Question 1

Why do the United States and many other countries have antitrust laws? What's so harmful about oligopoly that it warrants an entire body of law?

Accepted Answer

Oligopolies are industries characterized

Question 2

The noncooperative equilibrium of a prisoners' dilemma game can be avoided if the game is played repeatedly and firms engage in strategic behavior.

Accepted Answer

A) True 
 B)False

Question 3

Use the following to answer questions:  
-(Table: Demand Schedule for Gadgets) Look at the table Demand Schedule for Gadgets. The market for gadgets consists of two producers, Margaret and Ray. Each firm can produce gadgets with no marginal cost or fixed cost. If these two producers formed a cartel and acted to maximize total industry profits, total industry profit would be:

Accepted Answer

A)  $10,000. 
B)  $5,000. 
C)  $2,500. 
D)  $1,250. 
A)  $10,000. 
B)  $5,000. 
C)  $2,500. 
D)  $1,250.

Question 4

Use the following to answer question:  
-(Table: Demand for Breakfast Cereal) Look at the table Demand for Breakfast Cereal. Suppose that the marginal cost of producing cereal is zero.
A) If General Mills is the sole producer of breakfast cereal, how many boxes will the firm produce, what price will be charged, and how much revenue will be earned?
B) Now assume that Kellogg enters the market, and the industry is now a duopoly with two equal-sized firms. If these firms agree to split the monopoly output equally, how much revenue will each firm earn under the agreement?
C) If General Mills can cheat on this agreement by producing 50 million more boxes of cereal without punishment, will it? Analyze the price effect and quantity effect for General Mills of producing 1 million more boxes.

Accepted Answer

A) General Mills will maximize total rev

Question 5

A Nash equilibrium results when each player chooses the action that maximizes his or her payoff given the actions of other players.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following would make it difficult for oligopolists to collude?

Accepted Answer

A)  few firms 
B)  few buyers 
C)  similar costs of production 
D)  a homogeneous product 
A)  few firms 
B)  few buyers 
C)  similar costs of production 
D)  a homogeneous product

Question 7

Attempts by the federal government to prevent the exercise of monopoly power in the United States are known as _____ policy.

Accepted Answer

A)  stabilization 
B)  antitrust 
C)  fiscal 
D)  government 
A)  stabilization 
B)  antitrust 
C)  fiscal 
D)  government

Question 8

Use the following to answer questions:
Figure: Payoff Matrix for the United States and the European Union  
-(Figure: Payoff Matrix for the United States and the European Union) Look at the figure Payoff Matrix for the United States and the European Union. Suppose that the United States and the European Union both produce corn, and each region can make more profit if output is limited and the price of corn is high. The Nash equilibrium combination is for the United States to produce a _____ output and the European Union to produce a _____ output.

Accepted Answer

A)  high; high 
B)  high; low 
C)  low; low 
D)  low; high 
A)  high; high 
B)  high; low 
C)  low; low 
D)  low; high

Question 9

Use the following to answer questions:
Figure: Pricing Strategy in Cable TV Market I  
-(Figure: Pricing Strategy in Cable TV Market I) In the figure Pricing Strategy in Cable TV Market I, the dominant strategy for CableNorth:

Accepted Answer

A)  is to advertise. 
B)  is not to advertise. 
C)  is to do whatever CableSouth does. 
D)  does not exist. 
A)  is to advertise. 
B)  is not to advertise. 
C)  is to do whatever CableSouth does. 
D)  does not exist.

Question 10

Cartels were legal in the United States until 1890.

Accepted Answer

A) True 
 B)False

Question 11

The first trust in the United States was established in 1881 by lawyers at John D. Rockefeller's Standard Oil Company.

Accepted Answer

A) True 
 B)False

Question 12

The purpose of the trusts established in the United States in the late 1800s was to:

Accepted Answer

A)  engage in monopoly pricing. 
B)  promote international trade. 
C)  promote competition in the transportation industry. 
D)  limit the involvement of government in providing health care. 
A)  engage in monopoly pricing. 
B)  promote international trade. 
C)  promote competition in the transportation industry. 
D)  limit the involvement of government in providing health care.

