Question 1

As the number of firms in an oligopoly increases, the

Accepted Answer

A) price approaches marginal cost, and the quantity approaches the socially efficient level. 
B) price and quantity approach the monopoly levels. 
C) price effect exceeds the output effect. 
D) individual firms' profits increase. 
A) price approaches marginal cost, and the quantity approaches the socially efficient level. 
B) price and quantity approach the monopoly levels. 
C) price effect exceeds the output effect. 
D) individual firms' profits increase.

Question 2

In the prisoners' dilemma game, self-interest leads

Accepted Answer

A) each prisoner to confess. 
B) to a breakdown of any agreement that the prisoners might have made before being questioned. 
C) to an outcome that is not particularly good for either prisoner. 
D) All of the above are correct. 
A) each prisoner to confess. 
B) to a breakdown of any agreement that the prisoners might have made before being questioned. 
C) to an outcome that is not particularly good for either prisoner. 
D) All of the above are correct.

Question 3

As a group, oligopolists earn the highest profit when they

Accepted Answer

A) achieve a Nash equilibrium. 
B) produce a total quantity of output that falls short of the Nash-equilibrium total quantity. 
C) produce a total quantity of output that exceeds the Nash-equilibrium total quantity. 
D) charge a price that falls short of the Nash-equilibrium price. 
A) achieve a Nash equilibrium. 
B) produce a total quantity of output that falls short of the Nash-equilibrium total quantity. 
C) produce a total quantity of output that exceeds the Nash-equilibrium total quantity. 
D) charge a price that falls short of the Nash-equilibrium price.

Question 4

Two suspected drug dealers are stopped by the highway patrol for speeding. The officer searches the car and finds a small bag of marijuana and arrests the two. During the interrogation, each is separately offered the following: "If you confess to dealing drugs and testify against your partner, you will be given immunity and released while your partner will get 10 years in prison. If you both confess, you will each get 5 years." If neither confesses, there is no evidence of drug dealing, and the most they could get is one year each for possession of marijuana. If each suspected drug dealer follows a dominant strategy, what should he/she do?

Accepted Answer

A) Confess regardless of the partner's decision 
B) Confess only if the partner confesses 
C) Don't confess regardless of the partner's decision 
D) Don't confess only if the partner doesn't confess 
A) Confess regardless of the partner's decision 
B) Confess only if the partner confesses 
C) Don't confess regardless of the partner's decision 
D) Don't confess only if the partner doesn't confess

Question 5

Table 17-26
Two prescription drug manufacturers (Firm A and Firm B) are faced with lawsuits from states to recover the healthcare related expenses associated with side-effects from its drugs. Each drug manufacturer has evidence that indicates that taking its prescription drug causes liver failure. State prosecutors do not have access to the same data used by drug manufacturers and thus will have difficulty recovering full costs without the help of at least one of the drug manufacturer's studies. Each firm has been presented with an opportunity to lower its liability in the suit if it cooperates with attorneys representing the states.  
-Refer to Table 17-26. Which of the following statements is correct?

Accepted Answer

A) Neither firm A nor firm B has a dominant strategy. 
B) Both firm A and firm B have a dominant strategy. 
C) If this game were repeated, these firms would choose different strategies than they choose in a one-period game. 
D) This game is a typical prisoner's dilemma in which the firms are worse off by making decisions in their own self-interest. 
A) Neither firm A nor firm B has a dominant strategy. 
B) Both firm A and firm B have a dominant strategy. 
C) If this game were repeated, these firms would choose different strategies than they choose in a one-period game. 
D) This game is a typical prisoner's dilemma in which the firms are worse off by making decisions in their own self-interest.

Question 6

Which of the following groups or entities has the authority to initiate legal suits to enforce antitrust laws?

Accepted Answer

A) the U.S. Justice Department 
B) private citizens 
C) corporations 
D) All of the above are correct. 
A) the U.S. Justice Department 
B) private citizens 
C) corporations 
D) All of the above are correct.

Question 7

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. If there is only one digital cable TV company in this market, what price would it charge for a premium digital channel subscription to maximize its profit?

Accepted Answer

A) $30 
B) $60 
C) $90 
D) $150 
A) $30 
B) $60 
C) $90 
D) $150

Question 8

Cooperation is easier to achieve in __________.

Accepted Answer

The answer of Cooperation is easier to achieve in __________....

