Question 1

Game theory can be used to investigate

Accepted Answer

A) why cartels break down. 
B) why some firms maintain excess productive capacity. 
C) how oligopolists set prices. 
D) All of the responses are correct. 
A) why cartels break down. 
B) why some firms maintain excess productive capacity. 
C) how oligopolists set prices. 
D) All of the responses are correct.

Question 2

Perfect competition and pure monopoly are concepts useful primarily for realistic applications.

Accepted Answer

A) True 
 B)False

Question 3

For the monopolistic competitor, MR = P.

Accepted Answer

A) True 
 B)False

Question 4

The existence of interdependence among firms in an oligopoly market

Accepted Answer

A) allows the analysis of the market through standard approaches. 
B) results in a monopoly outcome under virtually all circumstances. 
C) increases entry into the market. 
D) results in a great deal of difficulty in analyzing the behavior of firms. 
A) allows the analysis of the market through standard approaches. 
B) results in a monopoly outcome under virtually all circumstances. 
C) increases entry into the market. 
D) results in a great deal of difficulty in analyzing the behavior of firms.

Question 5

Which of the following best expresses the attitude toward competition of a firm engaged in tacit collusion with its rivals?

Accepted Answer

A) A rolling stone gathers no moss. 
B) Waste not, want not. 
C) Do unto others as you would have them do unto you. 
D) Ask, and ye shall receive. 
A) A rolling stone gathers no moss. 
B) Waste not, want not. 
C) Do unto others as you would have them do unto you. 
D) Ask, and ye shall receive.

Question 6

The authors of this text argue that oligopolies are interdependent firms. What do they mean by this? Give three examples of the types of interdependence which might occur.

Accepted Answer

Oligopolists are few in number, and they

Question 7

Unlike a perfectly competitive firm, a monopolistically competitive firm

Accepted Answer

A) faces a perfectly inelastic demand curve. 
B) can earn positive economic profit in the short run and in the long run. 
C) cannot earn positive economic profit even in the short run. 
D) has a negatively sloped demand curve. 
A) faces a perfectly inelastic demand curve. 
B) can earn positive economic profit in the short run and in the long run. 
C) cannot earn positive economic profit even in the short run. 
D) has a negatively sloped demand curve.

Question 8

The monopolistically competitive firm in short-run equilibrium

Accepted Answer

A) faces a downward-sloping demand curve. 
B) has a marginal revenue curve which lies below its demand curve. 
C) maximizes profit where MR = MC. 
D) All of the responses are correct. 
A) faces a downward-sloping demand curve. 
B) has a marginal revenue curve which lies below its demand curve. 
C) maximizes profit where MR = MC. 
D) All of the responses are correct.

Question 9

In game theory, a prisoner's dilemma

Accepted Answer

A) never has a dominant strategy. 
B) is equivalent to a Nash equilibrium. 
C) always has the best result for the players when game is played repeatedly. 
D) is a game that has a preferred outcome for the players that is not an equilibrium. 
A) never has a dominant strategy. 
B) is equivalent to a Nash equilibrium. 
C) always has the best result for the players when game is played repeatedly. 
D) is a game that has a preferred outcome for the players that is not an equilibrium.

Question 10

Game theory applies to problems that arise in

Accepted Answer

A) perfect competition. 
B) monopolies. 
C) oligopolies. 
D) pure competition. 
A) perfect competition. 
B) monopolies. 
C) oligopolies. 
D) pure competition.

Question 11

An oligopoly will always use game theory to maximize sales rather than profits.

Accepted Answer

A) True 
 B)False

Question 12

Monopolistic competition is common in

Accepted Answer

A) retail selling. 
B) farming. 
C) basic manufacturing. 
D) electric power generation. 
A) retail selling. 
B) farming. 
C) basic manufacturing. 
D) electric power generation.

Question 13

Oligopolists almost always cooperate in making price and output decisions.

Accepted Answer

A) True 
 B)False

Question 14

What is a repeated game? How does this helps the players in a game?

Accepted Answer

A repeated game is one that is played ov

Question 15

A perfectly contestable market is one which a firm can enter and exit without losing its investment.

Accepted Answer

A) True 
 B)False

Question 16

Given the characteristics: (1)many buyers and sellers, (2)free entry and exit, (3)perfect information, and (4)heterogeneity of products, monopolistic competition and perfect competition share

Accepted Answer

A) (1)and (4). 
B) (1), (2), and (3). 
C) (2)and (4). 
D) (2), (3), and (4). 
A) (1)and (4). 
B) (1), (2), and (3). 
C) (2)and (4). 
D) (2), (3), and (4).

Question 17

Is it likely that oligopolistic firms will be in both a kinked demand curve situation and also engage in price leadership? Why or why not?

Accepted Answer

No, it is not. The models are not compat

Question 18

A firm in a monopolistically competitive market makes no economic profit in the long run because

Accepted Answer

A) long-run marginal cost will be too high to make any economic profit. 
B) long-run price will be equal to long-run marginal cost. 
C) long-run marginal cost will be equal to long-run marginal revenue. 
D) long-run price will be equal to long-run average cost. 
A) long-run marginal cost will be too high to make any economic profit. 
B) long-run price will be equal to long-run marginal cost. 
C) long-run marginal cost will be equal to long-run marginal revenue. 
D) long-run price will be equal to long-run average cost.

Question 19

Price leadership is a form of

Accepted Answer

A) tacit collusion. 
B) explicit collusion. 
C) monopolistic competition. 
D) a cartel policing mechanism. 
A) tacit collusion. 
B) explicit collusion. 
C) monopolistic competition. 
D) a cartel policing mechanism.

Question 20

A good example of a market that resembles a contestable market would be

Accepted Answer

A) electric power production. 
B) trucking companies. 
C) auto manufacturing. 
D) urgent-care clinics. 
A) electric power production. 
B) trucking companies. 
C) auto manufacturing. 
D) urgent-care clinics.

Exam 13: Between Competition and Monopoly

Game theory can be used to investigate

Perfect competition and pure monopoly are concepts useful primarily for realistic applications.

For the monopolistic competitor, MR = P.

The existence of interdependence among firms in an oligopoly market

Which of the following best expresses the attitude toward competition of a firm engaged in tacit collusion with its rivals?

The authors of this text argue that oligopolies are interdependent firms. What do they mean by this? Give three examples of the types of interdependence which might occur.

Unlike a perfectly competitive firm, a monopolistically competitive firm

The monopolistically competitive firm in short-run equilibrium

In game theory, a prisoner's dilemma

Game theory applies to problems that arise in

An oligopoly will always use game theory to maximize sales rather than profits.

Monopolistic competition is common in

Oligopolists almost always cooperate in making price and output decisions.

What is a repeated game? How does this helps the players in a game?

A perfectly contestable market is one which a firm can enter and exit without losing its investment.

Given the characteristics: (1)many buyers and sellers, (2)free entry and exit, (3)perfect information, and (4)heterogeneity of products, monopolistic competition and perfect competition share

Is it likely that oligopolistic firms will be in both a kinked demand curve situation and also engage in price leadership? Why or why not?

A firm in a monopolistically competitive market makes no economic profit in the long run because

Price leadership is a form of

A good example of a market that resembles a contestable market would be

What Is Economics

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: the Importance of Marginal Analysis

The Financial Markets and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

The Case for Free Markets: the Price System

Monopoly

Limiting Market Power: Antitrust and Regulation

The Shortcomings of Free Markets

Externalities, Externaliteis, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

International Trade and Comparative Advantage

Contemporary Issues in the Us Economy

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