Question 1

A tit-for-tat strategy can be used in

Accepted Answer

A)  a single-play game or a repeated game. 
B)  a single-play game but not a repeated game. 
C)  a repeated game but not a single-play game. 
D)  neither a repeated game nor a single-play game. 
A)  a single-play game or a repeated game. 
B)  a single-play game but not a repeated game. 
C)  a repeated game but not a single-play game. 
D)  neither a repeated game nor a single-play game. C

Question 2

In the scenario above, in Nash equilibrium

Accepted Answer

A)  both firms cheat to produce more than the agreed amount. 
B)  both firms comply with the agreement. 
C)  one firm complies with the agreement while the other cheats to produce more than the agreed amount. 
D)  both firms cheat to produce less than the agreed amount. 
A)  both firms cheat to produce more than the agreed amount. 
B)  both firms comply with the agreement. 
C)  one firm complies with the agreement while the other cheats to produce more than the agreed amount. 
D)  both firms cheat to produce less than the agreed amount. A

Question 3

When the government prohibits certain kinds of market behavior such as monopoly and monopolistic practices it generally does so through

Accepted Answer

A)  regulatory agencies such as the Interstate Commerce Commission or the Federal Communications Commission. 
B)  antitrust law. 
C)  the police powers of the states. 
D)  use of the capture theory of regulation. 
A)  regulatory agencies such as the Interstate Commerce Commission or the Federal Communications Commission. 
B)  antitrust law. 
C)  the police powers of the states. 
D)  use of the capture theory of regulation. B

Question 4

A duopoly is a form of

Accepted Answer

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

Question 5

Kellogg's and General Mills are two of the dominant breakfast cereal manufactures in the U.S. Each firm can either sign or not sign an exclusive contract with an Olympian gold-medal athlete to appear on the cover of a cereal box. If both companies sign an athlete, they will each make $5 million in economic profit. If only firm signs, they earn $8 million in economic profit and the other firm incurs an economic loss of $1 million. If neither firm signs, they break even. What is the outcome of this game if it is only played once?

Accepted Answer

A)  Neither Kellogg's nor General Mills will sign an athlete. 
B)  Kellogg's will sign an athlete and General Mills will not sign an athlete. 
C)  Both Kellogg's and General Mills will sign an athlete. 
D)  General Mills will sign an athlete and Kellogg's will not sign an athlete. 
A)  Neither Kellogg's nor General Mills will sign an athlete. 
B)  Kellogg's will sign an athlete and General Mills will not sign an athlete. 
C)  Both Kellogg's and General Mills will sign an athlete. 
D)  General Mills will sign an athlete and Kellogg's will not sign an athlete.

Question 6

The maximum total economic profit that can be made by colluding duopolists

Accepted Answer

A)  is less than the economic profit made by a monopolist. 
B)  equals the economic profit made by a monopolist. 
C)  exceeds the economic profit made by a monopolist. 
D)  bears no necessary relation to the economic profit made by a monopolist. 
A)  is less than the economic profit made by a monopolist. 
B)  equals the economic profit made by a monopolist. 
C)  exceeds the economic profit made by a monopolist. 
D)  bears no necessary relation to the economic profit made by a monopolist.

Question 7

A market with one or a small number of firms but no barriers to entry is known as

Accepted Answer

A)  a natural monopoly. 
B)  a contestable market. 
C)  a perfectly competitive market. 
D)  monopolistic competition. 
A)  a natural monopoly. 
B)  a contestable market. 
C)  a perfectly competitive market. 
D)  monopolistic competition.

Question 8

Sarah's Soothing Diapers, Inc. and Orville's Odorless Diapers, Inc. are duopolists, who have agreed to collude. Orville has decided that he will comply with the collusive agreement as long as Sarah cooperated in the previous period. But if Sarah cheated in the previous period, Orville will punish Sarah by cheating in the current period. Orville's strategy is referred to as a

Accepted Answer

A)  Nash strategy. 
B)  tit-for-tat strategy. 
C)  trigger strategy. 
D)  monkey-see, monkey-do strategy. 
A)  Nash strategy. 
B)  tit-for-tat strategy. 
C)  trigger strategy. 
D)  monkey-see, monkey-do strategy.