Question 9

The Sherman Antitrust Act was passed in

Accepted Answer

A) 1836. 
B) 1890. 
C) 1914. 
D) 1946. 
A) 1836. 
B) 1890. 
C) 1914. 
D) 1946.

Question 10

Table 17-6
Imagine a small town in which only two residents, Kunal and Naj, own wells that produce safe drinking water. Each week Kunal and Naj work together to decide how many gallons of water to pump, to bring the water to town, and to sell it at whatever price the market will bear. Assume Kunal and Naj can pump as much water as they want without cost so that the marginal cost of water equals zero.
The weekly town demand schedule and total revenue schedule for water are shown in the table below.  
-Refer to Table 17-6. Since Kunal and Naj operate as a profit-maximizing monopoly in the market for water, what price will they charge for water?

Accepted Answer

A) $2 
B) $4 
C) $6 
D) $7 
A) $2 
B) $4 
C) $6 
D) $7

Question 11

Table 17-7
The information in the table below shows the total demand for internet radio subscriptions in a small urban market. Assume that each company that provides these subscriptions incurs an annual fixed cost of $20,000 (per year) and that the marginal cost of providing an additional subscription is always $16.  
-Refer to Table 17-7. Suppose there is only one internet radio provider in this market and it seeks to maximize its profit. The company will

Accepted Answer

A) sell 2,000 subscriptions and charge a price of $48 for each subscription. 
B) sell 3,000 subscriptions and charge a price of $40 for each subscription. 
C) sell 4,000 subscriptions and charge a price of $32 for each subscription. 
D) sell 5,000 subscriptions and charge a price of $24 for each subscription. 
A) sell 2,000 subscriptions and charge a price of $48 for each subscription. 
B) sell 3,000 subscriptions and charge a price of $40 for each subscription. 
C) sell 4,000 subscriptions and charge a price of $32 for each subscription. 
D) sell 5,000 subscriptions and charge a price of $24 for each subscription.

Question 12

In markets characterized by oligopoly,

Accepted Answer

A) the oligopolists earn the highest profit when they cooperate and behave like a monopolist. 
B) collusive agreements will always prevail. 
C) collective profits are always lower with cartel arrangements than they are without cartel arrangements. 
D) pursuit of self-interest by profit-maximizing firms always maximizes collective profits in the market. 
A) the oligopolists earn the highest profit when they cooperate and behave like a monopolist. 
B) collusive agreements will always prevail. 
C) collective profits are always lower with cartel arrangements than they are without cartel arrangements. 
D) pursuit of self-interest by profit-maximizing firms always maximizes collective profits in the market.

Question 13

Predatory pricing occurs when

Accepted Answer

A) firms collude to set prices. Economists are certain this practice is profitable. 
B) firms collude to set prices. Economists are skeptical that this practice is profitable. 
C) A monopolist decreases its prices to maintain its monopoly. Economists are certain this practice is profitable. 
D) A monopolist decreases its prices to maintain its monopoly. Economists are skeptical that this practice is profitable. 
A) firms collude to set prices. Economists are certain this practice is profitable. 
B) firms collude to set prices. Economists are skeptical that this practice is profitable. 
C) A monopolist decreases its prices to maintain its monopoly. Economists are certain this practice is profitable. 
D) A monopolist decreases its prices to maintain its monopoly. Economists are skeptical that this practice is profitable.

Question 14

​A dominant strategy exists for at least one player in every game.

Accepted Answer

A) True 
 B)False

Question 15

In an oligopoly, the total output produced in the market is

Accepted Answer

A) higher than the total output that would be produced if the market were a monopoly and higher than the total output that would be produced if the market were perfectly competitive. 
B) higher than the total output that would be produced if the market were a monopoly but lower than the total output that would be produced if the market were perfectly competitive. 
C) lower than the total output that would be produced if the market were a monopoly but higher than the total output that would be produced if the market were perfectly competitive. 
D) lower than the total output that would be produced if the market were a monopoly and lower than the total output that would be produced if the market were perfectly competitive. 
A) higher than the total output that would be produced if the market were a monopoly and higher than the total output that would be produced if the market were perfectly competitive. 
B) higher than the total output that would be produced if the market were a monopoly but lower than the total output that would be produced if the market were perfectly competitive. 
C) lower than the total output that would be produced if the market were a monopoly but higher than the total output that would be produced if the market were perfectly competitive. 
D) lower than the total output that would be produced if the market were a monopoly and lower than the total output that would be produced if the market were perfectly competitive.

