Question 1

Explain the practice of resale price maintenance and discuss why it is controversial.

Accepted Answer

Resale price maintenance is a requiremen

Question 2

The Sherman Antitrust Act states that if a person can prove that he was damaged by an illegal arrangement to restrain trade,he could sue and recover three times the damages he sustained.

Accepted Answer

A) True 
 B)False

Question 3

What effect does the number of firms in an oligopoly have on the characteristics of the market?

Accepted Answer

As the number of firms increas

Question 4

If duopolists colluded but then stopped colluding,

Accepted Answer

A)  price and quantity would rise. 
B)  price would rise and quantity would fall. 
C)  price would fall and quantity would rise 
D)  price and quantity would fall. 
A)  price and quantity would rise. 
B)  price would rise and quantity would fall. 
C)  price would fall and quantity would rise 
D)  price and quantity would fall.

Question 5

As the number of firms in an oligopoly increases,the price approaches

Accepted Answer

A)  zero. 
B)  marginal cost. 
C)  infinity. 
D)  the monopoly price. 
A)  zero. 
B)  marginal cost. 
C)  infinity. 
D)  the monopoly price.

Question 6

When an oligopoly market reaches a Nash equilibrium,

Accepted Answer

A)  the market price will be different for each firm. 
B)  the firms will not have behaved as profit maximizers. 
C)  a firm will have chosen its best strategy, given the strategies chosen by other firms in the market. 
D)  a firm will not take into account the strategies of competing firms. 
A)  the market price will be different for each firm. 
B)  the firms will not have behaved as profit maximizers. 
C)  a firm will have chosen its best strategy, given the strategies chosen by other firms in the market. 
D)  a firm will not take into account the strategies of competing firms.

Question 7

When oligopolistic firms interacting with one another each choose their best strategy given the strategies chosen by other firms in the market,we have

Accepted Answer

A)  a cartel. 
B)  a group of oligopolists behaving as a monopoly. 
C)  a Nash equilibrium. 
D)  the perfectly competitive outcome. 
A)  a cartel. 
B)  a group of oligopolists behaving as a monopoly. 
C)  a Nash equilibrium. 
D)  the perfectly competitive outcome.

Question 8

Game theory is necessary for understanding

Accepted Answer

A)  all market structures. 
B)  competition and oligopoly, but it is not necessary for understanding monopoly. 
C)  monopoly and oligopoly, but it is not necessary for understanding competition. 
D)  oligopoly, but it is not necessary for understanding monopoly or competition. 
A)  all market structures. 
B)  competition and oligopoly, but it is not necessary for understanding monopoly. 
C)  monopoly and oligopoly, but it is not necessary for understanding competition. 
D)  oligopoly, but it is not necessary for understanding monopoly or competition.

Question 9

Table 17-17
This table shows a game played between two firms, Firm A and Firm B. In this game each firm must decide how much output (Q) to produce: 2 units or 3 units. The profit for each firm is given in the table as (Profit for Firm A, Profit for Firm B).
  
-Refer to Table 17-17.In this game,

Accepted Answer

A)  neither player has a dominant strategy. 
B)  both players have a dominant strategy. 
C)  Firm A has a dominant strategy, but Firm B does not have a dominant strategy. 
D)  Firm B has a dominant strategy, but Firm A does not have a dominant strategy. 
A)  neither player has a dominant strategy. 
B)  both players have a dominant strategy. 
C)  Firm A has a dominant strategy, but Firm B does not have a dominant strategy. 
D)  Firm B has a dominant strategy, but Firm A does not have a dominant strategy.

Question 10

Scenario 17-3. Consider two countries, Muria and Zenya, that are engaged in an arms race. Each country must decide whether to build new weapons or to disarm existing weapons. Each country prefers to have more arms than the other because a large arsenal gives it more influence in world affairs. But each country also prefers to live in a world safe from the other country's weapons. The following table shows the possible outcomes for each decision combination. The numbers in each cell represent the country's ranking of the outcome (4 = best outcome, 1 = worst outcome).
  
