Question 1

Predatory pricing occurs when

Accepted Answer

A)  firms collude to set prices. Economists are certain this practice is profitable. 
B)  firms collude to set prices. Economists are skeptical that this practice is profitable. 
C)  A monopolist decreases its prices to maintain its monopoly. Economists are certain this practice is profitable. 
D)  A monopolist decreases its prices to maintain its monopoly. Economists are skeptical that this practice is profitable. 
A)  firms collude to set prices. Economists are certain this practice is profitable. 
B)  firms collude to set prices. Economists are skeptical that this practice is profitable. 
C)  A monopolist decreases its prices to maintain its monopoly. Economists are certain this practice is profitable. 
D)  A monopolist decreases its prices to maintain its monopoly. Economists are skeptical that this practice is profitable.

Question 2

The practice of selling a product to retailers and requiring the retailers to charge a specific price for the product is called

Accepted Answer

A)  fixed retail pricing. 
B)  resale price maintenance. 
C)  cost plus pricing. 
D)  unfair trade. 
A)  fixed retail pricing. 
B)  resale price maintenance. 
C)  cost plus pricing. 
D)  unfair trade.

Question 3

Suppose a market is initially perfectly competitive with many firms selling an identical product.Over time,however,suppose the merging of firms results in the market being served by only three or four firms selling this same product.As a result,we would expect

Accepted Answer

A)  an increase in market output and an increase in the price of the product. 
B)  an increase in market output and an decrease in the price of the product. 
C)  a decrease in market output and an increase in the price of the product. 
D)  a decrease in market output and a decrease in the price of the product. 
A)  an increase in market output and an increase in the price of the product. 
B)  an increase in market output and an decrease in the price of the product. 
C)  a decrease in market output and an increase in the price of the product. 
D)  a decrease in market output and a decrease in the price of the product.

Question 4

Economists claim that a resale price maintenance agreement is not anti-competitive because

Accepted Answer

A)  suppliers are never able to exercise noncompetitive market power. 
B)  if a supplier has market power, it will be likely to exert that power through wholesale price rather than retail price. 
C)  retail markets are inherently noncompetitive. 
D)  retail cartel agreements cannot increase retail profits. 
A)  suppliers are never able to exercise noncompetitive market power. 
B)  if a supplier has market power, it will be likely to exert that power through wholesale price rather than retail price. 
C)  retail markets are inherently noncompetitive. 
D)  retail cartel agreements cannot increase retail profits.

Question 5

Acme Computer Co.sells computers to retail stores for $400.If Acme requires the retailers to charge customers $500 for the computers,then it is engaging in

Accepted Answer

A)  resale price maintenance. 
B)  predatory pricing. 
C)  tying. 
D)  monopolistic competition. 
A)  resale price maintenance. 
B)  predatory pricing. 
C)  tying. 
D)  monopolistic competition.

Question 6

Game theory is important for understanding which of the following market types?

Accepted Answer

A)  perfectly competitive and oligopolistic markets 
B)  perfectly competitive markets but not oligopolistic markets 
C)  oligoplistic but not perfectly competitive markets 
D)  neither oligopolistic nor perfectly competitive markets. 
A)  perfectly competitive and oligopolistic markets 
B)  perfectly competitive markets but not oligopolistic markets 
C)  oligoplistic but not perfectly competitive markets 
D)  neither oligopolistic nor perfectly competitive markets.

Question 7

Which of the following is necessarily a problem with antitrust laws?

Accepted Answer

A)  They may target a business whose practices appear to be anti-competitive but in fact have legitimate purposes. 
B)  They promote competition. 
C)  They limit monopoly power. 
D)  They prohibit firms from entering or exiting a market. 
A)  They may target a business whose practices appear to be anti-competitive but in fact have legitimate purposes. 
B)  They promote competition. 
C)  They limit monopoly power. 
D)  They prohibit firms from entering or exiting a market.

Question 8

Games that are played more than once generally

Accepted Answer

A)  lead to outcomes dominated purely by self-interest. 
B)  lead to outcomes that do not reflect joint rationality. 
C)  encourage cheating on cartel production quotas. 
D)  make collusive arrangements easier to enforce. 
A)  lead to outcomes dominated purely by self-interest. 
B)  lead to outcomes that do not reflect joint rationality. 
C)  encourage cheating on cartel production quotas. 
D)  make collusive arrangements easier to enforce.

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.If there is only one digital cable TV company in this market,what price would it charge for a premium digital channel subscription to maximize its profit?

Accepted Answer

A)  $30 
B)  $60 
C)  $90 
D)  $150 
A)  $30 
B)  $60 
C)  $90 
D)  $150

Question 10

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 and there is no fixed cost,then what will the combined profit of the cartel be?

Accepted Answer

A)  $40 
B)  $60 
C)  $80 
D)  $120 
A)  $40 
B)  $60 
C)  $80 
D)  $120

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.What is grocery store 2's dominant strategy?

Accepted Answer

A)  Grocery store 2 does not have a dominant strategy. 
B)  Grocery store 2 should always set a low price. 
C)  Grocery store 2 should always set a high price. 
D)  Grocery store 2 should set a low price when grocery store 1 sets a low price, and grocery store 2 should set a high price when grocery store 1 sets a high price. 
A)  Grocery store 2 does not have a dominant strategy. 
B)  Grocery store 2 should always set a low price. 
C)  Grocery store 2 should always set a high price. 
D)  Grocery store 2 should set a low price when grocery store 1 sets a low price, and grocery store 2 should set a high price when grocery store 1 sets a high price.

Question 12

Tying can be thought of as a form of price discrimination.

