profits are shown as (Matt, Brian) in each cell.  
-Refer to Table 17-22. Which of the following statements is correct?

Accepted Answer

A) Matt's dominant strategy is to charge a low price. 
B) Brian's dominant strategy is to charge a high price. 
C) The dominant strategy for both Brian and Matt is to charge a low price. 
D) Matt's dominant strategy is to charge a high price. 
A) Matt's dominant strategy is to charge a low price. 
B) Brian's dominant strategy is to charge a high price. 
C) The dominant strategy for both Brian and Matt is to charge a low price. 
D) Matt's dominant strategy is to charge a high price.

Question 9

The essence of an oligopolistic market is that there are only a few sellers.

Accepted Answer

A) True 
 B)False

Question 10

Lori and Maya are competitors in a local market. Each is trying to decide if it is better to advertise on TV, on radio, or not at all. If they both advertise on TV, each will earn a profit of $10,000. If they both advertise on radio, each will earn a profit of $14,000. If neither advertises at all, each will earn a profit of $20,000. If one advertises on TV and other advertises on radio, then the one advertising on TV will earn $16,000 and the other will earn $6,000. If one advertises on TV and the other does not advertise, then the one advertising on TV will earn $30,000 and the other will earn $4,000. If one advertises on radio and the other does not advertise, then the one advertising on radio will earn $24,000 and the other will earn $8,000. If both follow their dominant strategy, then Lori will

Accepted Answer

A) advertise on TV and earn $10,000. 
B) advertise on radio and earn $14,000. 
C) not advertise at all and earn $20,000. 
D) None of the above is correct. Lori and Maya do not have dominant strategies. 
A) advertise on TV and earn $10,000. 
B) advertise on radio and earn $14,000. 
C) not advertise at all and earn $20,000. 
D) None of the above is correct. Lori and Maya do not have dominant strategies.

Question 11

When strategic interactions are important to pricing and production decisions, a typical firm will

Accepted Answer

A) set the price of its product equal to marginal cost. 
B) consider how competing firms might respond to its actions. 
C) generally operate as if it is a monopolist. 
D) consider exiting the market. 
A) set the price of its product equal to marginal cost. 
B) consider how competing firms might respond to its actions. 
C) generally operate as if it is a monopolist. 
D) consider exiting the market.

Question 12

Some business practices that appear to reduce competition, such as resale price maintenance, may have legitimate economic purposes.

Accepted Answer

A) True 
 B)False

Question 13

Economists use game theory to analyze __________.

Accepted Answer

strategic

Question 14

Table 17-37​
Two restaurants with a focus on Mexican dining operate in Texama. Both Mitch's Mexican and Tim's Tacos need to decide whether to add Zesty Queso or Fresh Guacamole to their menus. The circumstances are that each firm wants to add only one of the two choices on their menu. Below you will find the profits for the stores, shown as: (1) the payoff to Mitch; (2) the payoff to Tim.   ​
-Refer to Table 17-37. Based upon the information from the table, if the two firms could coordinate the decisions about product introductions, how much profit would each firm make?​

Accepted Answer

A) ​Each firm would earn 8. 
B) ​Each firm would earn 3. 
C) ​Each firm would earn 5. 
D) ​Each firm would earn 7. 
A) ​Each firm would earn 8. 
B) ​Each firm would earn 3. 
C) ​Each firm would earn 5. 
D) ​Each firm would earn 7.

Question 15

Table 17-13
Two home-improvement stores (Lopes and HomeMax) in a growing urban area are interested in expanding their market share. Both are interested in expanding the size of their store and parking lot to accommodate potential growth in their customer base. The following game depicts the strategic outcomes that result from the game. Increases in annual profits of the two home-improvement stores are shown in the table below.  
-Refer to Table 17-13. If both stores follow a dominant strategy, Lopes's annual profit will grow by

Accepted Answer

A) $0.4 million. 
B) $1.0 million. 
C) $2.0 million. 
D) $3.2 million. 
A) $0.4 million. 
B) $1.0 million. 
C) $2.0 million. 
D) $3.2 million.

Question 16

Table 17-10
The table shows the demand schedule for a particular product.  
-Refer to Table 17-10. Suppose the market for this product is served by two firms who have formed a cartel and are colluding to set the price and quantity in this market. If the marginal cost to produce this product is constant at $40 per unit and there is no fixed cost, then what will the combined profit of the cartel be?

Accepted Answer

A) $15,000 
B) $24,000 
C) $27,000 
D) $63,000 
A) $15,000 
B) $24,000 
C) $27,000 
D) $63,000

Question 17

Table 17-5
The information in the table below shows the total demand for premium-channel digital cable TV subscriptions in a small urban market. Assume that each digital cable TV operator pays a fixed cost of $200,000 (per year) to provide premium digital channels in the market area and that the marginal cost of providing the premium channel service to a household is zero.  
-Refer to Table 17-5. Assume there are two digital cable TV companies operating in this market. If they are able to collude on the quantity of subscriptions that will be sold and on the price that will be charged for subscriptions, then their agreement will stipulate that

Accepted Answer

A) each firm will charge a price of $90 and each firm will sell 4,500 subscriptions. 
B) each firm will charge a price of $90 and each firm will sell 9,000 subscriptions. 
C) each firm will charge a price of $120 and each firm will sell 3,000 subscriptions. 
D) each firm will charge a price of $150 and each firm will sell 1,500 subscriptions. 
A) each firm will charge a price of $90 and each firm will sell 4,500 subscriptions. 
B) each firm will charge a price of $90 and each firm will sell 9,000 subscriptions. 
C) each firm will charge a price of $120 and each firm will sell 3,000 subscriptions. 
D) each firm will charge a price of $150 and each firm will sell 1,500 subscriptions.

Question 18

Which of the following is necessarily a problem with antitrust laws?

Accepted Answer

A) They may target a business whose practices appear to be anti-competitive but in fact have legitimate purposes. 
B) They may encourage firms to collude and reduce social welfare compared to the unregulated market. 
C) They reduce the effectiveness of the market to self-regulate. 
D) They are enforced by agencies whose self-interest contradicts the interests of society as a whole. 
A) They may target a business whose practices appear to be anti-competitive but in fact have legitimate purposes. 
B) They may encourage firms to collude and reduce social welfare compared to the unregulated market. 
C) They reduce the effectiveness of the market to self-regulate. 
D) They are enforced by agencies whose self-interest contradicts the interests of society as a whole.

Question 19

Outline the purpose of antitrust laws. What do they accomplish?

Accepted Answer

The purpose of antitrust laws

Question 20

Tying is always profitable for a monopoly.

Accepted Answer

A) True 
 B)False

Exam 17: Oligopoly

Economists claim that a resale price maintenance agreement is not anti-competitive because

If a certain market were a monopoly, then the monopolist would maximize its profit by producing 4,000 units of output. If, instead, that market were a duopoly, then which of the following outcomes would be most likely if the duopolists successfully collude?

​A Nash Equilibrium always results in the highest total profit for the firms in an oligopoly market.

If four firms comprise the entire golf club industry, the market would be

The essence of an oligopolistic market is that there are only a few sellers.

When strategic interactions are important to pricing and production decisions, a typical firm will

Some business practices that appear to reduce competition, such as resale price maintenance, may have legitimate economic purposes.

Economists use game theory to analyze __________.

Which of the following is necessarily a problem with antitrust laws?

Outline the purpose of antitrust laws. What do they accomplish?

Tying is always profitable for a monopoly.

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Applications: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers in Microeconomics

Measuring a Nation S Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters

A Nash Equilibrium always results in the highest total profit for the firms in an oligopoly market.