-Refer to Scenario 17-3.Building new weapons is a dominant strategy for

Accepted Answer

A)  Muria, but not for Zenya. 
B)  Zenya, but not for Muria. 
C)  both Muria and Zenya. 
D)  neither Muria nor Zenya. 
A)  Muria, but not for Zenya. 
B)  Zenya, but not for Muria. 
C)  both Muria and Zenya. 
D)  neither Muria nor Zenya.

Question 11

Table 17-14
This table shows a game played between two players, A and B. The payoffs in the table are shown as (Payoff to A, Payoff to B).
  
-Refer to Table 17-14.If both players choose their best strategies,player A will earn a payoff of

Accepted Answer

A)  0. 
B)  1. 
C)  2. 
D)  3. 
A)  0. 
B)  1. 
C)  2. 
D)  3.

Question 12

Scenario 17-1. Assume that the countries of Irun and Urun are the only two producers of crude oil. Further assume that both countries have entered into an agreement to maintain certain production levels in order to maximize profits. In the world market for oil, the demand curve is downward sloping.
-Refer to Scenario 17-1.If Irun fails to live up to the production agreement and overproduces,which of the following statements will be true of Urun's condition?

Accepted Answer

A)  Urun will invariably be worse off than before the agreement was broken. 
B)  Urun will counter by decreasing its production in order to maintain price stability. 
C)  Urun's profit will be maximized by holding its production constant. 
D)  Urun's profit will be unaffected by Irun's actions. 
A)  Urun will invariably be worse off than before the agreement was broken. 
B)  Urun will counter by decreasing its production in order to maintain price stability. 
C)  Urun's profit will be maximized by holding its production constant. 
D)  Urun's profit will be unaffected by Irun's actions.

Question 13

Table 17-4. The information in the table below shows the total demand for high-speed Internet subscriptions in a small urban market. Assume that each company that provides these subscriptions incurs an annual fixed cost of $200,000 (per year) and that the marginal cost of providing an additional subscription is always $80.
  
-Refer to Table 17-4.Assume there are two profit-maximizing high-speed Internet service providers operating in this market.Further assume that they are not able to collude on the price and quantity of subscriptions to sell.How many subscriptions will be sold altogether when this market reaches a Nash equilibrium?

Accepted Answer

A)  6,000 
B)  8,000 
C)  10,000 
D)  12,000 
A)  6,000 
B)  8,000 
C)  10,000 
D)  12,000

Question 14

OPEC is able to raise the price of its product by

Accepted Answer

A)  tying. 
B)  setting production levels for each of its members. 
C)  increasing the supply of oil above the competitive level. 
D)  imposing resale price maintenance agreements on members. 
A)  tying. 
B)  setting production levels for each of its members. 
C)  increasing the supply of oil above the competitive level. 
D)  imposing resale price maintenance agreements on members.

Question 15

Which of the following prohibits executives of competing firms from even talking about fixing prices?

Accepted Answer

A)  Sherman Act 
B)  Clayton Act 
C)  Federal Trade Commission 
D)  U.S. Justice Department 
A)  Sherman Act 
B)  Clayton Act 
C)  Federal Trade Commission 
D)  U.S. Justice Department

Question 16

The Clayton Act

Accepted Answer

A)  preceded the Sherman Act. 
B)  replaced the Sherman Act. 
C)  strengthened the Sherman Act. 
D)  was specifically designed to reduce the ability of cartels to organize. 
A)  preceded the Sherman Act. 
B)  replaced the Sherman Act. 
C)  strengthened the Sherman Act. 
D)  was specifically designed to reduce the ability of cartels to organize.

Question 17

The story of the prisoners' dilemma contains a general lesson that applies to any group trying to maintain cooperation among its members.

Accepted Answer

A) True 
 B)False

Question 18

Figure 17-4. Two companies, Acme and Bilco, are sellers in the same market. Each company decides whether to charge a high price or a low price. In the figure, the dollar amounts are payoffs and they represent annual profits for the two companies.
  
-Refer to Figure 17-4.If the two companies make their pricing decisions independently,then it is likely that Acme will

Accepted Answer

A)  charge a high price only if Bilco charges a high price. 
B)  charge a high price only if Bilco charges a low price. 
C)  charge a high price regardless of whether Bilco charges a high price or a low price. 
D)  None of the above are correct. 
A)  charge a high price only if Bilco charges a high price. 
B)  charge a high price only if Bilco charges a low price. 
C)  charge a high price regardless of whether Bilco charges a high price or a low price. 
D)  None of the above are correct.

