Question 1

If firms in an oligopoly agree to produce according to the monopoly outcome,they will produce the same level of output as they would produce in a Nash equilibrium.

Accepted Answer

A) True 
 B)False

Question 2

Table 17-23
Two bottled beverage manufacturers (Firm A and Firm B) determine that they could lower their costs, and thus increase their profits, if they reduced their advertising budgets. But in order for the plan to work, each firm must agree to refrain from advertising. Each firm believes that advertising works by increasing the demand for the firm's product, but each firm also believes that if neither firm advertises, the costs savings will outweigh the lost sales. Listed in the table below are the individual profits for each firm.
  
-Refer to Table 17-23.Suppose that the two firms,A and B,make an agreement to withhold any advertising for one month in order to lower each firm's costs and raise each firm's profits.If the firms reach the Nash equilibrium,

Accepted Answer

A)  both firms will choose not to advertise. 
B)  firm A will choose not to advertise, but firm B will break the agreement and choose to advertise. 
C)  firm B will choose not to advertise, but firm A will break the agreement and choose to advertise. 
D)  both firms will break the agreement and choose to advertise. 
A)  both firms will choose not to advertise. 
B)  firm A will choose not to advertise, but firm B will break the agreement and choose to advertise. 
C)  firm B will choose not to advertise, but firm A will break the agreement and choose to advertise. 
D)  both firms will break the agreement and choose to advertise.

Question 3

Like monopolists,oligopolists are aware that an increase in the quantity of output always

Accepted Answer

A)  reduces the price of their product. 
B)  reduces their profit. 
C)  reduces their revenue. 
D)  reduces productivity. 
A)  reduces the price of their product. 
B)  reduces their profit. 
C)  reduces their revenue. 
D)  reduces productivity.

Question 4

As a group,oligopolists would always be better off if they would act collectively

Accepted Answer

A)  as if they were each seeking to maximize their own individual profits. 
B)  in a manner that would prohibit collusive agreements. 
C)  as a single monopolist. 
D)  as a single perfectly competitive firm. 
A)  as if they were each seeking to maximize their own individual profits. 
B)  in a manner that would prohibit collusive agreements. 
C)  as a single monopolist. 
D)  as a single perfectly competitive firm.

Question 5

Which of the following statements about oligopolies is not correct?

Accepted Answer

A)  An oligopolistic market has only a few sellers. 
B)  The actions of any one seller can have a large impact on the profits of all other sellers. 
C)  Oligopolistic firms are interdependent in a way that competitive firms are not. 
D)  Unlike monopolies and monopolistically competitive markets, oligopolies prices do not exceed their marginal revenues. 
A)  An oligopolistic market has only a few sellers. 
B)  The actions of any one seller can have a large impact on the profits of all other sellers. 
C)  Oligopolistic firms are interdependent in a way that competitive firms are not. 
D)  Unlike monopolies and monopolistically competitive markets, oligopolies prices do not exceed their marginal revenues.

Question 6

The prisoners' dilemma provides insights into the

Accepted Answer

A)  difficulty of maintaining cooperation. 
B)  benefits of avoiding cooperation. 
C)  benefits of government ownership of monopoly. 
D)  ease with which oligopoly firms maintain high prices. 
A)  difficulty of maintaining cooperation. 
B)  benefits of avoiding cooperation. 
C)  benefits of government ownership of monopoly. 
D)  ease with which oligopoly firms maintain high prices.

Question 7

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 Turn,what will John choose to do and what will John'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 8

If duopolists individually pursue their own self-interest when deciding how much to produce,the amount they will produce collectively will

Accepted Answer

A)  be less than the monopoly quantity. 
B)  be equal to the monopoly quantity. 
C)  be greater than the monopoly quantity. 
D)  Any of the above are possible. 
A)  be less than the monopoly quantity. 
B)  be equal to the monopoly quantity. 
C)  be greater than the monopoly quantity. 
D)  Any of the above are possible.

Question 9

Table 17-3. The information in the table below shows the total demand for premium-channel digital cable TV subscriptions in a small urban market. Assume that each digital cable TV operator pays a fixed cost of $200,000 (per year) to provide premium digital channels in the market area and that the marginal cost of providing the premium channel service to a household is zero.
  
