Question 1

Price wars are ________ likely to occur when the industry is ________

Accepted Answer

A)  more; a monopoly. 
B)  more; an oligopoly. 
C)  more; perfect competition. 
D)  equally; monopoly, oligopoly, and perfect competition. 
A)  more; a monopoly. 
B)  more; an oligopoly. 
C)  more; perfect competition. 
D)  equally; monopoly, oligopoly, and perfect competition.

Question 2

There are two firms that compete against each other and each needs to decide if they will undertake research and development to improve their product. The payoffs are as follows: If Firm 1 does undertake R&D then Firm 2 will earn $25 million if they also do R&D or $50 million if not
If Firm 1 does not undertake R&D then Firm 2 will earn $2 million if they do R&D or $0 million if not
If Firm 2 does undertake R&D then Firm 1 will earn $10 million if they also do R&D or $20 million if not
If Firm 2 does not undertake R&D then Firm 1 will earn $2 million if they do R&D or $0 million if not
Regarding this game, which of the following is TRUE?

Accepted Answer

A)  Only one will do R&D but we cannot say which one. 
B)  Both firms will do R&D. 
C)  Both firms will not do R&D. 
D)  Firm 1 will do R&D and Firm 2 will not. 
A)  Only one will do R&D but we cannot say which one. 
B)  Both firms will do R&D. 
C)  Both firms will not do R&D. 
D)  Firm 1 will do R&D and Firm 2 will not.

Question 3

-Two students are assigned a group project. Each has the option to work or not work to achieve a high grade. The payoffs are shown in the above table. Student 1 should

Accepted Answer

A)  work only if student 2 works. 
B)  work regardless of the decision made by student 2. 
C)  not work if student 2 works. 
D)  not work regardless of what student 2 decides. 
A)  work only if student 2 works. 
B)  work regardless of the decision made by student 2. 
C)  not work if student 2 works. 
D)  not work regardless of what student 2 decides.

Question 4

OPEC, the Organization of Petroleum Exporting Countries, was formed in Baghdad in 1960. Since its formation, this cartel has suffered from a major problem with respect to the quota (limit) of output it assigns each member nation. What is OPEC's goal and what sort of quota do you think the cartel assigns? How and why do nations cheat on their quota? What happens when a nation cheats on its quota?

Accepted Answer

In order to keep oil prices high, as has

Question 5

-Firms A and B can conduct research and development (R&D) or not conduct it. R&D is costly but can increase the quality of the product and increase sales. The payoff matrix is the economic profits of the two firms and is given above, where the numbers are millions of dollars. The Nash equilibrium occurs when

Accepted Answer

A)  both A and B conduct R&D. 
B)  only A conducts R&D. 
C)  only B conducts R&D. 
D)  neither A nor B conduct R&D. 
A)  both A and B conduct R&D. 
B)  only A conducts R&D. 
C)  only B conducts R&D. 
D)  neither A nor B conduct R&D.

Question 6

Which of the following is a distinguishing characteristic of oligopoly?

Accepted Answer

A)  A small number of firms compete. 
B)  No one firm's actions directly affect the actions of the other firms. 
C)  Firms are free to enter and exit the industry. 
D)  Natural barriers cannot prevent the entry of new firms. 
A)  A small number of firms compete. 
B)  No one firm's actions directly affect the actions of the other firms. 
C)  Firms are free to enter and exit the industry. 
D)  Natural barriers cannot prevent the entry of new firms.

Question 7

The maximum economic profit that can be made by a duopoly that colludes is equal to the

Accepted Answer

A)  economic profit made by duopolists who cheat. 
B)  normal profit made by an oligopoly. 
C)  economic profit made by a monopoly. 
D)  normal profit made by firms in perfect competition. 
A)  economic profit made by duopolists who cheat. 
B)  normal profit made by an oligopoly. 
C)  economic profit made by a monopoly. 
D)  normal profit made by firms in perfect competition.