Question 19

Table 17-13
Two home-improvement stores (Lopes and HomeMax) in a growing urban area are interested in expanding their market share. Both are interested in expanding the size of their store and parking lot to accommodate potential growth in their customer base. The following game depicts the strategic outcomes that result from the game. Increases in annual profits of the two home-improvement stores are shown in the table below.
  
-Refer to Table 17-13.Suppose the owners of Lopes and HomeMax meet for a friendly game of golf one afternoon and happen to discuss a strategy to optimize growth related profit.They should both agree to

Accepted Answer

A)  increase their store and parking lot sizes. 
B)  refrain from increasing their store and parking lot sizes. 
C)  be more competitive in capturing market share. 
D)  share the context of their conversation with the Federal Trade Commission. 
A)  increase their store and parking lot sizes. 
B)  refrain from increasing their store and parking lot sizes. 
C)  be more competitive in capturing market share. 
D)  share the context of their conversation with the Federal Trade Commission.

Question 20

When prisoners' dilemma games are repeated over and over,sometimes the threat of penalty causes both parties to cooperate.

Accepted Answer

A) True 
 B)False

Explain the practice of resale price maintenance and discuss why it is controversial.

The Sherman Antitrust Act states that if a person can prove that he was damaged by an illegal arrangement to restrain trade,he could sue and recover three times the damages he sustained.

What effect does the number of firms in an oligopoly have on the characteristics of the market?

If duopolists colluded but then stopped colluding,

As the number of firms in an oligopoly increases,the price approaches

When an oligopoly market reaches a Nash equilibrium,

When oligopolistic firms interacting with one another each choose their best strategy given the strategies chosen by other firms in the market,we have

Game theory is necessary for understanding

Table 17-17 This table shows a game played between two firms, Firm A and Firm B. In this game each firm must decide how much output (Q) to produce: 2 units or 3 units. The profit for each firm is given in the table as (Profit for Firm A, Profit for Firm B). -Refer to Table 17-17.In this game,

Table 17-14 This table shows a game played between two players, A and B. The payoffs in the table are shown as (Payoff to A, Payoff to B). -Refer to Table 17-14.If both players choose their best strategies,player A will earn a payoff of

OPEC is able to raise the price of its product by

Which of the following prohibits executives of competing firms from even talking about fixing prices?

The Clayton Act

The story of the prisoners' dilemma contains a general lesson that applies to any group trying to maintain cooperation among its members.

When prisoners' dilemma games are repeated over and over,sometimes the threat of penalty causes both parties to cooperate.

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.

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Exam 17: Oligopoly.

Explain the practice of resale price maintenance and discuss why it is controversial.

The Sherman Antitrust Act states that if a person can prove that he was damaged by an illegal arrangement to restrain trade,he could sue and recover three times the damages he sustained.

What effect does the number of firms in an oligopoly have on the characteristics of the market?

If duopolists colluded but then stopped colluding,

As the number of firms in an oligopoly increases,the price approaches

When an oligopoly market reaches a Nash equilibrium,

When oligopolistic firms interacting with one another each choose their best strategy given the strategies chosen by other firms in the market,we have

Game theory is necessary for understanding

Table 17-17 This table shows a game played between two firms, Firm A and Firm B. In this game each firm must decide how much output (Q) to produce: 2 units or 3 units. The profit for each firm is given in the table as (Profit for Firm A, Profit for Firm B). -Refer to Table 17-17.In this game,

Table 17-14 This table shows a game played between two players, A and B. The payoffs in the table are shown as (Payoff to A, Payoff to B). -Refer to Table 17-14.If both players choose their best strategies,player A will earn a payoff of

OPEC is able to raise the price of its product by

Which of the following prohibits executives of competing firms from even talking about fixing prices?

The Clayton Act

The story of the prisoners' dilemma contains a general lesson that applies to any group trying to maintain cooperation among its members.

When prisoners' dilemma games are repeated over and over,sometimes the threat of penalty causes both parties to cooperate.

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