Question 1

The Sherman Antitrust Act prohibits executives of competing companies from

Accepted Answer

A) fixing prices, but it does not prohibit them from talking about fixing prices. 
B) even talking about fixing prices. 
C) sharing with one another their knowledge of game theory. 
D) failing to stand by agreements that they had made with one another. 
A) fixing prices, but it does not prohibit them from talking about fixing prices. 
B) even talking about fixing prices. 
C) sharing with one another their knowledge of game theory. 
D) failing to stand by agreements that they had made with one another.

Question 2

Table 17-31
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 17-31. Briefly explain why each duopolist earns a lower profit at the Nash equilibrium than if they cooperated to produce the monopoly output.

Accepted Answer

The monopoly outcome occurs at the highe

Question 3

A law that encourages market competition by prohibiting firms from gaining or exercising excessive market power is

Accepted Answer

A) a patent. 
B) impossible to enforce. 
C) an antitrust law. 
D) an externality law. 
A) a patent. 
B) impossible to enforce. 
C) an antitrust law. 
D) an externality law.

Question 4

If all of the firms in an oligopoly successfully collude and form a cartel, then total profit for the cartel is equal to what it would be if the market were a monopoly.

Accepted Answer

A) True 
 B)False

Question 5

What effect does the number of firms in an oligopoly have on the characteristics of the market?

Accepted Answer

As the number of firms increas

Question 6

Which of the following examples illustrates an oligopoly market?

Accepted Answer

A) a farmers' market with many individuals selling sweet corn and tomatoes 
B) a city whose electrical service is provided by one electric co-operative 
C) a city with two firms who are licensed to sell school uniforms for the local schools 
D) a city with many independently-owned hair styling salons 
A) a farmers' market with many individuals selling sweet corn and tomatoes 
B) a city whose electrical service is provided by one electric co-operative 
C) a city with two firms who are licensed to sell school uniforms for the local schools 
D) a city with many independently-owned hair styling salons

Question 7

​Table 17-36
The information in the table shows the total demand for water service in Takoma. Assume that there are two companies operating in Takoma. Each company that provides these services incurs an annual fixed cost of $400 and that the marginal cost of providing the service to each customer is exactly $2.00. Figures listed are for an annual service contract.
​  
-​Refer to Table 17-36. If there were only one water service provide in this market, and this single firm maximizes profits, the company will

Accepted Answer

A) ​sell 500 service contracts and charge a price of $35 for each contract. 
B) ​sell 600 service contracts and charge a price of $30 for each contract. 
C) ​sell 700 service contracts and charge a price of $25 for each contract. 
D) ​sell 800 service contracts and charge a price of $20 for each contract. 
A) ​sell 500 service contracts and charge a price of $35 for each contract. 
B) ​sell 600 service contracts and charge a price of $30 for each contract. 
C) ​sell 700 service contracts and charge a price of $25 for each contract. 
D) ​sell 800 service contracts and charge a price of $20 for each contract.

Question 8

Table 17-18
This table shows a game played between two firms, Firm A and Firm B. In this game each firm must decide how much output (Q) to produce: 10 units or 12 units. The profit for each firm is given in the table as (Profit for Firm A, Profit for Firm B).  
-Refer to Table 17-18. The dominant strategy For Firm A is to produce

Accepted Answer

A) 10 units and the dominant strategy for Firm B is to produce 10 units. 
B) 10 units and the dominant strategy for Firm B is to produce 12 units. 
C) 12 units and the dominant strategy for Firm B is to produce 10 units. 
D) 12 units and the dominant strategy for Firm B is to produce 12 units. 
A) 10 units and the dominant strategy for Firm B is to produce 10 units. 
B) 10 units and the dominant strategy for Firm B is to produce 12 units. 
C) 12 units and the dominant strategy for Firm B is to produce 10 units. 
D) 12 units and the dominant strategy for Firm B is to produce 12 units.

Question 9

Like monopolists, oligopolists are aware that an increase in the quantity of output always

Accepted Answer

A) reduces the price of their product. 
B) reduces their profit. 
C) reduces their revenue. 
D) reduces productivity. 
A) reduces the price of their product. 
B) reduces their profit. 
C) reduces their revenue. 
D) reduces productivity.

Question 10

As the number of firms in an oligopoly increases, the magnitude of the price effect increases.

Accepted Answer

A) True 
 B)False

Question 11

Consider a game of the "Jack and Jill" type in which a market is a duopoly and each firm decides to produce either a "high" quantity of output or a "low" quantity of output. If the two firms successfully reach and maintain the cooperative outcome of the game, then

Accepted Answer

A) both the combined profit of the firms and total surplus are maximized. 
B) the combined profit of the firms is maximized but total surplus is not maximized. 
C) the combined profit of the firms is not maximized but total surplus is maximized. 
D) neither the combined profit of the firms nor total surplus is maximized. 
A) both the combined profit of the firms and total surplus are maximized. 
B) the combined profit of the firms is maximized but total surplus is not maximized. 
C) the combined profit of the firms is not maximized but total surplus is maximized. 
D) neither the combined profit of the firms nor total surplus is maximized.

