Question 1

Explain how the output effect and the price effect influence the production decision of the individual oligopolist.

Accepted Answer

Since the individual oligopolist faces a

Question 2

An equilibrium in which each firm in an oligopoly maximizes profit,given the actions of its rivals,is called

Accepted Answer

A)  a general equilibrium. 
B)  a dominant equilibrium. 
C)  a Nash equilibrium. 
D)  an oligopoly equilibrium. 
A)  a general equilibrium. 
B)  a dominant equilibrium. 
C)  a Nash equilibrium. 
D)  an oligopoly equilibrium.

Question 3

Tying involves a firm

Accepted Answer

A)  colluding with another firm to restrict output and raise prices. 
B)  selling two individual products together for a single price rather than selling each product individually at separate prices. 
C)  temporarily cutting the price of its product to drive a competitor out of the market. 
D)  requiring that the firm reselling its product do so at a specified price. 
A)  colluding with another firm to restrict output and raise prices. 
B)  selling two individual products together for a single price rather than selling each product individually at separate prices. 
C)  temporarily cutting the price of its product to drive a competitor out of the market. 
D)  requiring that the firm reselling its product do so at a specified price.

Question 4

Scenario 17-5
Assume that a local bank sells two services, checking accounts and ATM card services. The bank's only two customers are Mr. Donethat and Ms. Beenthere. Mr. Donethat is willing to pay $8 a month for the bank to service his checking account and $2 a month for unlimited use of his ATM card. Ms. Beenthere is willing to pay only $5 for a checking account, but is willing to pay $9 for unlimited use of her ATM card. Assume that the bank can provide each of these services at zero marginal cost.
-Refer to Scenario 17-5.If the bank is unable to use tying,what is the profit-maximizing price to charge for unlimited use of an ATM card?

Accepted Answer

A)  $14 
B)  $11 
C)  $9 
D)  $2 
A)  $14 
B)  $11 
C)  $9 
D)  $2

Question 5

A group of firms that act in unison to maximize collective profits is called a

Accepted Answer

A)  monopolistically competitive industry. 
B)  monopoly. 
C)  cartel. 
D)  Nash equilibrium market. 
A)  monopolistically competitive industry. 
B)  monopoly. 
C)  cartel. 
D)  Nash equilibrium market.

Question 6

In the game in which two oil companies own adjacent oil fields,the companies will not use the oil efficiently because

Accepted Answer

A)  neither company has a dominant strategy in the game. 
B)  the companies collude and produce a quantity of oil that is less than the socially-efficient quantity. 
C)  the pool from which they recover the oil is a common resource. 
D)  the pool from which they recover the oil is not large enough to allow both companies to earn a positive profit. 
A)  neither company has a dominant strategy in the game. 
B)  the companies collude and produce a quantity of oil that is less than the socially-efficient quantity. 
C)  the pool from which they recover the oil is a common resource. 
D)  the pool from which they recover the oil is not large enough to allow both companies to earn a positive profit.

Question 7

A central issue in the Microsoft antitrust lawsuit involved Microsoft's integration of its Internet browser into its Windows operating system,to be sold as one unit.This practice is known as

Accepted Answer

A)  tying. 
B)  predation. 
C)  wholesale maintenance. 
D)  retail maintenance. 
A)  tying. 
B)  predation. 
C)  wholesale maintenance. 
D)  retail maintenance.

Question 8

A dominant strategy is one that

Accepted Answer

A)  makes every player better off. 
B)  makes at least one player better off without hurting the competitiveness of any other player. 
C)  increases the total payoff for the player. 
D)  is best for the player, regardless of what strategies other players follow. 
A)  makes every player better off. 
B)  makes at least one player better off without hurting the competitiveness of any other player. 
C)  increases the total payoff for the player. 
D)  is best for the player, regardless of what strategies other players follow.

