Question 1

When the Federal Trade Commission decides whether to allow firms in an industry to merge,it uses the ________ to guide its decision.

Accepted Answer

A)  social interest theory 
B)  HHI 
C)  capture theory 
D)  Sherman Act 
E)  predatory pricing theory 
A)  social interest theory 
B)  HHI 
C)  capture theory 
D)  Sherman Act 
E)  predatory pricing theory

Question 2

Predatory pricing occurs when a firm sets a ________ price to drive competitors out of business with the intention of then setting a ________ price.

Accepted Answer

A)  monopoly; high 
B)  monopoly; low 
C)  low; monopoly 
D)  low; low 
E)  high; monopoly 
A)  monopoly; high 
B)  monopoly; low 
C)  low; monopoly 
D)  low; low 
E)  high; monopoly

Question 3

The concepts of mutual interdependence and game theory illustrate the fact that firms competing in oligopoly

Accepted Answer

A)  consider the actions of the rivals before changing the price of their product. 
B)  ignore the actions of their rivals when considering price changes. 
C)  engage in frequent price changes. 
D)  never change prices. 
E)  will mutually determine the combined best outcome for all players. 
A)  consider the actions of the rivals before changing the price of their product. 
B)  ignore the actions of their rivals when considering price changes. 
C)  engage in frequent price changes. 
D)  never change prices. 
E)  will mutually determine the combined best outcome for all players.

Question 4

To determine if a market is an oligopoly,we need to determine if

Accepted Answer

A)  the market's HHI is less than 900. 
B)  there are many firms in the market. 
C)  the firms are so few that they recognize their mutual interdependencies. 
D)  the firms make identical or differentiated products. 
E)  cartels are legal in their market. 
A)  the market's HHI is less than 900. 
B)  there are many firms in the market. 
C)  the firms are so few that they recognize their mutual interdependencies. 
D)  the firms make identical or differentiated products. 
E)  cartels are legal in their market.

Question 5

If firms in an oligopolistic industry consistently cut their price to sell more output,what price and output will result?

Accepted Answer

A)  the monopoly price and output 
B)  the competitive price and output 
C)  the monopolistically competitive price and output 
D)  a price lower than the competitive price and less output than the competitive amount 
E)  a price lower than the competitive price and more output than the competitive amount 
A)  the monopoly price and output 
B)  the competitive price and output 
C)  the monopolistically competitive price and output 
D)  a price lower than the competitive price and less output than the competitive amount 
E)  a price lower than the competitive price and more output than the competitive amount

Question 6

-Intel and AMD are a duopoly that produce CPU chips.Intel and AMD can conduct R&D or they can not conduct R&D.The table above shows the payoff matrix for the two firms.If AMD is playing a tit-for-tat strategy,then if Intel conducted R&D last period,AMD

Accepted Answer

A)  definitely conducts R&D this period. 
B)  definitely does not conduct R&D this period. 
C)  might conduct R&D or might not conduct R&D, depending on Intel's profit. 
D)  might conduct R&D or might not conduct R&D, depending on its profit. 
E)  might conduct R&D or might not conduct R&D, but more information is needed to determine its action. 
A)  definitely conducts R&D this period. 
B)  definitely does not conduct R&D this period. 
C)  might conduct R&D or might not conduct R&D, depending on Intel's profit. 
D)  might conduct R&D or might not conduct R&D, depending on its profit. 
E)  might conduct R&D or might not conduct R&D, but more information is needed to determine its action.

Question 7

The figure above shows the market for airplanes.
-Suppose the airplane market is an oligopoly.According to the figure above,if the firms act as a monopolist,the quantity produced will be ________ planes per week and if the firms act as competitors the quantity produced will be ________ planes per week.

Accepted Answer

A)  6; 12 
B)  12; 6 
C)  0; 6 
D)  12; 0 
E)  None of the above answers is correct. 
A)  6; 12 
B)  12; 6 
C)  0; 6 
D)  12; 0 
E)  None of the above answers is correct.

Question 8

The possible alternatives for an oligopoly range from the monopoly case with ________ to the perfectly competitive case with ________.

Accepted Answer

A)  high output; low output 
B)  low prices; high prices 
C)  low profits; high profits 
D)  low output; high output 
E)  no cooperation among the firms; much cooperation among the firms 
A)  high output; low output 
B)  low prices; high prices 
C)  low profits; high profits 
D)  low output; high output 
E)  no cooperation among the firms; much cooperation among the firms

Question 9

There are two bookstores in a college town.If another bookstore opened,each of the stores would incur an economic loss.This bookstore market is

Accepted Answer

A)  a natural monopoly. 
B)  a monopoly. 
C)  monopolistic competition. 
D)  a natural oligopoly. 
E)  a legal oligopoly. 
A)  a natural monopoly. 
B)  a monopoly. 
C)  monopolistic competition. 
D)  a natural oligopoly. 
E)  a legal oligopoly.