Question 8

-The problem for the prisoners in the prisoners' dilemma game in the above table is that

Accepted Answer

A)  the Nash equilibrium is not the best outcome. 
B)  there is no equilibrium outcome. 
C)  neither prisoner has a workable strategy. 
D)  None of the above answers is correct. 
A)  the Nash equilibrium is not the best outcome. 
B)  there is no equilibrium outcome. 
C)  neither prisoner has a workable strategy. 
D)  None of the above answers is correct.

Question 9

What is meant by the term "exclusive dealing"? Give an example of an exclusive deal. When is it illegal?

Accepted Answer

Exclusive dealing is a contract that pre

Question 10

In the market for batteries, the three largest firms earn 90% of the total revenue and there are 35 firms in the industry. This industry is best described as

Accepted Answer

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

Question 11

If both firms in a duopoly cheat on a collusive agreement, the price ________ and both firms are ________.

Accepted Answer

A)  falls; better off 
B)  rises; worse off 
C)  falls; worse off 
D)  rises; better off 
A)  falls; better off 
B)  rises; worse off 
C)  falls; worse off 
D)  rises; better off

Question 12

Once a cartel determines the profit-maximizing price

Accepted Answer

A)  each firm faces the temptation to cheat by raising its price. 
B)  each firm faces the temptation to cheat by lowering its price. 
C)  changes in the output of any member firm will not affect the market price. 
D)  entry into the industry by rival firms will not affect the profit of the cartel. 
A)  each firm faces the temptation to cheat by raising its price. 
B)  each firm faces the temptation to cheat by lowering its price. 
C)  changes in the output of any member firm will not affect the market price. 
D)  entry into the industry by rival firms will not affect the profit of the cartel.

Question 13

The second federal antitrust law was passed in 1914. This antitrust law is the

Accepted Answer

A)  Clayton Act. 
B)  Robinson-Patman Amendment. 
C)  Cellar-Kefauver Amendment. 
D)  Taft-Hartley Act. 
A)  Clayton Act. 
B)  Robinson-Patman Amendment. 
C)  Cellar-Kefauver Amendment. 
D)  Taft-Hartley Act.

Question 14

What is the Sherman Act and what is its purpose?

Accepted Answer

The Sherman Act of 1890 was the first ma

Question 15

Under Federal Trade Commission merger guidelines, an industry with a Herfindahl-Hirschman index (HHI) of 800 points is considered

Accepted Answer

A)  competitive. 
B)  moderately concentrated. 
C)  concentrated. 
D)  a monopoly. 
A)  competitive. 
B)  moderately concentrated. 
C)  concentrated. 
D)  a monopoly.

Question 16

In game theory, strategies include

Accepted Answer

A)  all possible actions of each player. 
B)  only the winning action of each player. 
C)  all possible actions and payoffs of each player. 
D)  the payoff matrix. 
A)  all possible actions of each player. 
B)  only the winning action of each player. 
C)  all possible actions and payoffs of each player. 
D)  the payoff matrix.

Question 17

Which of the following games provides the best way to model price wars?

Accepted Answer

A)  a repeated duopoly game 
B)  a game of chicken 
C)  a sequential entry game in a noncontestable market 
D)  a sequential entry game in a contestable market 
A)  a repeated duopoly game 
B)  a game of chicken 
C)  a sequential entry game in a noncontestable market 
D)  a sequential entry game in a contestable market

Question 18

The outcome of a prisoners' dilemma game with a Nash equilibrium is that

Accepted Answer

A)  both players deny. 
B)  one player denies and one player confesses. 
C)  both players confess. 
D)  there is no equilibrium. 
A)  both players deny. 
B)  one player denies and one player confesses. 
C)  both players confess. 
D)  there is no equilibrium.

