Question 1

Which of the following questions about predatory pricing remains unresolved?

Accepted Answer

A) Are the courts capable of determining which price cuts are competitive and which are predatory? 
B) Are the courts capable of determining which price cuts are good for consumers? 
C) Is predatory pricing ever a profitable business strategy? 
D) All of the above questions about predatory pricing are unresolved. 
A) Are the courts capable of determining which price cuts are competitive and which are predatory? 
B) Are the courts capable of determining which price cuts are good for consumers? 
C) Is predatory pricing ever a profitable business strategy? 
D) All of the above questions about predatory pricing are unresolved.

Question 2

To increase their individual profits, members of a cartel have an incentive to

Accepted Answer

A) charge a higher price than the other members of the cartel. 
B) increase production above the level agreed upon. 
C) ignore the choices made by the other firms and act as a monopolist. 
D) charge the same price a monopolist would charge. 
A) charge a higher price than the other members of the cartel. 
B) increase production above the level agreed upon. 
C) ignore the choices made by the other firms and act as a monopolist. 
D) charge the same price a monopolist would charge.

Question 3

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 if Brian and Matt will play this game only once?

Accepted Answer

A) The Nash equilibrium is the high price. 
B) A Nash equilibrium cannot be established unless Brian and Matt collude. 
C) A Nash equilibrium cannot be established without the players repeating the game. 
D) The Nash equilibrium price is the low price. 
A) The Nash equilibrium is the high price. 
B) A Nash equilibrium cannot be established unless Brian and Matt collude. 
C) A Nash equilibrium cannot be established without the players repeating the game. 
D) The Nash equilibrium price is the low price.

Question 4

Table 17-20
Nadia and Maddie are two college roommates who both prefer a clean common space in their dorm room, but neither enjoys cleaning. The roommates must each make a decision to either clean or not clean the dorm room's common space. The payoff table for this situation is provided below, where the higher a player's payoff number, the better off that player is. The payoffs in each cell are shown as (payoff for Nadia, payoff for Maddie).  
-Refer to Table 17-20. If Maddie chooses not to clean, then Nadia will

Accepted Answer

A) clean, and Nadia's payoff will be 50. 
B) not clean, and Nadia's payoff will be 10. 
C) clean, and Nadia's payoff will be 7. 
D) not clean, and Nadia's payoff will be 30. 
A) clean, and Nadia's payoff will be 50. 
B) not clean, and Nadia's payoff will be 10. 
C) clean, and Nadia's payoff will be 7. 
D) not clean, and Nadia's payoff will be 30.

Question 5

To move the allocation of resources closer to the social optimum, policymakers should typically try to induce firms in an oligopoly to

Accepted Answer

A) collude with each other. 
B) form various degrees of cartels. 
C) compete rather than cooperate with each other. 
D) cooperate rather than compete with each other. 
A) collude with each other. 
B) form various degrees of cartels. 
C) compete rather than cooperate with each other. 
D) cooperate rather than compete with each other.

Question 6

Which of the following statements is false?

Accepted Answer

A) The Clayton Act allows triple damages in civil lawsuits in order to encourage lawsuits against conspiring oligopolists. 
B) Many economists defend the practice of resale price maintenance on the grounds that it may help solve a free-rider problem. 
C) Most economists agree that predatory pricing is a profitable business strategy that usually preserves market power. 
D) The U.S. Supreme Court's view that the practice of tying usually allows a firm to extend its market power is not generally supported by economic theory. 
A) The Clayton Act allows triple damages in civil lawsuits in order to encourage lawsuits against conspiring oligopolists. 
B) Many economists defend the practice of resale price maintenance on the grounds that it may help solve a free-rider problem. 
C) Most economists agree that predatory pricing is a profitable business strategy that usually preserves market power. 
D) The U.S. Supreme Court's view that the practice of tying usually allows a firm to extend its market power is not generally supported by economic theory.

Question 7

As the number of firms in an oligopoly becomes very large, the price effect disappears.

Accepted Answer

A) True 
 B)False

Question 8

A manufacturer of light bulbs sells its products to retail stores and requires the stores to sell the bulbs to customers for $2 per bulb. This practice is known as tying.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following statements about oligopolies is not correct?