Question 13

Oligopoly is a market structure that is characterized by a _____ number of _____ firms that produce _____ products.

Accepted Answer

A)  large; relatively small and independent; identical 
B)  small; independent; identical or differentiated 
C)  large; relatively small and independent; differentiated 
D)  small; interdependent; identical or differentiated 
A)  large; relatively small and independent; identical 
B)  small; independent; identical or differentiated 
C)  large; relatively small and independent; differentiated 
D)  small; interdependent; identical or differentiated

Question 14

Use the following to answer questions:
Figure: Monopoly Profits in Duopoly  
-(Figure: Monopoly Profits in Duopoly) The figure Monopoly Profits in Duopoly shows how an industry consisting of two firms that face identical demand curves (D1) can collude to increase profits. If the firms collude to share the market demand equally, then each firm will act as if its marginal revenue curve is given by:

Accepted Answer

A)  MR1. 
B)  2 × MR1. 
C)  MR2. 
D)  MC. 
A)  MR1. 
B)  2 × MR1. 
C)  MR2. 
D)  MC.

Question 15

A situation in which one firm sets the price and other firms in the industry match it is known as:

Accepted Answer

A)  a Nash equilibrium. 
B)  price leadership. 
C)  Cournot competition. 
D)  price competition. 
A)  a Nash equilibrium. 
B)  price leadership. 
C)  Cournot competition. 
D)  price competition.

Question 16

Use the following to answer questions:  
-(Table: Demand for Crude Oil) Look at the table Demand for Crude Oil. The marginal cost of producing crude oil is zero. If the crude oil industry is a monopoly, the price of crude oil will be _____, the total quantity of crude oil produced by the monopoly will be _____ barrels, and the monopoly will earn revenue equal to _____.

Accepted Answer

A)  $80; 80; $6,400 
B)  $80; 80; $0 
C)  $160; 0; $0 
D)  $60; 100; $6,000 
A)  $80; 80; $6,400 
B)  $80; 80; $0 
C)  $160; 0; $0 
D)  $60; 100; $6,000

Question 17

Microsoft sets prices for its new line of computers, and Dell and HP follow. This practice is known as:

Accepted Answer

A)  antitrust pricing. 
B)  price extortion. 
C)  price leadership. 
D)  kinked demand behavior. 
A)  antitrust pricing. 
B)  price extortion. 
C)  price leadership. 
D)  kinked demand behavior.

Question 18

Use the following to answer questions:
Figure: Pricing Strategy in Cable TV Market II  
-(Figure: Pricing Strategy in Cable TV Market II) Look at the figure Pricing Strategy in Cable TV Market II. The dominant strategy for CableNorth:

Accepted Answer

A)  is to charge a high price. 
B)  is to charge a low price. 
C)  is to charge what CableSouth does. 
D)  does not exist. 
A)  is to charge a high price. 
B)  is to charge a low price. 
C)  is to charge what CableSouth does. 
D)  does not exist.

Question 19

If an industry initially has an HHI of 1,250, a merger between two of the largest (in terms of market share) firms in the industry:

Accepted Answer

A)  would be allowed to occur, since it would increase the competitive nature of the industry. 
B)  would not likely be allowed, since it most likely would reduce the competitive nature of the industry. 
C)  would be allowed, since this HHI represents a strongly competitive industry. 
D)  is likely to be allowed, since it moves the industry toward a socially optimal level of output. 
A)  would be allowed to occur, since it would increase the competitive nature of the industry. 
B)  would not likely be allowed, since it most likely would reduce the competitive nature of the industry. 
C)  would be allowed, since this HHI represents a strongly competitive industry. 
D)  is likely to be allowed, since it moves the industry toward a socially optimal level of output.

Question 20

An unwritten, unspoken agreement through which firms limit competition among themselves is called:

Accepted Answer

A)  satisfying. 
B)  tacit collusion. 
C)  overt collusion. 
D)  a cartel. 
A)  satisfying. 
B)  tacit collusion. 
C)  overt collusion. 
D)  a cartel.