Question 9

When firms have agreements among themselves on the quantity to produce and the price at which to sell output,we refer to their form of organization as a

Accepted Answer

A)  Nash arrangement. 
B)  cartel. 
C)  monopolistically competitive oligopoly. 
D)  perfectly competitive oligopoly. 
A)  Nash arrangement. 
B)  cartel. 
C)  monopolistically competitive oligopoly. 
D)  perfectly competitive oligopoly.

Question 10

In choosing among alternative courses of action,Raj must consider how others might respond to the action he takes.In the language of game theory,we say that Raj must think

Accepted Answer

A)  openly. 
B)  strategically. 
C)  dominantly. 
D)  cooperatively. 
A)  openly. 
B)  strategically. 
C)  dominantly. 
D)  cooperatively.

Question 11

When price is above marginal cost,selling one more unit at the current price will increase profit.This concept is known as the

Accepted Answer

A)  income effect. 
B)  price effect. 
C)  output effect. 
D)  cartel effect. 
A)  income effect. 
B)  price effect. 
C)  output effect. 
D)  cartel effect.

Question 12

Assume that demand for a product that is produced at zero marginal cost is reflected in the table below.
 
a.What is the profit-maximizing level of production for a group of oligopolistic firms that operate as a cartel?
b.Assume that this market is characterized by a duopoly in which collusive agreements are illegal.What market price and quantity will be associated with a Nash equilibrium?

Accepted Answer

a.Q = 1200

Question 13

The paradoxical nature of oligopoly can be demonstrated by the fact that,even though the monopoly outcome is best for the oligopolists,

Accepted Answer

A)  they collude to set the output level equal to the Nash equilibrium level of output. 
B)  they have incentives to increase production above the monopoly outcome. 
C)  they do not behave as profit maximizers. 
D)  self-interest juxtaposes the profits earned at the Nash equilibrium. 
A)  they collude to set the output level equal to the Nash equilibrium level of output. 
B)  they have incentives to increase production above the monopoly outcome. 
C)  they do not behave as profit maximizers. 
D)  self-interest juxtaposes the profits earned at the Nash equilibrium.

Question 14

Assume that Apple Computer has entered into an enforceable resale price maintenance agreement with Computer Super Stores Inc.(CSS Inc.)and Wal-Mart.Which of the following will always be true?

Accepted Answer

A)  The wholesale price of Apple computers will be different for CSS Inc. than it is for Wal-Mart. 
B)  Wal-Mart will benefit from customers who go to CSS Inc. for information about different computers. 
C)  CSS Inc. will sell Apple computers at a lower price than Wal-Mart. 
D)  Wal-Mart and CSS Inc. will always sell Apple Computers for exactly the same price. 
A)  The wholesale price of Apple computers will be different for CSS Inc. than it is for Wal-Mart. 
B)  Wal-Mart will benefit from customers who go to CSS Inc. for information about different computers. 
C)  CSS Inc. will sell Apple computers at a lower price than Wal-Mart. 
D)  Wal-Mart and CSS Inc. will always sell Apple Computers for exactly the same price.

Question 15

In the U.S.government's 1998 suit against the Microsoft Corporation,a central issue was whether Microsoft should be allowed to integrate its Internet browser into its Windows operating system.Microsoft responded that

Accepted Answer

A)  this integration of products is an example of tying, and the U.S. Supreme Court has consistently ruled that tying is a perfectly acceptable and legal business practice. 
B)  this integration of products is an example of resale price maintenance, and the U.S. Supreme Court has consistently ruled that fair trade is a perfectly acceptable and legal business practice. 
C)  putting new features into old products is a natural part of technological practice. 
D)  it would discontinue this integration of products, provided a speedy resolution of the government's case could be reached. 
A)  this integration of products is an example of tying, and the U.S. Supreme Court has consistently ruled that tying is a perfectly acceptable and legal business practice. 
B)  this integration of products is an example of resale price maintenance, and the U.S. Supreme Court has consistently ruled that fair trade is a perfectly acceptable and legal business practice. 
C)  putting new features into old products is a natural part of technological practice. 
D)  it would discontinue this integration of products, provided a speedy resolution of the government's case could be reached.

