Question 1

Explain how a large number of firms in the industry and product heterogeneity affect the likelihood of cartel success.

Accepted Answer

Cartel cheating is more likely if there

Question 2

Baumol and Blinder argue that oligopolies are interdependent firms.What do they mean by this? Give three examples of the types of interdependence which might occur.

Accepted Answer

Oligopolists are few in number, and they

Question 3

If a firm decides to ignore the reactions of its rivals to its policies, the appropriate model to analyze its behavior is

Accepted Answer

A)  game theory. 
B)  perfect competition. 
C)  monopoly. 
D)  cartels. 
A)  game theory. 
B)  perfect competition. 
C)  monopoly. 
D)  cartels.

Question 4

The force that leads to zero economic profits for monopolistically competitive firms in the long run is

Accepted Answer

A)  excess capacity. 
B)  price wars among firms. 
C)  entry by new firms. 
D)  excessive advertising. 
A)  excess capacity. 
B)  price wars among firms. 
C)  entry by new firms. 
D)  excessive advertising.

Question 5

A dominant strategy is one that gives a player in a game a bigger payoff than the other player receives.

Accepted Answer

A) True 
 B)False

Question 6

Sales maximization and profit maximization are essentially equivalent.

Accepted Answer

A) True 
 B)False

Question 7

Probably the simplest approach to the problem of oligopolistic interdependence is to

Accepted Answer

A)  conduct market experiments. 
B)  assume that rivals will pursue a course most detrimental to the firm concerned. 
C)  ignore the actions of rivals. 
D)  increase the firm's advertising outlay considerably. 
A)  conduct market experiments. 
B)  assume that rivals will pursue a course most detrimental to the firm concerned. 
C)  ignore the actions of rivals. 
D)  increase the firm's advertising outlay considerably.

Question 8

The development of game theory was the work of

Accepted Answer

A)  Joan Robinson and Edward Chamberlin. 
B)  John von Neumann and Oskar Morgenstern. 
C)  Wassily Leontief and Joseph Schumpeter. 
D)  John Maynard Keynes. 
A)  Joan Robinson and Edward Chamberlin. 
B)  John von Neumann and Oskar Morgenstern. 
C)  Wassily Leontief and Joseph Schumpeter. 
D)  John Maynard Keynes.

Question 9

Markets in which the behavior of the firms theoretically leads to an efficient allocation of resources that maximizes the benefits to consumers given the resources available to consumers are

Accepted Answer

A)  monopolistic competition and oligopoly. 
B)  monopoly and oligopoly. 
C)  monopolistic competition and monopoly. 
D)  perfect competition and perfectly contestable. 
A)  monopolistic competition and oligopoly. 
B)  monopoly and oligopoly. 
C)  monopolistic competition and monopoly. 
D)  perfect competition and perfectly contestable.

Question 10

A perfectly contestable market is one which a firm can enter and exit without losing its investment.

Accepted Answer

A) True 
 B)False

Question 11

Heavy advertising expenditures usually indicate

Accepted Answer

A)  oligopoly. 
B)  pure competition or monopolistic competition. 
C)  oligopoly or monopoly. 
D)  differentiated pure competition or monopoly. 
A)  oligopoly. 
B)  pure competition or monopolistic competition. 
C)  oligopoly or monopoly. 
D)  differentiated pure competition or monopoly.

Question 12

When an airline reduces its fares, other airlines typically match the action.But when an airline increases its fare, other airlines do not follow suit.Which oligopoly model cartel, price leadership, or kinked demand best fits the airline industry as described? Justify your choice and explain why the other models are less appropriate.

Accepted Answer

The interdependence fits the kinked dema

Question 13

Advertising never makes sense for an oligopolistic firm.

Accepted Answer

A) True 
 B)False

Question 14

Some oligopolies may try to maximize sales revenue rather than maximize profits.

Accepted Answer

A) True 
 B)False

Question 15

The demand curve for a monopolistic competitor has a negative slope.

Accepted Answer

A) True 
 B)False

Question 16

Oligopolists

Accepted Answer

A)  are price takers. 
B)  rarely advertise. 
C)  must take rivals' reactions into account. 
D)  offer homogeneous products. 
A)  are price takers. 
B)  rarely advertise. 
C)  must take rivals' reactions into account. 
D)  offer homogeneous products.

Question 17

What is a repeated game? Hoe does this helps the players in a game?

Accepted Answer

A repeated game is one that is played ov

Question 18

The market structure that is associated with big business in developed economies is

Accepted Answer

A)  perfect competition. 
B)  monopolistic competition. 
C)  monopoly. 
D)  oligopoly. 
A)  perfect competition. 
B)  monopolistic competition. 
C)  monopoly. 
D)  oligopoly.

Question 19

What quantity of output and price do they try to set, when a group of oligopoly firms form a cartel? Will there be any changes in the price and quantity supplied if the cartel gets broken down?

Accepted Answer

By forming cartels, oligopoly

Question 20

The monopolistically competitive firm differs from monopoly in that its

Accepted Answer

A)  demand curve is flatter. 
B)  demand curve slopes downward. 
C)  MR curve lies below its demand curve. 
D)  profit is maximized where MR = MC. 
A)  demand curve is flatter. 
B)  demand curve slopes downward. 
C)  MR curve lies below its demand curve. 
D)  profit is maximized where MR = MC.

Exam 12: Between Competition and Monopoly

Explain how a large number of firms in the industry and product heterogeneity affect the likelihood of cartel success.

Baumol and Blinder argue that oligopolies are interdependent firms.What do they mean by this? Give three examples of the types of interdependence which might occur.

If a firm decides to ignore the reactions of its rivals to its policies, the appropriate model to analyze its behavior is

The force that leads to zero economic profits for monopolistically competitive firms in the long run is

A dominant strategy is one that gives a player in a game a bigger payoff than the other player receives.

Sales maximization and profit maximization are essentially equivalent.

Probably the simplest approach to the problem of oligopolistic interdependence is to

The development of game theory was the work of

Markets in which the behavior of the firms theoretically leads to an efficient allocation of resources that maximizes the benefits to consumers given the resources available to consumers are

A perfectly contestable market is one which a firm can enter and exit without losing its investment.

Heavy advertising expenditures usually indicate

Advertising never makes sense for an oligopolistic firm.

Some oligopolies may try to maximize sales revenue rather than maximize profits.

The demand curve for a monopolistic competitor has a negative slope.

Oligopolists

What is a repeated game? Hoe does this helps the players in a game?

The market structure that is associated with big business in developed economies is

What quantity of output and price do they try to set, when a group of oligopoly firms form a cartel? Will there be any changes in the price and quantity supplied if the cartel gets broken down?

The monopolistically competitive firm differs from monopoly in that its

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: The Importance of Marginal Analysis

Securities: Business Finance, and the Economy: The Tail that Wags the Dog?

The Firm and the Industry under Perfect Competition

Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets I: The Price System

The Shortcomings of Free Markets

The Market's Prime Achievement: Innovation and Growth

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: The Human Inputs

Poverty, Inequality, and Discrimination

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation?

Bringing in the Supply Side: Unemployment and Inflation?

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder?

Exchange Rates and the Macroeconomy

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