Question 10

The first antitrust law in the United States was the

Accepted Answer

A)  Sherman Act, passed in 1960. 
B)  Clayton Act, passed in 1914. 
C)  Clayton Act, passed in 1830. 
D)  Sherman Act, passed in 1890. 
E)  Sherman Act, passed in 1933. 
A)  Sherman Act, passed in 1960. 
B)  Clayton Act, passed in 1914. 
C)  Clayton Act, passed in 1830. 
D)  Sherman Act, passed in 1890. 
E)  Sherman Act, passed in 1933.

Question 11

-The figure above shows the market demand curve and the ATC curve for a firm.If all firms in the market have the same ATC curve,the lowest price at which a firm could stay in business in the long run is ________ per unit and the quantity demanded in the market at that price is ________ units per hour.

Accepted Answer

A)  $20; 4,000 
B)  $10; 8,000 
C)  $10; 4,000 
D)  $20; 2,000 
E)  $20; 8,000 
A)  $20; 4,000 
B)  $10; 8,000 
C)  $10; 4,000 
D)  $20; 2,000 
E)  $20; 8,000

Question 12

The focus of antitrust legislation is to

Accepted Answer

A)  encourage cartels to form because they are easier to regulate. 
B)  maintain competition. 
C)  force society to act in the best interest of producers. 
D)  limit the power of regulatory bodies. 
E)  ensure that producers earn enough profit to stay in business so that consumers are not harmed by too many businesses closing. 
A)  encourage cartels to form because they are easier to regulate. 
B)  maintain competition. 
C)  force society to act in the best interest of producers. 
D)  limit the power of regulatory bodies. 
E)  ensure that producers earn enough profit to stay in business so that consumers are not harmed by too many businesses closing.

Question 13

In the case of two recently proposed mergers,PepsiCo buying 7-Up and Coca-Cola buying Dr.Pepper,the government blocked

Accepted Answer

A)  the PepsiCo but not the Coca-Cola merger. 
B)  the Coca-Cola but not the PepsiCo merger. 
C)  both mergers. 
D)  neither merger. 
E)  the Coca-Cola merger and tried to block, but failed, the PepsiCo merger. 
A)  the PepsiCo but not the Coca-Cola merger. 
B)  the Coca-Cola but not the PepsiCo merger. 
C)  both mergers. 
D)  neither merger. 
E)  the Coca-Cola merger and tried to block, but failed, the PepsiCo merger.

Question 14

The Federal Trade Commission uses ________ to help determine whether to challenge a possible merger.

Accepted Answer

A)  the Sherman Act 
B)  the Clayton Act 
C)  the Herfindahl-Hirschman Index 
D)  the antitrust law of natural monopolies 
E)  the four-firm concentration ratio 
A)  the Sherman Act 
B)  the Clayton Act 
C)  the Herfindahl-Hirschman Index 
D)  the antitrust law of natural monopolies 
E)  the four-firm concentration ratio

Question 15

If a few oil-producing countries in the Middle East decide to jointly limit the production of oil,

Accepted Answer

A)  they are forming a cartel. 
B)  they would like the price of oil to be the same as if the market were perfectly competitive. 
C)  game theory does not apply to their actions because they are nations, not firms. 
D)  they will try to operate as a large, monopolistically competitive firm. 
E)  they will agree to lower the price of oil in order to increase their profits. 
A)  they are forming a cartel. 
B)  they would like the price of oil to be the same as if the market were perfectly competitive. 
C)  game theory does not apply to their actions because they are nations, not firms. 
D)  they will try to operate as a large, monopolistically competitive firm. 
E)  they will agree to lower the price of oil in order to increase their profits.

Question 16

A cartel is a group of firms

Accepted Answer

A)  acting separately to limit output, lower price, and decrease economic profit. 
B)  acting together to limit output, raise price, and increase economic profit. 
C)  legally fixing prices. 
D)  acting together to erect barriers to entry. 
E)  that compete primarily with each other rather than the other firms in the market. 
A)  acting separately to limit output, lower price, and decrease economic profit. 
B)  acting together to limit output, raise price, and increase economic profit. 
C)  legally fixing prices. 
D)  acting together to erect barriers to entry. 
E)  that compete primarily with each other rather than the other firms in the market.