Question 16

Table 17-19
Consider a small town that has two grocery stores from which residents can choose to buy a gallon of milk. The store owners each must make a decision to set a high milk price or a low milk price. The payoff table, showing profit per week, is provided below. The profit in each cell is shown as (Store 1, Store 2).
  
-Refer to Table 17-19.If grocery store 1 sets a low price,what price should grocery store 2 set? And what will grocery store 2's payoff equal?

Accepted Answer

A)  Low price, $500 
B)  High price, $800 
C)  Low price, $100 
D)  High price, $650 
A)  Low price, $500 
B)  High price, $800 
C)  Low price, $100 
D)  High price, $650

Question 17

The primary purpose of antitrust legislation is to

Accepted Answer

A)  protect small businesses. 
B)  protect the competitiveness of U.S. markets. 
C)  protect the prices of American-made products. 
D)  ensure firms earn only a fair profit. 
A)  protect small businesses. 
B)  protect the competitiveness of U.S. markets. 
C)  protect the prices of American-made products. 
D)  ensure firms earn only a fair profit.

Question 18

Which of the following statements is (are)true of the prisoners' dilemma?
(i)Rational self-interest leads neither party to confess.
(ii)Cooperation between the prisoners is difficult to maintain.
(iii)Cooperation between the prisoners is individually rational.

Accepted Answer

A)  (ii) only 
B)  (ii) and (iii) 
C)  (i) and (iii) 
D)  (i), (ii), and (iii) 
A)  (ii) only 
B)  (ii) and (iii) 
C)  (i) and (iii) 
D)  (i), (ii), and (iii)

Question 19

Table 17-1
Imagine a small town in which only two residents, Rochelle and Alec, own wells that produce safe drinking water. Each week Rochelle and Alec work together to decide how many gallons of water to pump. They bring the water to town and sell it at whatever price the market will bear. To keep things simple, suppose that Rochelle and Alec can pump as much water as they want without cost so that the marginal cost of water equals zero. The weekly town demand schedule and total revenue schedule for water is shown in the table below:
  
-Refer to Table 17-1.If Rochelle and Alec operate as a profit-maximizing monopoly in the market for water,what price will they charge?

Accepted Answer

A)  $25 
B)  $30 
C)  $35 
D)  $40 
A)  $25 
B)  $30 
C)  $35 
D)  $40

Question 20

The Sherman Antitrust Act

Accepted Answer

A)  overturned centuries-old views of English and American judges on agreements among competitors. 
B)  had the effect of discouraging private lawsuits against conspiring oligopolists. 
C)  strengthened the Clayton Act. 
D)  elevated agreements among conspiring oligopolists from an unenforceable contract to a criminal conspiracy. 
A)  overturned centuries-old views of English and American judges on agreements among competitors. 
B)  had the effect of discouraging private lawsuits against conspiring oligopolists. 
C)  strengthened the Clayton Act. 
D)  elevated agreements among conspiring oligopolists from an unenforceable contract to a criminal conspiracy.

Explain how the output effect and the price effect influence the production decision of the individual oligopolist.

An equilibrium in which each firm in an oligopoly maximizes profit,given the actions of its rivals,is called

Tying involves a firm

A group of firms that act in unison to maximize collective profits is called a

In the game in which two oil companies own adjacent oil fields,the companies will not use the oil efficiently because

A central issue in the Microsoft antitrust lawsuit involved Microsoft's integration of its Internet browser into its Windows operating system,to be sold as one unit.This practice is known as

A dominant strategy is one that

When firms have agreements among themselves on the quantity to produce and the price at which to sell output,we refer to their form of organization as a

In choosing among alternative courses of action,Raj must consider how others might respond to the action he takes.In the language of game theory,we say that Raj must think

When price is above marginal cost,selling one more unit at the current price will increase profit.This concept is known as the

The paradoxical nature of oligopoly can be demonstrated by the fact that,even though the monopoly outcome is best for the oligopolists,

Assume that Apple Computer has entered into an enforceable resale price maintenance agreement with Computer Super Stores Inc.(CSS Inc.)and Wal-Mart.Which of the following will always be true?