Why do the United States and many other countries have antitrust laws? What's so harmful about oligopoly that it warrants an entire body of law?

The noncooperative equilibrium of a prisoners' dilemma game can be avoided if the game is played repeatedly and firms engage in strategic behavior.

A Nash equilibrium results when each player chooses the action that maximizes his or her payoff given the actions of other players.

Which of the following would make it difficult for oligopolists to collude?

Attempts by the federal government to prevent the exercise of monopoly power in the United States are known as _____ policy.

Use the following to answer questions: Figure: Pricing Strategy in Cable TV Market I -(Figure: Pricing Strategy in Cable TV Market I) In the figure Pricing Strategy in Cable TV Market I, the dominant strategy for CableNorth:

Cartels were legal in the United States until 1890.

The first trust in the United States was established in 1881 by lawyers at John D. Rockefeller's Standard Oil Company.

The purpose of the trusts established in the United States in the late 1800s was to:

Oligopoly is a market structure that is characterized by a ___ number of _ firms that produce ___ products.

A situation in which one firm sets the price and other firms in the industry match it is known as:

Microsoft sets prices for its new line of computers, and Dell and HP follow. This practice is known as:

Use the following to answer questions: Figure: Pricing Strategy in Cable TV Market II -(Figure: Pricing Strategy in Cable TV Market II) Look at the figure Pricing Strategy in Cable TV Market II. The dominant strategy for CableNorth:

If an industry initially has an HHI of 1,250, a merger between two of the largest (in terms of market share) firms in the industry:

An unwritten, unspoken agreement through which firms limit competition among themselves is called:

First Principles

Economic Models: Trade-Offs and Trade 25

Supply and Demand

Consumer and Producer Surplus

Price Controls and Quotas: Meddling With Markets

Elasticity

Taxes

International Trade

Decision Making by Individuals Firms

The Rational Consumer

Behind the Supply Curve: Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Monopolistic Competition and Product Differentiation

Externalities

Public Goods Common Resources

The Economics of the Welfare

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Filters

Exam 14: Oligopoly

Why do the United States and many other countries have antitrust laws? What's so harmful about oligopoly that it warrants an entire body of law?

The noncooperative equilibrium of a prisoners' dilemma game can be avoided if the game is played repeatedly and firms engage in strategic behavior.

A Nash equilibrium results when each player chooses the action that maximizes his or her payoff given the actions of other players.

Which of the following would make it difficult for oligopolists to collude?

Attempts by the federal government to prevent the exercise of monopoly power in the United States are known as _____ policy.

Use the following to answer questions: Figure: Pricing Strategy in Cable TV Market I -(Figure: Pricing Strategy in Cable TV Market I) In the figure Pricing Strategy in Cable TV Market I, the dominant strategy for CableNorth:

Cartels were legal in the United States until 1890.

The first trust in the United States was established in 1881 by lawyers at John D. Rockefeller's Standard Oil Company.

The purpose of the trusts established in the United States in the late 1800s was to:

Oligopoly is a market structure that is characterized by a _____ number of _____ firms that produce _____ products.

A situation in which one firm sets the price and other firms in the industry match it is known as:

Microsoft sets prices for its new line of computers, and Dell and HP follow. This practice is known as:

Use the following to answer questions: Figure: Pricing Strategy in Cable TV Market II -(Figure: Pricing Strategy in Cable TV Market II) Look at the figure Pricing Strategy in Cable TV Market II. The dominant strategy for CableNorth:

If an industry initially has an HHI of 1,250, a merger between two of the largest (in terms of market share) firms in the industry:

An unwritten, unspoken agreement through which firms limit competition among themselves is called:

First Principles

Economic Models: Trade-Offs and Trade 25

Supply and Demand

Consumer and Producer Surplus

Price Controls and Quotas: Meddling With Markets

Elasticity

Taxes

International Trade

Decision Making by Individuals Firms

The Rational Consumer

Behind the Supply Curve: Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Monopolistic Competition and Product Differentiation

Externalities

Public Goods Common Resources

The Economics of the Welfare

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Filters

Oligopoly is a market structure that is characterized by a ___ number of _ firms that produce ___ products.