Question 12

If a person can prove that she was damaged by an illegal arrangement to restrain trade, that person can sue and recover

Accepted Answer

A) the damages she sustained, as provided for in the Sherman Act. 
B) the damages she sustained, as provided for in the Clayton Act. 
C) three times the damages she sustained, as provided for in the Sherman Act. 
D) three times the damages she sustained, as provided for in the Clayton Act. 
A) the damages she sustained, as provided for in the Sherman Act. 
B) the damages she sustained, as provided for in the Clayton Act. 
C) three times the damages she sustained, as provided for in the Sherman Act. 
D) three times the damages she sustained, as provided for in the Clayton Act.

Question 13

If an oligopolist is part of a cartel that is collectively producing the monopoly level of output, then that oligopolist has the incentive to increase production with the aim of

Accepted Answer

A) increasing prices. 
B) increasing profits for the group of firms as a whole. 
C) increasing profits for itself, regardless of the impact on profits for the group of firms as a whole. 
D) decreasing costs of production. 
A) increasing prices. 
B) increasing profits for the group of firms as a whole. 
C) increasing profits for itself, regardless of the impact on profits for the group of firms as a whole. 
D) decreasing costs of production.

Question 14

A firm that practices resale price maintenance

Accepted Answer

A) has incentive to reduce competition between its retailers. Resale price maintenance can lead to more service. 
B) has incentive to reduce competition between its retailers. Resale price maintenance cannot lead to more service. 
C) has no incentive to reduce competition between its retailers. Resale price maintenance can lead to more service. 
D) has no incentive to reduce competition between its retailers. Resale price maintenance cannot lead to more service. 
A) has incentive to reduce competition between its retailers. Resale price maintenance can lead to more service. 
B) has incentive to reduce competition between its retailers. Resale price maintenance cannot lead to more service. 
C) has no incentive to reduce competition between its retailers. Resale price maintenance can lead to more service. 
D) has no incentive to reduce competition between its retailers. Resale price maintenance cannot lead to more service.

Question 15

In a duopoly if the firms have agreed to jointly maximize profits, then each firm can increase its current individual profits by producing more.

Accepted Answer

A) True 
 B)False

Question 16

To be successful, a cartel must

Accepted Answer

A) find a way to encourage members to produce more than they would otherwise produce. 
B) agree on the total level of production for the cartel, but they need not agree on the amount produced by each member. 
C) agree on the total level of production and on the amount produced by each member. 
D) agree on the prices charged by each member, but they need not agree on amounts produced. 
A) find a way to encourage members to produce more than they would otherwise produce. 
B) agree on the total level of production for the cartel, but they need not agree on the amount produced by each member. 
C) agree on the total level of production and on the amount produced by each member. 
D) agree on the prices charged by each member, but they need not agree on amounts produced.

Question 17

Compare the equilibrium output in a duopoly to the monopoly output.

Accepted Answer

The duopoly output will be higher than t

Question 18

Table 17-11
Only two firms, ABC and XYZ, sell a particular product. The table below shows the demand curve for their product. Each firm has the same constant marginal cost of $8 and zero fixed cost.  
-Refer to Table 17-11. How much less do each of these firms earn in the Nash equilibrium than if they jointly maximize profits?

Accepted Answer

A) $5 
B) $10 
C) $15 
D) $20 
A) $5 
B) $10 
C) $15 
D) $20

Question 19

When firms are faced with making strategic choices to maximize profit, economists typically use

Accepted Answer

A) the theory of monopoly to model their behavior. 
B) the theory of aggressive competition to model their behavior. 
C) game theory to model their behavior. 
D) cartel theory to model their behavior. 
A) the theory of monopoly to model their behavior. 
B) the theory of aggressive competition to model their behavior. 
C) game theory to model their behavior. 
D) cartel theory to model their behavior.

Question 20

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 company is unable to use tying, what is the profit-maximizing price to charge for high speed internet access?

Accepted Answer

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

Exam 17: Oligopoly

The Sherman Antitrust Act prohibits executives of competing companies from

A law that encourages market competition by prohibiting firms from gaining or exercising excessive market power is

If all of the firms in an oligopoly successfully collude and form a cartel, then total profit for the cartel is equal to what it would be if the market were a monopoly.

What effect does the number of firms in an oligopoly have on the characteristics of the market?

Which of the following examples illustrates an oligopoly market?

Like monopolists, oligopolists are aware that an increase in the quantity of output always

As the number of firms in an oligopoly increases, the magnitude of the price effect increases.

Consider a game of the "Jack and Jill" type in which a market is a duopoly and each firm decides to produce either a "high" quantity of output or a "low" quantity of output. If the two firms successfully reach and maintain the cooperative outcome of the game, then

If a person can prove that she was damaged by an illegal arrangement to restrain trade, that person can sue and recover

If an oligopolist is part of a cartel that is collectively producing the monopoly level of output, then that oligopolist has the incentive to increase production with the aim of

A firm that practices resale price maintenance

In a duopoly if the firms have agreed to jointly maximize profits, then each firm can increase its current individual profits by producing more.

To be successful, a cartel must

Compare the equilibrium output in a duopoly to the monopoly output.

When firms are faced with making strategic choices to maximize profit, economists typically use

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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