-Refer to Table 17-3.Assume there are two digital cable TV companies operating in this market.If they are able to collude on the quantity of subscriptions that will be sold and on the price that will be charged for subscriptions,then their agreement will stipulate that

Accepted Answer

A)  each firm will charge a price of $90 and each firm will sell 4,500 subscriptions. 
B)  each firm will charge a price of $90 and each firm will sell 9,000 subscriptions. 
C)  each firm will charge a price of $120 and each firm will sell 3,000 subscriptions. 
D)  each firm will charge a price of $150 and each firm will sell 1,500 subscriptions. 
A)  each firm will charge a price of $90 and each firm will sell 4,500 subscriptions. 
B)  each firm will charge a price of $90 and each firm will sell 9,000 subscriptions. 
C)  each firm will charge a price of $120 and each firm will sell 3,000 subscriptions. 
D)  each firm will charge a price of $150 and each firm will sell 1,500 subscriptions.

Question 10

Table 17-11
Two cigarette manufacturers (Firm A and Firm B) are faced with lawsuits from states to recover the healthcare related expenses associated with cigarette smoking. Both cigarette firms have evidence that indicates that cigarette smoke causes lung cancer (and other related illnesses). State prosecutors do not have access to the same data used by cigarette manufacturers and thus will have difficulty recovering full costs without the help of at least one cigarette firm study. Each firm has been presented with an opportunity to lower its liability in the suit if it cooperates with attorneys representing the states.
  
-Refer to Table 17-11.If both firms follow a dominant strategy,Firm B's profits (losses)will be

Accepted Answer

A)  $-50 
B)  $-15 
C)  $-10 
D)  $-5 
A)  $-50 
B)  $-15 
C)  $-10 
D)  $-5

Question 11

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 high price,what price should grocery store 2 set? And what will grocery store 2's payoff equal?

Accepted Answer

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

Question 12

Table 17-3. The information in the table below shows the total demand for premium-channel digital cable TV subscriptions in a small urban market. Assume that each digital cable TV operator pays a fixed cost of $200,000 (per year) to provide premium digital channels in the market area and that the marginal cost of providing the premium channel service to a household is zero.
  
-Refer to Table 17-3.Assume there are two profit-maximizing digital cable TV companies operating in this market.Further assume that they are not able to collude on the price and quantity of premium digital channel subscriptions to sell.What price will premium digital channel cable TV subscriptions be sold at when this market reaches a Nash equilibrium?

Accepted Answer

A)  $30 
B)  $60 
C)  $90 
D)  $120 
A)  $30 
B)  $60 
C)  $90 
D)  $120

Question 13

Which government entity is charged with investigating and enforcing antitrust laws?

Accepted Answer

A)  the U.S. Justice Department 
B)  the U.S. Commerce Department 
C)  the U.S. Treasury Department 
D)  the Bureau of Alcohol, Tobacco, and Firearms 
A)  the U.S. Justice Department 
B)  the U.S. Commerce Department 
C)  the U.S. Treasury Department 
D)  the Bureau of Alcohol, Tobacco, and Firearms

Question 14

The practice of tying is illegal on the grounds that

Accepted Answer

A)  it allows firms to expand their market power. 
B)  it allows firms to form collusive arrangements. 
C)  it prevents firms from forming collusive agreements. 
D)  the Sherman Act explicitly prohibited such agreements. 
A)  it allows firms to expand their market power. 
B)  it allows firms to form collusive arrangements. 
C)  it prevents firms from forming collusive agreements. 
D)  the Sherman Act explicitly prohibited such agreements.

Question 15

A special kind of imperfectly competitive market that has only two firms is called

Accepted Answer

A)  a two-tier competitive structure. 
B)  an incidental monopoly. 
C)  a doublet. 
D)  a duopoly. 
A)  a two-tier competitive structure. 
B)  an incidental monopoly. 
C)  a doublet. 
D)  a duopoly.

Question 16

Table 17-6. The table shows the demand schedule for a particular product.
  
-Refer to Table 17-6.Suppose the market for this product is served by two firms that have formed a cartel.What price will the cartel charge in this market if the marginal cost of production is $4?