Accepted Answer

A) An oligopolistic market has only a few sellers. 
B) The actions of any one seller can have a large impact on the profits of all other sellers. 
C) Oligopolistic firms are interdependent in a way that competitive firms are not. 
D) Unlike monopolies and monopolistically competitive markets, oligopolies prices do not exceed their marginal revenues. 
A) An oligopolistic market has only a few sellers. 
B) The actions of any one seller can have a large impact on the profits of all other sellers. 
C) Oligopolistic firms are interdependent in a way that competitive firms are not. 
D) Unlike monopolies and monopolistically competitive markets, oligopolies prices do not exceed their marginal revenues.

Question 10

Why are the actions of firms interdependent in an oligopoly market but not in a monopolistically competitive market?

Accepted Answer

Because there are only a few firms in an

Question 11

Table 17-15
This table shows a game played between two players, A and B. The payoffs in the table are shown as (Payoff to A, Payoff to B).  
-Refer to Table 17-15. Which of the following statements regarding this game is true?

Accepted Answer

A) Both players have a dominant strategy. 
B) Player A has a dominant strategy, but player B does not have a dominant strategy. 
C) Player A does not have a dominant strategy, but player B does have a dominant strategy. 
D) Neither player has a dominant strategy. 
A) Both players have a dominant strategy. 
B) Player A has a dominant strategy, but player B does not have a dominant strategy. 
C) Player A does not have a dominant strategy, but player B does have a dominant strategy. 
D) Neither player has a dominant strategy.

Question 12

Scenario 17-2.
​
Imagine that two oil companies, BQ and Exxoff, own adjacent oil fields. Under the fields is a common pool of oil worth $144 million. Drilling a well to recover oil costs $5 million per well. If each company drills one well, each will get half of the oil and earn a $67 million profit ($72 million in revenue - $5 million in costs). Assume that having X percent of the total wells means that a company will collect X percent of the total revenue.
-Refer to Scenario 17-2. If BQ and Exxoff are able to successfully cooperate to maximize their joint profits, BQ will earn

Accepted Answer

A) $43 million and Exxoff will earn $86 million. 
B) $62 million and Exxoff will earn $62 million. 
C) $67 million and Exxoff will earn $67 million. 
D) $86 million and Exxoff will earn $43 million. 
A) $43 million and Exxoff will earn $86 million. 
B) $62 million and Exxoff will earn $62 million. 
C) $67 million and Exxoff will earn $67 million. 
D) $86 million and Exxoff will earn $43 million.

Question 13

Scenario 17-3.
​
Consider two countries, Kinglandia and Rovinastan, that are engaged in an arms race. Each country must decide whether to build new weapons or to disarm existing weapons. Each country prefers to have more arms than the other because a large arsenal gives it more influence in world affairs. But each country also prefers to live in a world safe from the other country's weapons. The following table shows the possible outcomes for each decision combination. The numbers in each cell represent the country's ranking of the outcome (10 = best outcome, 1 = worst outcome).  
-Refer to Scenario 17-3. If Rovinastan chooses to disarm its existing weapons, then Kinglandia will

Accepted Answer

A) disarm to increase its influence in world affairs. 
B) disarm to promote world peace. 
C) build new weapons to promote world peace. 
D) build new weapons to increase its influence in world affairs. 
A) disarm to increase its influence in world affairs. 
B) disarm to promote world peace. 
C) build new weapons to promote world peace. 
D) build new weapons to increase its influence in world affairs.

Question 14

Juan Pablo and Zak 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 $8,000. 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 $12,000 and the other will earn $10,000. If one advertises on TV and the other does not advertise, then the one advertising on TV will earn $22,000 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 Juan Pablo will

Accepted Answer

A) advertise on TV and earn $8,000. 
B) advertise on radio and earn $14,000. 
C) advertise on TV and earn $22,000. 
D) not advertise and earn $20,000. 
A) advertise on TV and earn $8,000. 
B) advertise on radio and earn $14,000. 
C) advertise on TV and earn $22,000. 
D) not advertise and earn $20,000.

