Question 1

When firms are faced with making strategic choices in order to maximize profit,economists typically use

Accepted Answer

A)  the theory of monopoly to model their behavior. 
B)  the theory of aggressive competition to model their behavior. 
C)  game theory to model their behavior. 
D)  cartel theory to model their behavior. 
A)  the theory of monopoly to model their behavior. 
B)  the theory of aggressive competition to model their behavior. 
C)  game theory to model their behavior. 
D)  cartel theory to model their behavior.

Question 2

Ford and General Motors are considering expanding into the Vietnamese automobile market.Devise a simple prisoners' dilemma game to demonstrate the strategic considerations that are relevant to this decision.

Accepted Answer

The answer should present two strategies

Question 3

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.If Acme and Pinnacle operate to jointly maximize profits and agree to share the profit equally,then how much profit will each of them earn?

Accepted Answer

A)  $9,000 
B)  $8,750 
C)  $8,000 
D)  $6,750 
A)  $9,000 
B)  $8,750 
C)  $8,000 
D)  $6,750

Question 4

Table 17-7. The table shows the demand schedule for a particular product.
  
-Refer to Table 17-7.Suppose the market for this product is served by two firms who have formed a cartel and are colluding to set the price and quantity in this market.If the marginal cost to produce this product is constant at $2 per unit,then what price will the cartel set in this market?

Accepted Answer

A)  $4 
B)  $5 
C)  $6 
D)  $7 
A)  $4 
B)  $5 
C)  $6 
D)  $7

Question 5

Suppose that Makemoney Movies produces two new films - The Hulk and The Piano.Makemoney offers theaters the two films together at a single price but will not supply the movies separately.What do economists call this business practice?

Accepted Answer

A)  predatory pricing 
B)  resale price maintenance 
C)  tying 
D)  leverage 
A)  predatory pricing 
B)  resale price maintenance 
C)  tying 
D)  leverage

Question 6

A firm that practices resale price maintenance

Accepted Answer

A)  has incentive to reduce competition between its retailers. Resale price maintenance can lead to more service. 
B)  has incentive to reduce competition between its retailers. Resale price maintenance cannot lead to more service. 
C)  has no incentive to reduce competition between its retailers. Resale price maintenance can lead to more service. 
D)  has no incentive to reduce competition between its retailers. Resale price maintenance cannot lead to more service. 
A)  has incentive to reduce competition between its retailers. Resale price maintenance can lead to more service. 
B)  has incentive to reduce competition between its retailers. Resale price maintenance cannot lead to more service. 
C)  has no incentive to reduce competition between its retailers. Resale price maintenance can lead to more service. 
D)  has no incentive to reduce competition between its retailers. Resale price maintenance cannot lead to more service.

Question 7

In markets characterized by oligopoly,

Accepted Answer

A)  the oligopolists earn the highest profit when they cooperate and behave like a monopolist. 
B)  collusive agreements will always prevail. 
C)  collective profits are always lower with cartel arrangements than they are without cartel arrangements. 
D)  pursuit of self-interest by profit-maximizing firms always maximizes collective profits in the market. 
A)  the oligopolists earn the highest profit when they cooperate and behave like a monopolist. 
B)  collusive agreements will always prevail. 
C)  collective profits are always lower with cartel arrangements than they are without cartel arrangements. 
D)  pursuit of self-interest by profit-maximizing firms always maximizes collective profits in the market.

Question 8

In a game,a dominant strategy is

Accepted Answer

A)  the best strategy for a player to follow only if other players are cooperative. 
B)  the best strategy for a player to follow, regardless of the strategies followed by other players. 
C)  a strategy that must appear in every game. 
D)  a strategy that leads to one player's interests dominating the interests of the other players. 
A)  the best strategy for a player to follow only if other players are cooperative. 
B)  the best strategy for a player to follow, regardless of the strategies followed by other players. 
C)  a strategy that must appear in every game. 
D)  a strategy that leads to one player's interests dominating the interests of the other players.

Question 9

Dave and Andy are competitors in a local market.Each is trying to decide if it is better to advertise on TV,on radio,or not at all.If they both advertise on TV,each will earn a profit of $4,000.If they both advertise on radio,each will earn a profit of $7,000.If neither advertises at all,each will earn a profit of $10,000.If one advertises on TV and other advertises on radio,then the one advertising on TV will earn $6,000 and the other will earn $5,000.If one advertises on TV and the other does not advertise,then the one advertising on TV will earn $11,000 and the other will earn $2,000.If one advertises on radio and the other does not advertise,then the one advertising on radio will earn $12,000 and the other will earn $4,000.If both follow their dominant strategy,then Dave will

Accepted Answer

A)  advertise on TV and earn $4,000. 
B)  advertise on radio and earn $7,000. 
C)  advertise on TV and earn $11,000. 
D)  not advertise and earn $10,000. 
A)  advertise on TV and earn $4,000. 
B)  advertise on radio and earn $7,000. 
C)  advertise on TV and earn $11,000. 
D)  not advertise and earn $10,000.

Question 10

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.What is (are)the Nash equilibrium (equilibria)in this Chicken game?

Accepted Answer

A)  John: Turn
Paul: Turn 
B)  John: Turn
Paul: Drive Straight 
C)  John: Drive Straight
Paul: Turn 
D)  Both b and c are Nash equilibria 
A)  John: Turn
Paul: Turn 
B)  John: Turn
Paul: Drive Straight 
C)  John: Drive Straight
Paul: Turn 
D)  Both b and c are Nash equilibria

When firms are faced with making strategic choices in order to maximize profit,economists typically use

Ford and General Motors are considering expanding into the Vietnamese automobile market.Devise a simple prisoners' dilemma game to demonstrate the strategic considerations that are relevant to this decision.

Suppose that Makemoney Movies produces two new films - The Hulk and The Piano.Makemoney offers theaters the two films together at a single price but will not supply the movies separately.What do economists call this business practice?

A firm that practices resale price maintenance

In markets characterized by oligopoly,

In a game,a dominant strategy is

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.

When firms are faced with making strategic choices in order to maximize profit,economists typically use

Ford and General Motors are considering expanding into the Vietnamese automobile market.Devise a simple prisoners' dilemma game to demonstrate the strategic considerations that are relevant to this decision.

Suppose that Makemoney Movies produces two new films - The Hulk and The Piano.Makemoney offers theaters the two films together at a single price but will not supply the movies separately.What do economists call this business practice?

A firm that practices resale price maintenance

In markets characterized by oligopoly,

In a game,a dominant strategy is

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