Question 1

As a group,oligopolists would always earn the highest profit if they would

Accepted Answer

A)  produce the perfectly competitive quantity of output. 
B)  produce more than the perfectly competitive quantity of output. 
C)  charge the same price that a monopolist would charge if the market were a monopoly. 
D)  operate according to their own individual self-interests. 
A)  produce the perfectly competitive quantity of output. 
B)  produce more than the perfectly competitive quantity of output. 
C)  charge the same price that a monopolist would charge if the market were a monopoly. 
D)  operate according to their own individual self-interests.

Question 2

Policymakers should be aggressive in using their powers to place limits on firm behavior,because business practices that appear to reduce competition never have any legitimate purposes.

Accepted Answer

A) True 
 B)False

Question 3

In the language of game theory,a situation in which each person must consider how others might respond to his or her own actions is called a

Accepted Answer

A)  quantifiable situation. 
B)  cooperative situation. 
C)  strategic situation. 
D)  tactical situation. 
A)  quantifiable situation. 
B)  cooperative situation. 
C)  strategic situation. 
D)  tactical situation.

Question 4

In a prisoners' dilemma game,

Accepted Answer

A)  the solution when playing the game once will be the same as the solution when the players play the game repeatedly, since agreements cannot be maintained in a prisoners' dilemma. 
B)  if the players play the game repeatedly, the players can achieve a higher payoff, on average, than when they play the game only once. 
C)  repeated play will always result in a better outcome for both players than when the game is played only once. 
D)  the tit-for-tat strategy in repeated play requires players to always select the opposite strategy as their opponent. 
A)  the solution when playing the game once will be the same as the solution when the players play the game repeatedly, since agreements cannot be maintained in a prisoners' dilemma. 
B)  if the players play the game repeatedly, the players can achieve a higher payoff, on average, than when they play the game only once. 
C)  repeated play will always result in a better outcome for both players than when the game is played only once. 
D)  the tit-for-tat strategy in repeated play requires players to always select the opposite strategy as their opponent.

Question 5

Table 17-21
The Chicken Game is named for a contest in which drivers test their courage by driving straight at each other. John and Paul have a common interest to avoid crashing into each other, but they also have a personal, competing interest to not turn first to demonstrate their courage to those observing the contest. The payoff table for this situation is provided below. The payoffs are shown as (John, Paul).
  
-Refer to Table 17-21.If John chooses Turn,what will Paul choose to do and what will Paul's payoff equal?

Accepted Answer

A)  Turn, 10 
B)  Drive Straight, 20 
C)  Turn, 5 
D)  Drive Straight, 0 
A)  Turn, 10 
B)  Drive Straight, 20 
C)  Turn, 5 
D)  Drive Straight, 0

Question 6

The game that oligopolists play in trying to reach the oligopoly outcome is similar to the game that the two prisoners play in the prisoners' dilemma.

Accepted Answer

A) True 
 B)False

Question 7

The prisoners' dilemma is an important game to study because

Accepted Answer

A)  most games present zero-sum alternatives. 
B)  it identifies the fundamental difficulty in maintaining cooperative agreements. 
C)  strategic decisions faced by prisoners are identical to those faced by firms engaged in competitive agreements. 
D)  all interactions among firms are represented by this game. 
A)  most games present zero-sum alternatives. 
B)  it identifies the fundamental difficulty in maintaining cooperative agreements. 
C)  strategic decisions faced by prisoners are identical to those faced by firms engaged in competitive agreements. 
D)  all interactions among firms are represented by this game.

Question 8

Suppose three firms form a cartel and agree to charge a specific price for their output.Each individual firm has an incentive to maintain the agreement because the firm's individual profits will be the greatest under the cartel arrangement.

Accepted Answer

A) True 
 B)False

Question 9

Assume oligopoly firms are profit maximizers,they do not form a cartel,and they take other firms' production levels as given.Then in equilibrium the output effect

Accepted Answer

A)  must dominate the price effect. 
B)  must be smaller than the price effect. 
C)  must balance with the price effect. 
D)  can be larger or smaller than the price effect. 
A)  must dominate the price effect. 
B)  must be smaller than the price effect. 
C)  must balance with the price effect. 
D)  can be larger or smaller than the price effect.

