Question 1

When only a small number of producers compete with each other is a defining characteristic of

Accepted Answer

A)  inelastic supply. 
B)  monopolistic competition. 
C)  efficient competition. 
D)  oligopoly. 
A)  inelastic supply. 
B)  monopolistic competition. 
C)  efficient competition. 
D)  oligopoly.

Question 2

Russia and Qatar made the first serious moves in October 2008 toward forming an OPEC-style cartel for natural gas. The two strategies these countries face are to comply with the cartel agreement or to cheat on the cartel agreement. If all countries comply, the economic profit for both will be $140 million. If one country cheats, that country earns $200 million in economic profit and the other country has an economic loss of $10 million. If all countries cheat, they break even. What is the the likely outcome of this game if it is repeated as a tit-for-tat game?

Accepted Answer

A)  If there are periods of cheating and colluding, then the countries' profits will be more than if they always colluded. 
B)  If the countries never collude, the outcome will be the monopoly outcome. 
C)  The countries will collude. 
D)  If the countries always collude, the outcome will be the perfectly competitive outcome. 
A)  If there are periods of cheating and colluding, then the countries' profits will be more than if they always colluded. 
B)  If the countries never collude, the outcome will be the monopoly outcome. 
C)  The countries will collude. 
D)  If the countries always collude, the outcome will be the perfectly competitive outcome.

Question 3

Game theory can be used for studying which of the following types of market structure?

Accepted Answer

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

Question 4

A trigger 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 single-play game nor a repeated 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 single-play game nor a repeated game.

Question 5

-Two software firms have developed an identical new software application. They are debating whether to give the new app away free and then sell add-ons or sell the application at $30 a copy. The payoff matrix is above and the payoffs are profits in millions of dollars. What is Firm 1's best strategy?

Accepted Answer

A)  Give away the application regardless of what Firm 2 does. 
B)  Sell the application at $30 a copy regardless of what Firm 2 does. 
C)  Give away the application only if Firm 2 sells the application. 
D)  Give away the application only if Firm 2 gives away the application. 
A)  Give away the application regardless of what Firm 2 does. 
B)  Sell the application at $30 a copy regardless of what Firm 2 does. 
C)  Give away the application only if Firm 2 sells the application. 
D)  Give away the application only if Firm 2 gives away the application.

Question 6

Two firms make most of the consumer alkaline batteries in the country: Duracell and Energizer. The market for batteries is most likely

Accepted Answer

A)  a monopoly. 
B)  an oligopoly. 
C)  perfectly competitive. 
D)  monopolistically competitive. 
A)  a monopoly. 
B)  an oligopoly. 
C)  perfectly competitive. 
D)  monopolistically competitive.

Question 7

The distinguishing features of oligopoly are ________ and a ________ in the industry.

Accepted Answer

A)  barriers to entry; large number of firms 
B)  no barriers to entry; few firms 
C)  barriers to entry; few firms 
D)  no barriers to entry; large number of firms 
A)  barriers to entry; large number of firms 
B)  no barriers to entry; few firms 
C)  barriers to entry; few firms 
D)  no barriers to entry; large number of firms

Question 8

If two duopolists can collude successfully, then both will

Accepted Answer

A)  earn greater profits than if they did not collude. 
B)  price at marginal cost. 
C)  price below average total cost. 
D)  lower their economic profits. 
A)  earn greater profits than if they did not collude. 
B)  price at marginal cost. 
C)  price below average total cost. 
D)  lower their economic profits.

Question 9

"A Nash equilibrium occurs when both parties to a game end up worse off as a result of the decisions that are made." Is the previous definition of a Nash equilibrium correct or incorrect?

Accepted Answer

The definition is incorrect. A

Question 10

In a contestable market the Herfindahl-Hirschman Index is ________ and the market behaves as if it is ________.

Accepted Answer

A)  low; perfectly competitive 
B)  low; a monopoly 
C)  high; perfectly competitive 
D)  high; a monopoly 
A)  low; perfectly competitive 
B)  low; a monopoly 
C)  high; perfectly competitive 
D)  high; a monopoly

Question 11

An market in which the Herfindahl-Hirschman Index (HHI) is 2,500 is considered to be

Accepted Answer

A)  an oligopoly. 
B)  monopolistically competitive. 
C)  a monopoly. 
D)  perfectly competitive. 
A)  an oligopoly. 
B)  monopolistically competitive. 
C)  a monopoly. 
D)  perfectly competitive.