Question 19

Suppose that two clothing manufacturers, Frederick's Fashions and Stephan's Styles, announce that they plan to merge. The Herfindahl-Hirschman index is currently 1,500. After the merger, the HHI will rise to 1,560. This market is

Accepted Answer

A)  highly concentrated and so the government will definitely challenge the merger. 
B)  moderately concentrated and because the merger increases the HHI by more than 50 points, the government will definitely challenge the merger. 
C)  moderately concentrated, but because the merger increases the HHI by less than 100 points, the government will probably not challenge the merger. 
D)  competitive and so the government will not challenge the merger. 
A)  highly concentrated and so the government will definitely challenge the merger. 
B)  moderately concentrated and because the merger increases the HHI by more than 50 points, the government will definitely challenge the merger. 
C)  moderately concentrated, but because the merger increases the HHI by less than 100 points, the government will probably not challenge the merger. 
D)  competitive and so the government will not challenge the merger.

Question 20

Which of the following is a defining characteristic of oligopoly?

Accepted Answer

A)  barriers to entry 
B)  selling a homogeneous good 
C)  selling a differentiated good 
D)  collusion 
A)  barriers to entry 
B)  selling a homogeneous good 
C)  selling a differentiated good 
D)  collusion

Price wars are likely to occur when the industry is

-Two students are assigned a group project. Each has the option to work or not work to achieve a high grade. The payoffs are shown in the above table. Student 1 should

Which of the following is a distinguishing characteristic of oligopoly?

The maximum economic profit that can be made by a duopoly that colludes is equal to the

-The problem for the prisoners in the prisoners' dilemma game in the above table is that

What is meant by the term "exclusive dealing"? Give an example of an exclusive deal. When is it illegal?

In the market for batteries, the three largest firms earn 90% of the total revenue and there are 35 firms in the industry. This industry is best described as

If both firms in a duopoly cheat on a collusive agreement, the price and both firms are .

Once a cartel determines the profit-maximizing price

The second federal antitrust law was passed in 1914. This antitrust law is the

What is the Sherman Act and what is its purpose?

Under Federal Trade Commission merger guidelines, an industry with a Herfindahl-Hirschman index (HHI) of 800 points is considered

In game theory, strategies include

Which of the following games provides the best way to model price wars?

The outcome of a prisoners' dilemma game with a Nash equilibrium is that

Suppose that two clothing manufacturers, Frederick's Fashions and Stephan's Styles, announce that they plan to merge. The Herfindahl-Hirschman index is currently 1,500. After the merger, the HHI will rise to 1,560. This market is

Which of the following is a defining characteristic of 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

Exam 15: Oligopoly

Price wars are ________ likely to occur when the industry is ________

-Two students are assigned a group project. Each has the option to work or not work to achieve a high grade. The payoffs are shown in the above table. Student 1 should

Which of the following is a distinguishing characteristic of oligopoly?

The maximum economic profit that can be made by a duopoly that colludes is equal to the

-The problem for the prisoners in the prisoners' dilemma game in the above table is that

What is meant by the term "exclusive dealing"? Give an example of an exclusive deal. When is it illegal?

In the market for batteries, the three largest firms earn 90% of the total revenue and there are 35 firms in the industry. This industry is best described as

If both firms in a duopoly cheat on a collusive agreement, the price ________ and both firms are ________.

Once a cartel determines the profit-maximizing price

The second federal antitrust law was passed in 1914. This antitrust law is the

What is the Sherman Act and what is its purpose?

Under Federal Trade Commission merger guidelines, an industry with a Herfindahl-Hirschman index (HHI) of 800 points is considered

In game theory, strategies include

Which of the following games provides the best way to model price wars?

The outcome of a prisoners' dilemma game with a Nash equilibrium is that

Suppose that two clothing manufacturers, Frederick's Fashions and Stephan's Styles, announce that they plan to merge. The Herfindahl-Hirschman index is currently 1,500. After the merger, the HHI will rise to 1,560. This market is

Which of the following is a defining characteristic of 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

Price wars are likely to occur when the industry is

If both firms in a duopoly cheat on a collusive agreement, the price and both firms are .