Question 10

Oligopolies produce more when they collude then when they do not.

Accepted Answer

A) True 
 B)False

Question 11

Explain the practice of tying and discuss why it is controversial.

Accepted Answer

Tying is the practice of bundling goods

Question 12

If duopoly firms that are not colluding were able to successfully collude,then

Accepted Answer

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

Question 13

Who wrote,"People of the same trade seldom meet together,but the conversation ends in a conspiracy against the public,or in some diversion to raise prices."?

Accepted Answer

A)  Thomas Jefferson 
B)  Adam Smith 
C)  Bill Gates 
D)  Robert Axelrod 
A)  Thomas Jefferson 
B)  Adam Smith 
C)  Bill Gates 
D)  Robert Axelrod

Question 14

Table 17-21
The Chicken Game is named for a contest in which drivers test their courage by driving straight at each other. John and Paul have a common interest to avoid crashing into each other, but they also have a personal, competing interest to not turn first to demonstrate their courage to those observing the contest. The payoff table for this situation is provided below. The payoffs are shown as (John, Paul).
  
-Refer to Table 17-21.If Paul chooses Drive Straight,what will John choose to do and what will John's payoff equal?

Accepted Answer

A)  Turn, 5 
B)  Drive Straight, 0 
C)  Turn, 20 
D)  Drive Straight, 5 
A)  Turn, 5 
B)  Drive Straight, 0 
C)  Turn, 20 
D)  Drive Straight, 5

Question 15

The notion of a tit-for-tat strategy applies to a prisoners' dilemma game that is played repeatedly,but it does not apply if the game is played only once.

Accepted Answer

A) True 
 B)False

Question 16

Table 17-10
The table shows the town of Driveaway's demand schedule for gasoline. Assume the town's gasoline seller(s) incurs a cost of $2 for each gallon sold, with no fixed cost.
  
-Refer to Table 17-10.Suppose we observe that the price of a gallon of gasoline in Driveaway is $5; we observe as well that a particular seller's profit is $150.Given this observation,which of the following scenarios is most likely?

Accepted Answer

A)  The market for gasoline in Driveaway is a monopoly. 
B)  There are two identical sellers of gasoline in Driveaway, and the sellers collude. 
C)  There are two identical sellers of gasoline in Driveaway, and the sellers do not collude. 
D)  There are three identical sellers of gasoline in Driveaway, and the sellers collude. 
A)  The market for gasoline in Driveaway is a monopoly. 
B)  There are two identical sellers of gasoline in Driveaway, and the sellers collude. 
C)  There are two identical sellers of gasoline in Driveaway, and the sellers do not collude. 
D)  There are three identical sellers of gasoline in Driveaway, and the sellers collude.

Question 17

Table 17-8. For a certain small town, the table shows the demand schedule for water. Assume the marginal cost of supplying water is constant at $4 per bottle.
  
-Refer to Table 17-8.If there were many suppliers of bottled water,what would be the price and quantity?

Accepted Answer

A)  The price would be $6 per gallon and the quantity would be 800 gallons. 
B)  The price would be $5 per gallon and the quantity would be 1000 gallons. 
C)  The price would be $4 per gallon and the quantity would be 1200 gallons. 
D)  The price would be $3 per gallon and the quantity would be 1400 gallons. 
A)  The price would be $6 per gallon and the quantity would be 800 gallons. 
B)  The price would be $5 per gallon and the quantity would be 1000 gallons. 
C)  The price would be $4 per gallon and the quantity would be 1200 gallons. 
D)  The price would be $3 per gallon and the quantity would be 1400 gallons.

Question 18

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.Which of these statements is correct?
(i)Muria is better off building new weapons if Zenya builds new weapons.
(ii)Muria is better off building new weapons if Zenya disarms existing weapons.
(iii)Building new weapons is Muria's dominant strategy.