Question 9

"If firms in duopoly collude and operate as a monopoly, the industry produces more output compared to the Nash equilibrium." True or false? Explain.

Accepted Answer

The statement is false. In the Nash equi

Question 10

The ABC Nail Company has entered into a collusive agreement with the other firm in the industry, the DC Nail Company. What occurs in the nail industry if ABC decides to cheat on the agreement?

Accepted Answer

A)  ABC lowers the price of its nails. 
B)  The total industry output increases. 
C)  The total profits in the nail industry will decrease. 
D)  All of the above answers are correct. 
A)  ABC lowers the price of its nails. 
B)  The total industry output increases. 
C)  The total profits in the nail industry will decrease. 
D)  All of the above answers are correct.

Question 11

Oligopoly differs from perfect competition because a single competitive firm's behavior does not affect the behavior of its competitors while the behavior of a single oligopolistic firm does affect the behavior of its rivals.

Accepted Answer

A) True 
 B)False

Question 12

What is the dilemma faced by firms in collusive agreement to restrict output and boost price?

Accepted Answer

Because there are just a few large firms

Question 13

Economies of scale and limited demand can form a natural barrier to entry that can create a natural oligopoly.

Accepted Answer

A) True 
 B)False

Question 14

If firms in a duopoly can successfully collude

Accepted Answer

A)  each firm can earn an economic profit. 
B)  the industry, that is, both firms taken together, can earn the maximum economic profit. 
C)  the firms achieve a cooperative equilibrium. 
D)  All of the above answers are true. 
A)  each firm can earn an economic profit. 
B)  the industry, that is, both firms taken together, can earn the maximum economic profit. 
C)  the firms achieve a cooperative equilibrium. 
D)  All of the above answers are true.

Question 15

Limit pricing is a strategy which is intended to deter entry into an industry.

Accepted Answer

A) True 
 B)False

Question 16

An industry is made up of 8 firms with the following percent market shares: 29, 20, 11, 10, 9, 8, 7, 6. The firms with 8 and 7 percent market share are proposing to merge. What is the new Herfindahl-Hirschman index if the merger takes place?

Accepted Answer

A)  225 
B)  1462 
C)  1692 
D)  1804 
A)  225 
B)  1462 
C)  1692 
D)  1804

Question 17

If the Herfindahl-Hirschman index (HHI) among the firms in the long distance telecommunications market were equal to 1755, when would the Federal Trade Commission probably challenge a proposed merger between any two of the firms?

Accepted Answer

A)  It would challenge if the HHI would increase by more than 50 points. 
B)  It would challenge if the HHI would increase by more than 100 points. 
C)  It would challenge no matter what happened to the HHI because the market has so few firms. 
D)  It would not challenge because the HHI is less than 1800. 
A)  It would challenge if the HHI would increase by more than 50 points. 
B)  It would challenge if the HHI would increase by more than 100 points. 
C)  It would challenge no matter what happened to the HHI because the market has so few firms. 
D)  It would not challenge because the HHI is less than 1800.

Question 18

Market share in the Widget industry
  
-Using the market shares in the table above, if Big W wants to buy Widgette, the Federal Trade Commission will probably

Accepted Answer

A)  approve the merger because the industry is moderately concentrated and the increase in the Herfindahl-Hirschman index (HHI) is small enough. 
B)  block the merger because the industry is moderately concentrated (HHI between 1,500 and 2,500) and the increase in the HHI is too much. 
C)  approve the merger because the industry is highly concentrated (HHI exceeds 2,500) but the increase in the HHI is small enough. 
D)  block the merger because the industry is highly concentrated (HHI exceeds 2,500) and the increase in the HHI is too much. 
A)  approve the merger because the industry is moderately concentrated and the increase in the Herfindahl-Hirschman index (HHI) is small enough. 
B)  block the merger because the industry is moderately concentrated (HHI between 1,500 and 2,500) and the increase in the HHI is too much. 
C)  approve the merger because the industry is highly concentrated (HHI exceeds 2,500) but the increase in the HHI is small enough. 
D)  block the merger because the industry is highly concentrated (HHI exceeds 2,500) and the increase in the HHI is too much.