Question 15

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. If the market for gasoline in Driveaway is perfectly competitive, then the equilibrium price of gasoline is

Accepted Answer

A) $0 and the equilibrium quantity is 400 gallons. 
B) $1 and the equilibrium quantity is 350 gallons. 
C) $2 and the equilibrium quantity is 300 gallons. 
D) $4 and the equilibrium quantity is 200 gallons. 
A) $0 and the equilibrium quantity is 400 gallons. 
B) $1 and the equilibrium quantity is 350 gallons. 
C) $2 and the equilibrium quantity is 300 gallons. 
D) $4 and the equilibrium quantity is 200 gallons.

Question 16

To function as a monopoly, OPEC and other cartels rely on __________ among members.

Accepted Answer

The answer of To function as a monopoly, OPEC and...

Question 17

The prisoners' dilemma game

Accepted Answer

A) provides insight into why cooperation is individually rational. 
B) provides insight into why cooperation is difficult. 
C) is a game in which neither player has a dominant strategy. 
D) is a game in which exactly one of the two players has a dominant strategy. 
A) provides insight into why cooperation is individually rational. 
B) provides insight into why cooperation is difficult. 
C) is a game in which neither player has a dominant strategy. 
D) is a game in which exactly one of the two players has a dominant strategy.

Question 18

Figure 17-5. Two companies, ABC and QRS, are sellers in the same market. Each company decides whether to charge a high price or a low price. In the figure, the dollar amounts are payoffs and they represent annual profits for the two companies.  
-Refer to Figure 17-5. If this game is played only once, then the most likely outcome is that

Accepted Answer

A) both firms charge a low price. 
B) ABC charges a low price and QRS charges a high price. 
C) ABC charges a high price and QRS charges a low price. 
D) both firms charge a high price. 
A) both firms charge a low price. 
B) ABC charges a low price and QRS charges a high price. 
C) ABC charges a high price and QRS charges a low price. 
D) both firms charge a high price.

Question 19

In the prisoners' dilemma,

Accepted Answer

A) the prisoners easily collude in order to achieve the best possible payoff for both. 
B) only one player has a dominant strategy. 
C) when each player chooses his dominant strategy the players achieve the best joint outcome. 
D) when each player chooses his dominant strategy the players reach a Nash equilibrium. 
A) the prisoners easily collude in order to achieve the best possible payoff for both. 
B) only one player has a dominant strategy. 
C) when each player chooses his dominant strategy the players achieve the best joint outcome. 
D) when each player chooses his dominant strategy the players reach a Nash equilibrium.

Question 20

Table 17-28
Suppose that two firms determine that each could lower its costs and increase its profits if both reduced their advertising budgets. But in order for the plan to work, each firm must agree to refrain from advertising. Each firm believes that advertising works by increasing the demand for the firm's product, but each firm also believes that if neither firm advertises, the cost savings will outweigh the lost sales. The table below lists each firm's individual profits:
Firm A
Breaks agreement Maintains agreement
and advertises and does not advertise  
-Refer to Table 17-28. Does either Firm A or Firm B have a dominant strategy?

Accepted Answer

A) Firm A has a dominant strategy, but Firm B does not. 
B) Firm A does not have a dominant strategy, but Firm B does. 
C) Neither Firm A nor Firm B has a dominant strategy. 
D) Both Firm A and Firm B have a dominant strategy. 
A) Firm A has a dominant strategy, but Firm B does not. 
B) Firm A does not have a dominant strategy, but Firm B does. 
C) Neither Firm A nor Firm B has a dominant strategy. 
D) Both Firm A and Firm B have a dominant strategy.

Exam 17: Oligopoly

Which of the following questions about predatory pricing remains unresolved?

To increase their individual profits, members of a cartel have an incentive to

To move the allocation of resources closer to the social optimum, policymakers should typically try to induce firms in an oligopoly to

Which of the following statements is false?

As the number of firms in an oligopoly becomes very large, the price effect disappears.

A manufacturer of light bulbs sells its products to retail stores and requires the stores to sell the bulbs to customers for $2 per bulb. This practice is known as tying.

Which of the following statements about oligopolies is not correct?

Why are the actions of firms interdependent in an oligopoly market but not in a monopolistically competitive market?

Table 17-15 This table shows a game played between two players, A and B. The payoffs in the table are shown as (Payoff to A, Payoff to B). -Refer to Table 17-15. Which of the following statements regarding this game is true?

To function as a monopoly, OPEC and other cartels rely on __________ among members.

The prisoners' dilemma game

In the prisoners' dilemma,

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

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