Accepted Answer

A) True 
 B)False

Question 13

The equilibrium price in a market characterized by oligopoly is

Accepted Answer

A)  higher than in monopoly markets and higher than in perfectly competitive markets. 
B)  higher than in monopoly markets and lower than in perfectly competitive markets. 
C)  lower than in monopoly markets and higher than in perfectly competitive markets. 
D)  lower than in monopoly markets and lower than in perfectly competitive markets. 
A)  higher than in monopoly markets and higher than in perfectly competitive markets. 
B)  higher than in monopoly markets and lower than in perfectly competitive markets. 
C)  lower than in monopoly markets and higher than in perfectly competitive markets. 
D)  lower than in monopoly markets and lower than in perfectly competitive markets.

Question 14

In the case of oligopolistic markets,self-interest makes cooperation difficult and it often leads to an undesirable outcome for the firms that are involved.

Accepted Answer

A) True 
 B)False

Question 15

From society's standpoint,cooperation among oligopolists is

Accepted Answer

A)  desirable, because it leads to less conflict among firms and a wider variety of products for consumers. 
B)  desirable, because it leads to an outcome closer to the competitive outcome than what would be observed in the absence of cooperation. 
C)  undesirable, because it leads to output levels that are too low and prices that are too high. 
D)  undesirable, because it leads to output levels that are too high and prices that are too high. 
A)  desirable, because it leads to less conflict among firms and a wider variety of products for consumers. 
B)  desirable, because it leads to an outcome closer to the competitive outcome than what would be observed in the absence of cooperation. 
C)  undesirable, because it leads to output levels that are too low and prices that are too high. 
D)  undesirable, because it leads to output levels that are too high and prices that are too high.

Question 16

When an oligopoly grows very large,the

Accepted Answer

A)  output effect disappears. 
B)  price effect disappears. 
C)  output effect equals the price effect. 
D)  price of the product greatly exceeds marginal cost. 
A)  output effect disappears. 
B)  price effect disappears. 
C)  output effect equals the price effect. 
D)  price of the product greatly exceeds marginal cost.

Question 17

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,then what is the price?

Accepted Answer

A)  $45 
B)  $40 
C)  $35 
D)  $30 
A)  $45 
B)  $40 
C)  $35 
D)  $30

Question 18

If the output effect from increased production is larger than the price effect,then an oligopolist would increase production.

Accepted Answer

A) True 
 B)False

Question 19

As the number of firms in an oligopoly increases,the magnitude of the

Accepted Answer

A)  output effect increases. 
B)  output effect decreases. 
C)  price effect increases. 
D)  price effect decreases. 
A)  output effect increases. 
B)  output effect decreases. 
C)  price effect increases. 
D)  price effect decreases.

Question 20

Figure 17-3. Katie and Taylor are roommates. On a particular day, their lawn needs to be mowed. Each person has to decide whether to take part in mowing the lawn. At the end of the day, either the lawn will be mowed (if one or both roommates take part in mowing), or it will remain unmowed (if neither roommate mows). With happiness measured on a scale of 1 (very unhappy) to 10 (very happy), the possible outcomes are as follows:
  
-Refer to Figure 17-3.In pursuing her own self-interest,Taylor will

Accepted Answer

A)  refrain from mowing whether or not Katie mows. 
B)  mow only if Katie mows. 
C)  mow only if Katie refrains from mowing. 
D)  mow whether or not Katie mows. 
A)  refrain from mowing whether or not Katie mows. 
B)  mow only if Katie mows. 
C)  mow only if Katie refrains from mowing. 
D)  mow whether or not Katie mows.

Predatory pricing occurs when

The practice of selling a product to retailers and requiring the retailers to charge a specific price for the product is called

Suppose a market is initially perfectly competitive with many firms selling an identical product.Over time,however,suppose the merging of firms results in the market being served by only three or four firms selling this same product.As a result,we would expect

Economists claim that a resale price maintenance agreement is not anti-competitive because

Acme Computer Co.sells computers to retail stores for $400.If Acme requires the retailers to charge customers $500 for the computers,then it is engaging in

Game theory is important for understanding which of the following market types?

Which of the following is necessarily a problem with antitrust laws?

Games that are played more than once generally

Tying can be thought of as a form of price discrimination.

The equilibrium price in a market characterized by oligopoly is

In the case of oligopolistic markets,self-interest makes cooperation difficult and it often leads to an undesirable outcome for the firms that are involved.

From society's standpoint,cooperation among oligopolists is

When an oligopoly grows very large,the

If the output effect from increased production is larger than the price effect,then an oligopolist would increase production.

As the number of firms in an oligopoly increases,the magnitude of the

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.

Predatory pricing occurs when

The practice of selling a product to retailers and requiring the retailers to charge a specific price for the product is called

Suppose a market is initially perfectly competitive with many firms selling an identical product.Over time,however,suppose the merging of firms results in the market being served by only three or four firms selling this same product.As a result,we would expect

Economists claim that a resale price maintenance agreement is not anti-competitive because

Acme Computer Co.sells computers to retail stores for $400.If Acme requires the retailers to charge customers $500 for the computers,then it is engaging in

Game theory is important for understanding which of the following market types?

Which of the following is necessarily a problem with antitrust laws?

Games that are played more than once generally

Tying can be thought of as a form of price discrimination.

The equilibrium price in a market characterized by oligopoly is

In the case of oligopolistic markets,self-interest makes cooperation difficult and it often leads to an undesirable outcome for the firms that are involved.

From society's standpoint,cooperation among oligopolists is

When an oligopoly grows very large,the

If the output effect from increased production is larger than the price effect,then an oligopolist would increase production.

As the number of firms in an oligopoly increases,the magnitude of the

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