Question 12

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 are the strategies in this game?

Accepted Answer

A)  Do not sign exclusive contract with an Olympian gold-medal athlete to appear on the cover of a cereal box and make $8 million in profit. 
B)  Sign an exclusive contract with an Olympian gold-medal athlete to appear on the cover of a cereal box and do not sign exclusive contract with an Olympian gold-medal athlete to appear on the cover of a cereal box. 
C)  Sign an exclusive contract with an Olympian gold-medal athlete to appear on the cover of a cereal box and make $8 million in profit. 
D)  Make $5 million or $8 million in profit. 
A)  Do not sign exclusive contract with an Olympian gold-medal athlete to appear on the cover of a cereal box and make $8 million in profit. 
B)  Sign an exclusive contract with an Olympian gold-medal athlete to appear on the cover of a cereal box and do not sign exclusive contract with an Olympian gold-medal athlete to appear on the cover of a cereal box. 
C)  Sign an exclusive contract with an Olympian gold-medal athlete to appear on the cover of a cereal box and make $8 million in profit. 
D)  Make $5 million or $8 million in profit.

Question 13

The first antitrust law passed was the

Accepted Answer

A)  Federal Trade Commission Act. 
B)  Sherman Act. 
C)  Clayton Act. 
D)  Robinson-Patman Amendment. 
A)  Federal Trade Commission Act. 
B)  Sherman Act. 
C)  Clayton Act. 
D)  Robinson-Patman Amendment.

Question 14

In a repeated game, punishments that result in heavy damages are an incentive for players to adopt the strategies that result in a ________ equilibrium.

Accepted Answer

A)  contestable 
B)  strategic 
C)  cooperative 
D)  winner-share-all 
A)  contestable 
B)  strategic 
C)  cooperative 
D)  winner-share-all

Question 15

The practice of the only seller in a market charging a price at the highest level that would still inflict a loss on a new entrant into the market is called

Accepted Answer

A)  limit pricing. 
B)  collusive pricing. 
C)  agile pricing. 
D)  trigger pricing. 
A)  limit pricing. 
B)  collusive pricing. 
C)  agile pricing. 
D)  trigger pricing.

Question 16

When is price fixing among competitors not a violation of the antitrust laws?

Accepted Answer

A)  Price fixing among competitors is always a violation of the antitrust law. 
B)  when a cartel can maximize profit without behaving like a monopoly 
C)  when price fixing leads to a more efficient outcome 
D)  when price fixing does not result in predatory pricing 
A)  Price fixing among competitors is always a violation of the antitrust law. 
B)  when a cartel can maximize profit without behaving like a monopoly 
C)  when price fixing leads to a more efficient outcome 
D)  when price fixing does not result in predatory pricing

Question 17

Under current guidelines, the Federal Trade Commission will likely challenge

Accepted Answer

A)  all mergers if the Herfindahl-Hirschman index (HHI) is 2500 or higher. 
B)  a merger if the HHI is 2500 or higher and the merger increases the HHI by more than 200 points. 
C)  a merger if the HHI is 2500 or higher and the merger increases the HHI by more than 50 points. 
D)  a merger if the HHI is 1500 or higher and the merger increases the HHI by more than 300 points. 
A)  all mergers if the Herfindahl-Hirschman index (HHI) is 2500 or higher. 
B)  a merger if the HHI is 2500 or higher and the merger increases the HHI by more than 200 points. 
C)  a merger if the HHI is 2500 or higher and the merger increases the HHI by more than 50 points. 
D)  a merger if the HHI is 1500 or higher and the merger increases the HHI by more than 300 points.

Question 18

Price wars can be the result of

Accepted Answer

A)  a cooperative equilibrium. 
B)  a firm playing a tit-for-tat strategy in which last period the competitors complied with a collusive agreement. 
C)  new firms entering the industry and immediately agreeing to abide by a collusive agreement. 
D)  new firms entering an industry and all firms then finding themselves in a prisoners' dilemma. 
A)  a cooperative equilibrium. 
B)  a firm playing a tit-for-tat strategy in which last period the competitors complied with a collusive agreement. 
C)  new firms entering the industry and immediately agreeing to abide by a collusive agreement. 
D)  new firms entering an industry and all firms then finding themselves in a prisoners' dilemma.