Accepted Answer

A)  $6 
B)  $8 
C)  $10 
D)  $12 
A)  $6 
B)  $8 
C)  $10 
D)  $12

Question 17

In a duopoly situation,the logic of self-interest results in a total output level that

Accepted Answer

A)  equals the output level that would prevail in a competitive market. 
B)  equals the output level that would prevail in a monopoly. 
C)  exceeds the monopoly level of output, but falls short of the competitive level of output. 
D)  falls short of the monopoly level of output. 
A)  equals the output level that would prevail in a competitive market. 
B)  equals the output level that would prevail in a monopoly. 
C)  exceeds the monopoly level of output, but falls short of the competitive level of output. 
D)  falls short of the monopoly level of output.

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.If Zenya chooses to build new weapons,then Muria will

Accepted Answer

A)  disarm in order to prevent the loss of influence in world affairs. 
B)  disarm in order to promote world peace. 
C)  build new weapons in order to prevent the loss of influence in world affairs. 
D)  None of the above are correct. 
A)  disarm in order to prevent the loss of influence in world affairs. 
B)  disarm in order to promote world peace. 
C)  build new weapons in order to prevent the loss of influence in world affairs. 
D)  None of the above are correct.

Question 19

The manufacturer of Bozz Radios sells radios to retail stores for $500 each,and it requires the retail stores to charge customers $550 per radio.Any retailer that charges less than $550 would violate its contract with Bozz Radios.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 20

Much of the research on game theory in recent decades was driven by attempts to analyze actions of players during

Accepted Answer

A)  the Great Depression of the 1930s. 
B)  World War II. 
C)  the Cold War between the United States and the Soviet Union. 
D)  the ascendancy of the conservative movement in the United States in the 1970s and 1980s. 
A)  the Great Depression of the 1930s. 
B)  World War II. 
C)  the Cold War between the United States and the Soviet Union. 
D)  the ascendancy of the conservative movement in the United States in the 1970s and 1980s.

If firms in an oligopoly agree to produce according to the monopoly outcome,they will produce the same level of output as they would produce in a Nash equilibrium.

Like monopolists,oligopolists are aware that an increase in the quantity of output always

As a group,oligopolists would always be better off if they would act collectively

Which of the following statements about oligopolies is not correct?

The prisoners' dilemma provides insights into the

If duopolists individually pursue their own self-interest when deciding how much to produce,the amount they will produce collectively will

Which government entity is charged with investigating and enforcing antitrust laws?

The practice of tying is illegal on the grounds that

A special kind of imperfectly competitive market that has only two firms is called

Table 17-6. The table shows the demand schedule for a particular product. -Refer to Table 17-6.Suppose the market for this product is served by two firms that have formed a cartel.What price will the cartel charge in this market if the marginal cost of production is $4?

In a duopoly situation,the logic of self-interest results in a total output level that

The manufacturer of Bozz Radios sells radios to retail stores for $500 each,and it requires the retail stores to charge customers $550 per radio.Any retailer that charges less than $550 would violate its contract with Bozz Radios.What do economists call this business practice?

Much of the research on game theory in recent decades was driven by attempts to analyze actions of players during

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.

If firms in an oligopoly agree to produce according to the monopoly outcome,they will produce the same level of output as they would produce in a Nash equilibrium.

Like monopolists,oligopolists are aware that an increase in the quantity of output always

As a group,oligopolists would always be better off if they would act collectively

Which of the following statements about oligopolies is not correct?

The prisoners' dilemma provides insights into the

If duopolists individually pursue their own self-interest when deciding how much to produce,the amount they will produce collectively will

Which government entity is charged with investigating and enforcing antitrust laws?

The practice of tying is illegal on the grounds that

A special kind of imperfectly competitive market that has only two firms is called

Table 17-6. The table shows the demand schedule for a particular product. -Refer to Table 17-6.Suppose the market for this product is served by two firms that have formed a cartel.What price will the cartel charge in this market if the marginal cost of production is $4?

In a duopoly situation,the logic of self-interest results in a total output level that

The manufacturer of Bozz Radios sells radios to retail stores for $500 each,and it requires the retail stores to charge customers $550 per radio.Any retailer that charges less than $550 would violate its contract with Bozz Radios.What do economists call this business practice?

Much of the research on game theory in recent decades was driven by attempts to analyze actions of players during

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