Accepted Answer

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

Question 19

The theory of oligopoly provides a reason why

Accepted Answer

A)  perfect competition is not a useful object of study. 
B)  price is less than marginal cost for many firms. 
C)  all countries can benefit from free trade among nations. 
D)  firms do not want to capture larger shares of their markets. 
A)  perfect competition is not a useful object of study. 
B)  price is less than marginal cost for many firms. 
C)  all countries can benefit from free trade among nations. 
D)  firms do not want to capture larger shares of their markets.

Question 20

Table 17-9
Only two firms, Acme and Pinnacle, sell a particular product. The table below shows the demand curve for their product. Each firm has the same constant marginal cost of $10 and zero fixed cost.
  
-Refer to Table 17-9.How much less do each of these firms earn in the Nash equilibrium than if they jointly maximize profits?

Accepted Answer

A)  $250 
B)  $500 
C)  $750 
D)  $1000 
A)  $250 
B)  $500 
C)  $750 
D)  $1000

As a group,oligopolists would always earn the highest profit if they would

Policymakers should be aggressive in using their powers to place limits on firm behavior,because business practices that appear to reduce competition never have any legitimate purposes.

In the language of game theory,a situation in which each person must consider how others might respond to his or her own actions is called a

In a prisoners' dilemma game,

The game that oligopolists play in trying to reach the oligopoly outcome is similar to the game that the two prisoners play in the prisoners' dilemma.

The prisoners' dilemma is an important game to study because

Suppose three firms form a cartel and agree to charge a specific price for their output.Each individual firm has an incentive to maintain the agreement because the firm's individual profits will be the greatest under the cartel arrangement.

Assume oligopoly firms are profit maximizers,they do not form a cartel,and they take other firms' production levels as given.Then in equilibrium the output effect

Oligopolies produce more when they collude then when they do not.

Explain the practice of tying and discuss why it is controversial.

If duopoly firms that are not colluding were able to successfully collude,then

Who wrote,"People of the same trade seldom meet together,but the conversation ends in a conspiracy against the public,or in some diversion to raise prices."?

The notion of a tit-for-tat strategy applies to a prisoners' dilemma game that is played repeatedly,but it does not apply if the game is played only once.

Table 17-8. For a certain small town, the table shows the demand schedule for water. Assume the marginal cost of supplying water is constant at $4 per bottle. -Refer to Table 17-8.If there were many suppliers of bottled water,what would be the price and quantity?

The theory of oligopoly provides a reason why

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.

As a group,oligopolists would always earn the highest profit if they would

Policymakers should be aggressive in using their powers to place limits on firm behavior,because business practices that appear to reduce competition never have any legitimate purposes.

In the language of game theory,a situation in which each person must consider how others might respond to his or her own actions is called a

In a prisoners' dilemma game,

The game that oligopolists play in trying to reach the oligopoly outcome is similar to the game that the two prisoners play in the prisoners' dilemma.

The prisoners' dilemma is an important game to study because

Suppose three firms form a cartel and agree to charge a specific price for their output.Each individual firm has an incentive to maintain the agreement because the firm's individual profits will be the greatest under the cartel arrangement.

Assume oligopoly firms are profit maximizers,they do not form a cartel,and they take other firms' production levels as given.Then in equilibrium the output effect

Oligopolies produce more when they collude then when they do not.

Explain the practice of tying and discuss why it is controversial.

If duopoly firms that are not colluding were able to successfully collude,then

Who wrote,"People of the same trade seldom meet together,but the conversation ends in a conspiracy against the public,or in some diversion to raise prices."?

The notion of a tit-for-tat strategy applies to a prisoners' dilemma game that is played repeatedly,but it does not apply if the game is played only once.

Table 17-8. For a certain small town, the table shows the demand schedule for water. Assume the marginal cost of supplying water is constant at $4 per bottle. -Refer to Table 17-8.If there were many suppliers of bottled water,what would be the price and quantity?

The theory of oligopoly provides a reason why

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