Question 16

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. The dominant strategy for ABC is to

Accepted Answer

A) charge a high price, and the dominant strategy for QRS is to charge a high price. 
B) charge a high price, and the dominant strategy for QRS is to charge a low price. 
C) charge a low price, and the dominant strategy for QRS is to charge a high price. 
D) charge a low price, and the dominant strategy for QRS is to charge a low price. 
A) charge a high price, and the dominant strategy for QRS is to charge a high price. 
B) charge a high price, and the dominant strategy for QRS is to charge a low price. 
C) charge a low price, and the dominant strategy for QRS is to charge a high price. 
D) charge a low price, and the dominant strategy for QRS is to charge a low price.

Question 17

Figure 17-4. Aaron and Ed are roommates. After a big snowstorm, their driveway needs to be shoveled. Each person has to decide whether to take part in shoveling the driveway. At the end of the day, either the driveway will be shoveled (if one or both roommates take part in shoveling), or it will remain unshoveled (if neither roommate shovels). With happiness measured on a scale of 1 (very unhappy) to 10 (very happy), the possible outcomes are as follows:  
-Refer to Figure 17-4. If this game is played only once, then which of the following outcomes is the most likely one?

Accepted Answer

A) Aaron and Ed both shovel. 
B) Aaron shovels and Ed does not shovel. 
C) Ed shovels and Aaron does not shovel. 
D) All of the above outcomes are equally likely. 
A) Aaron and Ed both shovel. 
B) Aaron shovels and Ed does not shovel. 
C) Ed shovels and Aaron does not shovel. 
D) All of the above outcomes are equally likely.

Question 18

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. Pursuing its own best interest, HomeMax will

Accepted Answer

A) increase the size of its store and parking lot only if Lopes also increases the size of its store and parking lot. 
B) increase the size of its store and parking lot only if Lopes does not increase the size of its store and parking lot. 
C) increase the size of its store and parking lot regardless of the decision made by Lopes. 
D) not increase the size of its store and parking lot regardless of the decision made by Lopes. 
A) increase the size of its store and parking lot only if Lopes also increases the size of its store and parking lot. 
B) increase the size of its store and parking lot only if Lopes does not increase the size of its store and parking lot. 
C) increase the size of its store and parking lot regardless of the decision made by Lopes. 
D) not increase the size of its store and parking lot regardless of the decision made by Lopes.

Question 19

Scenario 17-6
Assume that a local telecommunications company sells high speed internet access and cable television. The company's only two customers are Taylor and Tim. Taylor is willing to pay $50 per month for high speed internet access and $50 per month for cable television. Tim is willing to pay only $20 per month for high speed internet access, but is willing to pay $70 per month for cable television. Assume that the telecommunications company can provide each of these products at zero marginal cost.
-Refer to Scenario 17-6. If the telecommunications provider is able to use tying to price high speed internet access and cable television, what is the profit-maximizing price to charge for the "tied" good?

Accepted Answer

The answer of Scenario 17-6
Assume that a local telecommunications company...

Question 20

When individuals are damaged by an illegal arrangement to restrain trade, which law allows them to pursue civil action and recover up to three times the damages sustained?

Accepted Answer

A) Trade Damage Act 
B) Clayton Act 
C) Sherman Act 
D) No law allows individuals to pursue civil action and recover up to three times the damages sustained. 
A) Trade Damage Act 
B) Clayton Act 
C) Sherman Act 
D) No law allows individuals to pursue civil action and recover up to three times the damages sustained.

Exam 17: Oligopoly

As the number of firms in an oligopoly increases, the

In the prisoners' dilemma game, self-interest leads

As a group, oligopolists earn the highest profit when they

Which of the following groups or entities has the authority to initiate legal suits to enforce antitrust laws?

Cooperation is easier to achieve in __________.

The Sherman Antitrust Act was passed in

In markets characterized by oligopoly,

Predatory pricing occurs when

​A dominant strategy exists for at least one player in every game.

In an oligopoly, the total output produced in the market is

When individuals are damaged by an illegal arrangement to restrain trade, which law allows them to pursue civil action and recover up to three times the damages sustained?

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 dominant strategy exists for at least one player in every game.