In the U.S.government's 1998 suit against the Microsoft Corporation,a central issue was whether Microsoft should be allowed to integrate its Internet browser into its Windows operating system.Microsoft responded that

The primary purpose of antitrust legislation is to

Which of the following statements is (are)true of the prisoners' dilemma? (i)Rational self-interest leads neither party to confess. (ii)Cooperation between the prisoners is difficult to maintain. (iii)Cooperation between the prisoners is individually rational.

The Sherman Antitrust Act

Ten Principles of Economics.

Thinking Like an Economist.

Interdependence and the Gains from Trade.

The Market Forces of Supply and Demand.

Elasticity and Its Application

Supply, Demand, And Government Policies.

Consumers, Producers, and the Efficiency of Markets.

Application: The Costs of Taxation.

Application: International Trade.

Externalities.

Public Goods and Common Resources.

The Design of the Tax System.

The Costs of Production.

Firms in Competitive Markets.

Monopoly.

Monopolistic Competition.

The Market For the Factors of Production.

Earnings and Discrimination.

Income Inequality and Poverty.

The Theory of Consumer Choice.

Frontiers in Microeconomics.

Filters

Exam 17: Oligopoly.

Explain how the output effect and the price effect influence the production decision of the individual oligopolist.

An equilibrium in which each firm in an oligopoly maximizes profit,given the actions of its rivals,is called

Tying involves a firm

A group of firms that act in unison to maximize collective profits is called a

In the game in which two oil companies own adjacent oil fields,the companies will not use the oil efficiently because

A central issue in the Microsoft antitrust lawsuit involved Microsoft's integration of its Internet browser into its Windows operating system,to be sold as one unit.This practice is known as

A dominant strategy is one that

When firms have agreements among themselves on the quantity to produce and the price at which to sell output,we refer to their form of organization as a

In choosing among alternative courses of action,Raj must consider how others might respond to the action he takes.In the language of game theory,we say that Raj must think

When price is above marginal cost,selling one more unit at the current price will increase profit.This concept is known as the

The paradoxical nature of oligopoly can be demonstrated by the fact that,even though the monopoly outcome is best for the oligopolists,

Assume that Apple Computer has entered into an enforceable resale price maintenance agreement with Computer Super Stores Inc.(CSS Inc.)and Wal-Mart.Which of the following will always be true?

In the U.S.government's 1998 suit against the Microsoft Corporation,a central issue was whether Microsoft should be allowed to integrate its Internet browser into its Windows operating system.Microsoft responded that

The primary purpose of antitrust legislation is to

Which of the following statements is (are)true of the prisoners' dilemma? (i)Rational self-interest leads neither party to confess. (ii)Cooperation between the prisoners is difficult to maintain. (iii)Cooperation between the prisoners is individually rational.

The Sherman Antitrust Act

Ten Principles of Economics.

Thinking Like an Economist.

Interdependence and the Gains from Trade.

The Market Forces of Supply and Demand.

Elasticity and Its Application

Supply, Demand, And Government Policies.

Consumers, Producers, and the Efficiency of Markets.

Application: The Costs of Taxation.

Application: International Trade.

Externalities.

Public Goods and Common Resources.

The Design of the Tax System.

The Costs of Production.

Firms in Competitive Markets.

Monopoly.

Monopolistic Competition.

The Market For the Factors of Production.

Earnings and Discrimination.

Income Inequality and Poverty.

The Theory of Consumer Choice.

Frontiers in Microeconomics.

Filters