Question 19

The local pizza delivery industry currently has a Herfindahl-Hirschman index (HHI) value of 999 and two of the competing pizza shops have considered merging. Because the merger would raise the HHI by 55 points, the Federal Trade Commission would likely

Accepted Answer

A)  not challenge the merger. 
B)  challenge the merger. 
C)  allow the merger under the condition that HHI does not rise by more than 55 points as promised. 
D)  allow the merger under the condition that the HHI remain at the premerger level of 999. 
A)  not challenge the merger. 
B)  challenge the merger. 
C)  allow the merger under the condition that HHI does not rise by more than 55 points as promised. 
D)  allow the merger under the condition that the HHI remain at the premerger level of 999.

Question 20

A group of firms that has entered into a collusive agreement to restrict output and increase prices and profits is called

Accepted Answer

A)  a compliance. 
B)  a cartel. 
C)  an oligopoly. 
D)  a duopoly. 
A)  a compliance. 
B)  a cartel. 
C)  an oligopoly. 
D)  a duopoly.

When only a small number of producers compete with each other is a defining characteristic of

Game theory can be used for studying which of the following types of market structure?

A trigger strategy can be used in

Two firms make most of the consumer alkaline batteries in the country: Duracell and Energizer. The market for batteries is most likely

The distinguishing features of oligopoly are and a in the industry.

If two duopolists can collude successfully, then both will

"A Nash equilibrium occurs when both parties to a game end up worse off as a result of the decisions that are made." Is the previous definition of a Nash equilibrium correct or incorrect?

In a contestable market the Herfindahl-Hirschman Index is and the market behaves as if it is .

An market in which the Herfindahl-Hirschman Index (HHI) is 2,500 is considered to be

The first antitrust law passed was the

In a repeated game, punishments that result in heavy damages are an incentive for players to adopt the strategies that result in a ________ equilibrium.

The practice of the only seller in a market charging a price at the highest level that would still inflict a loss on a new entrant into the market is called

When is price fixing among competitors not a violation of the antitrust laws?

Under current guidelines, the Federal Trade Commission will likely challenge

Price wars can be the result of

The local pizza delivery industry currently has a Herfindahl-Hirschman index (HHI) value of 999 and two of the competing pizza shops have considered merging. Because the merger would raise the HHI by 55 points, the Federal Trade Commission would likely

A group of firms that has entered into a collusive agreement to restrict output and increase prices and profits is called

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

When only a small number of producers compete with each other is a defining characteristic of

Game theory can be used for studying which of the following types of market structure?

A trigger strategy can be used in

Two firms make most of the consumer alkaline batteries in the country: Duracell and Energizer. The market for batteries is most likely

The distinguishing features of oligopoly are ________ and a ________ in the industry.

If two duopolists can collude successfully, then both will

"A Nash equilibrium occurs when both parties to a game end up worse off as a result of the decisions that are made." Is the previous definition of a Nash equilibrium correct or incorrect?

In a contestable market the Herfindahl-Hirschman Index is ________ and the market behaves as if it is ________.

An market in which the Herfindahl-Hirschman Index (HHI) is 2,500 is considered to be

The first antitrust law passed was the

In a repeated game, punishments that result in heavy damages are an incentive for players to adopt the strategies that result in a ________ equilibrium.

The practice of the only seller in a market charging a price at the highest level that would still inflict a loss on a new entrant into the market is called

When is price fixing among competitors not a violation of the antitrust laws?

Under current guidelines, the Federal Trade Commission will likely challenge

Price wars can be the result of

The local pizza delivery industry currently has a Herfindahl-Hirschman index (HHI) value of 999 and two of the competing pizza shops have considered merging. Because the merger would raise the HHI by 55 points, the Federal Trade Commission would likely

A group of firms that has entered into a collusive agreement to restrict output and increase prices and profits is called

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

The distinguishing features of oligopoly are and a in the industry.

In a contestable market the Herfindahl-Hirschman Index is and the market behaves as if it is .