Question 19

One difference between oligopoly and monopolistic competition is that

Accepted Answer

A)  a monopolistically competitive industry has fewer firms. 
B)  in monopolistic competition, the products are identical. 
C)  monopolistic competition has barriers to entry. 
D)  fewer firms compete in oligopoly than in monopolistic competition. 
A)  a monopolistically competitive industry has fewer firms. 
B)  in monopolistic competition, the products are identical. 
C)  monopolistic competition has barriers to entry. 
D)  fewer firms compete in oligopoly than in monopolistic competition.

Question 20

In an oligopoly

Accepted Answer

A)  there are only a few firms. 
B)  there is no product differentiation. 
C)  there is free entry and exit. 
D)  firms' decisions are unrelated to each other. 
A)  there are only a few firms. 
B)  there is no product differentiation. 
C)  there is free entry and exit. 
D)  firms' decisions are unrelated to each other.

A tit-for-tat strategy can be used in

In the scenario above, in Nash equilibrium

When the government prohibits certain kinds of market behavior such as monopoly and monopolistic practices it generally does so through

A duopoly is a form of

The maximum total economic profit that can be made by colluding duopolists

A market with one or a small number of firms but no barriers to entry is known as

"If firms in duopoly collude and operate as a monopoly, the industry produces more output compared to the Nash equilibrium." True or false? Explain.

The ABC Nail Company has entered into a collusive agreement with the other firm in the industry, the DC Nail Company. What occurs in the nail industry if ABC decides to cheat on the agreement?

Oligopoly differs from perfect competition because a single competitive firm's behavior does not affect the behavior of its competitors while the behavior of a single oligopolistic firm does affect the behavior of its rivals.

What is the dilemma faced by firms in collusive agreement to restrict output and boost price?

Economies of scale and limited demand can form a natural barrier to entry that can create a natural oligopoly.

If firms in a duopoly can successfully collude

Limit pricing is a strategy which is intended to deter entry into an industry.

An industry is made up of 8 firms with the following percent market shares: 29, 20, 11, 10, 9, 8, 7, 6. The firms with 8 and 7 percent market share are proposing to merge. What is the new Herfindahl-Hirschman index if the merger takes place?

If the Herfindahl-Hirschman index (HHI) among the firms in the long distance telecommunications market were equal to 1755, when would the Federal Trade Commission probably challenge a proposed merger between any two of the firms?

Market share in the Widget industry -Using the market shares in the table above, if Big W wants to buy Widgette, the Federal Trade Commission will probably

One difference between oligopoly and monopolistic competition is that

In an oligopoly

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Public Choices, Public Goods, and Healthcare

Externalities

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

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Exam 15: Oligopoly

A tit-for-tat strategy can be used in

In the scenario above, in Nash equilibrium

When the government prohibits certain kinds of market behavior such as monopoly and monopolistic practices it generally does so through

A duopoly is a form of

The maximum total economic profit that can be made by colluding duopolists

A market with one or a small number of firms but no barriers to entry is known as

"If firms in duopoly collude and operate as a monopoly, the industry produces more output compared to the Nash equilibrium." True or false? Explain.

The ABC Nail Company has entered into a collusive agreement with the other firm in the industry, the DC Nail Company. What occurs in the nail industry if ABC decides to cheat on the agreement?

Oligopoly differs from perfect competition because a single competitive firm's behavior does not affect the behavior of its competitors while the behavior of a single oligopolistic firm does affect the behavior of its rivals.

What is the dilemma faced by firms in collusive agreement to restrict output and boost price?

Economies of scale and limited demand can form a natural barrier to entry that can create a natural oligopoly.

If firms in a duopoly can successfully collude

Limit pricing is a strategy which is intended to deter entry into an industry.

An industry is made up of 8 firms with the following percent market shares: 29, 20, 11, 10, 9, 8, 7, 6. The firms with 8 and 7 percent market share are proposing to merge. What is the new Herfindahl-Hirschman index if the merger takes place?

If the Herfindahl-Hirschman index (HHI) among the firms in the long distance telecommunications market were equal to 1755, when would the Federal Trade Commission probably challenge a proposed merger between any two of the firms?

Market share in the Widget industry -Using the market shares in the table above, if Big W wants to buy Widgette, the Federal Trade Commission will probably

One difference between oligopoly and monopolistic competition is that

In an oligopoly

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Public Choices, Public Goods, and Healthcare

Externalities

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters