Question 1

Refer to the diagram. Equilibrium price is

Accepted Answer

A) e. 
B) d. 
C) c. 
D) b. 
A) e. 
B) d. 
C) c. 
D) b.

Question 2

If three or four homogeneous oligopolists collude, the resulting price and production outcomes will be similar to those of pure monopoly.

Accepted Answer

A) True 
 B)False

Question 3

Answer the question based on the payoff matrix for a duopoly in which the numbers indicate the profit from either opening a coffee shop in a small town or not opening the coffee shop. If both firms choose their strategies simultaneously, then

Accepted Answer

A) firm A's dominant strategy is to open a coffee shop. 
B) there is no Nash equilibrium for this game. 
C) firm B's dominant strategy is to not open a coffee shop. 
D) both firms have a dominant strategy to not open a coffee shop. 
A) firm A's dominant strategy is to open a coffee shop. 
B) there is no Nash equilibrium for this game. 
C) firm B's dominant strategy is to not open a coffee shop. 
D) both firms have a dominant strategy to not open a coffee shop.

Question 4

Describe a positive sum game.

Accepted Answer

In game theory, a positive sum game is o

Question 5

Game theory is best suited to analyze the pricing behavior of

Accepted Answer

A) pure monopolists. 
B) pure competitors. 
C) monopolistic competitors. 
D) oligopolists. 
A) pure monopolists. 
B) pure competitors. 
C) monopolistic competitors. 
D) oligopolists.

Question 6

Zippy's and Tony's are rival pizza restaurants in a small town. (Together they form a local duopoly.)Zippy's management determines that if it increases its advertising expenditures, it will increase profits regardless of whether Tony's increases its advertising budget. Based on this information, we can conclude that

Accepted Answer

A) this is a one-time game. 
B) Zippy's has a dominant strategy in this advertising game. 
C) this advertising game will reach a Nash equilibrium. 
D) Zippy's has first-mover advantages in this advertising game. 
A) this is a one-time game. 
B) Zippy's has a dominant strategy in this advertising game. 
C) this advertising game will reach a Nash equilibrium. 
D) Zippy's has first-mover advantages in this advertising game.

Question 7

The U.S. steel industry is an example of homogeneous oligopoly.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following factors tends to foster the development of an oligopoly?

Accepted Answer

A) economies of scale 
B) foreign competition 
C) antitrust legislation 
D) low barriers to entry 
A) economies of scale 
B) foreign competition 
C) antitrust legislation 
D) low barriers to entry

Question 9

Mutual interdependence refers to the situation when entry by new firms into an industry will tend to shrink the profits of existing firms.

Accepted Answer

A) True 
 B)False

Question 10

Answer the question based on the payoff matrices for a repeated game involving two firms that are considering introducing new products to the market. The numbers indicate the profit from following either a strategy to introduce a new product or a strategy to not introduce a new product.First game.   Second game.   In the first game,

Accepted Answer

A) introducing a new product is the dominant strategy for both firms. 
B) not introducing a new product is the dominant strategy for both firms. 
C) introducing a new product is the dominant strategy for firm A, while not introducing a new product is the dominant strategy for firm B. 
D) not introducing a new product is the dominant strategy for firm A, while introducing a new product is the dominant strategy for firm B. 
A) introducing a new product is the dominant strategy for both firms. 
B) not introducing a new product is the dominant strategy for both firms. 
C) introducing a new product is the dominant strategy for firm A, while not introducing a new product is the dominant strategy for firm B. 
D) not introducing a new product is the dominant strategy for firm A, while introducing a new product is the dominant strategy for firm B.

Question 11

Which of the following is the best example of oligopoly?

Accepted Answer

A) women's dress manufacturing 
B) automobile manufacturing 
C) restaurants 
D) cotton farming 
A) women's dress manufacturing 
B) automobile manufacturing 
C) restaurants 
D) cotton farming

Question 12

Advertising can impede economic efficiency when it

Accepted Answer

A) increases entry barriers. 
B) reduces brand loyalty. 
C) enables firms to achieve substantial economies of scale. 
D) increases consumer awareness of substitute products. 
A) increases entry barriers. 
B) reduces brand loyalty. 
C) enables firms to achieve substantial economies of scale. 
D) increases consumer awareness of substitute products.

Question 13

In the long run, an oligopoly

Accepted Answer

A) will produce less than a monopoly. 
B) may be able to earn positive economic profits. 
C) will always produce in the range of decreasing returns to scale. 
D) will produce on the portion of the demand curve where demand is price-inelastic. 
A) will produce less than a monopoly. 
B) may be able to earn positive economic profits. 
C) will always produce in the range of decreasing returns to scale. 
D) will produce on the portion of the demand curve where demand is price-inelastic.

Question 14

A low concentration ratio means that

Accepted Answer

A) there is a low probability of entering the industry. 
B) there is a low probability of success in the industry. 
C) each firm accounts for a small market share of the industry. 
D) each firm accounts for a large market share of the industry. 
A) there is a low probability of entering the industry. 
B) there is a low probability of success in the industry. 
C) each firm accounts for a small market share of the industry. 
D) each firm accounts for a large market share of the industry.

Question 15

The Herfindahl index for an industry is 3,000. Which of the following sets of market shares and industry with four firms would produce such an index?

Accepted Answer

A) lose $150 million in profit and firm A will gain $25 million in profit. 
B) gain $75 million in profit and firm A will lose $50 million in profit. 
C) gain $25 million in profit and firm A will gain $150 million in profit. 
D) gain $25 million in profit and firm A will lose $50 million in profit. 
A) lose $150 million in profit and firm A will gain $25 million in profit. 
B) gain $75 million in profit and firm A will lose $50 million in profit. 
C) gain $25 million in profit and firm A will gain $150 million in profit. 
D) gain $25 million in profit and firm A will lose $50 million in profit.

Question 16

The terminal nodes in an extensive form representation

Accepted Answer

A) are used solely to show payoffs that represent a Nash equilibrium. 
B) represent the starting points for a sequential game. 
C) indicate the strategies available to the players of a game. 
D) indicate the possible outcomes of a game. 
A) are used solely to show payoffs that represent a Nash equilibrium. 
B) represent the starting points for a sequential game. 
C) indicate the strategies available to the players of a game. 
D) indicate the possible outcomes of a game.

Question 17

Refer to the profits-payoff table for a duopoly. If initially firm X's price was $6 and Y's price was $5,

Accepted Answer

A) X would find it profitable to cut its price, provided Y also cut its price. 
B) Y would find it profitable to cut its price, provided X also cut its price. 
C) Y would find it profitable to raise its price by $1, provided X would also raise its price by $1. 
D) both firms would profit by simultaneously lowering their prices by $1. 
A) X would find it profitable to cut its price, provided Y also cut its price. 
B) Y would find it profitable to cut its price, provided X also cut its price. 
C) Y would find it profitable to raise its price by $1, provided X would also raise its price by $1. 
D) both firms would profit by simultaneously lowering their prices by $1.

Question 18

Refer to the game theory matrix, where the numerical data show the profits resulting from alternative combinations of advertising strategies for Ajax and Acme. Ajax's profits are shown in the upper right part of each cell; Acme's profits are shown in the lower left. Without collusion, Nash equilibrium is represented by which cell?

Accepted Answer

A) A 
B) B and C both 
C) D 
D) There is no Nash equilibrium in this game. 
A) A 
B) B and C both 
C) D 
D) There is no Nash equilibrium in this game.

Question 19

The industry characterized by these data is

Accepted Answer

A) an oligopoly. 
B) a monopolistically competitive industry. 
C) a purely competitive industry. 
D) a pure monopoly. 
A) an oligopoly. 
B) a monopolistically competitive industry. 
C) a purely competitive industry. 
D) a pure monopoly.

Question 20

What would you expect the concentration ratio and Herfindahl index of the Internet search industry to look like?

Accepted Answer

There are a few major firms in the marke

Exam 14: Oligopoly and Strategic Behavior

Refer to the diagram. Equilibrium price is

If three or four homogeneous oligopolists collude, the resulting price and production outcomes will be similar to those of pure monopoly.

Answer the question based on the payoff matrix for a duopoly in which the numbers indicate the profit from either opening a coffee shop in a small town or not opening the coffee shop. If both firms choose their strategies simultaneously, then

Describe a positive sum game.

Game theory is best suited to analyze the pricing behavior of

The U.S. steel industry is an example of homogeneous oligopoly.

Which of the following factors tends to foster the development of an oligopoly?

Mutual interdependence refers to the situation when entry by new firms into an industry will tend to shrink the profits of existing firms.

Which of the following is the best example of oligopoly?

Advertising can impede economic efficiency when it

In the long run, an oligopoly

A low concentration ratio means that

The Herfindahl index for an industry is 3,000. Which of the following sets of market shares and industry with four firms would produce such an index?

The terminal nodes in an extensive form representation

Refer to the profits-payoff table for a duopoly. If initially firm X's price was $6 and Y's price was $5,

The industry characterized by these data is

What would you expect the concentration ratio and Herfindahl index of the Internet search industry to look like?

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures Caused by Externalities Asymmetric Information

Public Goods, Public Choice, and Government Failure

Elasticity

Utility Maximization

Behavioral Economics

Businesses and the Costs of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition

Technology, RD, and Efficiency

The Demand for Resources

Wage Determination

Rent, Interest, and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

Health Care

Immigration

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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