Question 17

If price fixing is necessary because without it a firm will go bankrupt,is the price fixing legal?

Accepted Answer

No,price fixing is always ille

Question 18

Suppose that an industry has an HHI of 1,900.Two firms in the industry want to merge.Under which conditions will the Federal Trade Commission challenge the merger?

Accepted Answer

A)  The market is considered competitive, so the merger will not be challenged. 
B)  The merger will be challenged if it raises the HHI by 100 or more points. 
C)  The merger will be challenged if it raises the HHI by 50 or more points. 
D)  The merger will be challenged if it raises the HHI by 200 or more points. 
E)  The merger will be challenged if it raises the HHI by 500 or more points. 
A)  The market is considered competitive, so the merger will not be challenged. 
B)  The merger will be challenged if it raises the HHI by 100 or more points. 
C)  The merger will be challenged if it raises the HHI by 50 or more points. 
D)  The merger will be challenged if it raises the HHI by 200 or more points. 
E)  The merger will be challenged if it raises the HHI by 500 or more points.

Question 19

Why are cartels among firms usually kept secret?

Accepted Answer

Cartels are typically kept secret becaus

Question 20

The prisoners' dilemma is similar to the problem faced by firms in an oligopoly in the United States because

Accepted Answer

A)  mutual interdependence exists, and collusion is illegal in the United States, so the firms cannot legally communicate. 
B)  collusion is legal in the United States, and firms can communicate their pricing decisions to each other. 
C)  failure to cooperate leads to better outcomes than cooperation. 
D)  private prisons are run by oligopolies. 
E)  the firms can communicate but mutual interdependence exists. 
A)  mutual interdependence exists, and collusion is illegal in the United States, so the firms cannot legally communicate. 
B)  collusion is legal in the United States, and firms can communicate their pricing decisions to each other. 
C)  failure to cooperate leads to better outcomes than cooperation. 
D)  private prisons are run by oligopolies. 
E)  the firms can communicate but mutual interdependence exists.

When the Federal Trade Commission decides whether to allow firms in an industry to merge,it uses the ________ to guide its decision.

Predatory pricing occurs when a firm sets a price to drive competitors out of business with the intention of then setting a price.

The concepts of mutual interdependence and game theory illustrate the fact that firms competing in oligopoly

To determine if a market is an oligopoly,we need to determine if

If firms in an oligopolistic industry consistently cut their price to sell more output,what price and output will result?

-Intel and AMD are a duopoly that produce CPU chips.Intel and AMD can conduct R&D or they can not conduct R&D.The table above shows the payoff matrix for the two firms.If AMD is playing a tit-for-tat strategy,then if Intel conducted R&D last period,AMD

The figure above shows the market for airplanes. -Suppose the airplane market is an oligopoly.According to the figure above,if the firms act as a monopolist,the quantity produced will be planes per week and if the firms act as competitors the quantity produced will be planes per week.

The possible alternatives for an oligopoly range from the monopoly case with to the perfectly competitive case with .

There are two bookstores in a college town.If another bookstore opened,each of the stores would incur an economic loss.This bookstore market is

The first antitrust law in the United States was the

-The figure above shows the market demand curve and the ATC curve for a firm.If all firms in the market have the same ATC curve,the lowest price at which a firm could stay in business in the long run is per unit and the quantity demanded in the market at that price is units per hour.

The focus of antitrust legislation is to

In the case of two recently proposed mergers,PepsiCo buying 7-Up and Coca-Cola buying Dr.Pepper,the government blocked

The Federal Trade Commission uses ________ to help determine whether to challenge a possible merger.

If a few oil-producing countries in the Middle East decide to jointly limit the production of oil,

A cartel is a group of firms

If price fixing is necessary because without it a firm will go bankrupt,is the price fixing legal?

Suppose that an industry has an HHI of 1,900.Two firms in the industry want to merge.Under which conditions will the Federal Trade Commission challenge the merger?

Why are cartels among firms usually kept secret?

The prisoners' dilemma is similar to the problem faced by firms in an oligopoly in the United States because

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets With Private Information

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition

Markets for Factors of Production

Economic Inequality

Filters

Exam 18: Oligopoly

When the Federal Trade Commission decides whether to allow firms in an industry to merge,it uses the ________ to guide its decision.

Predatory pricing occurs when a firm sets a ________ price to drive competitors out of business with the intention of then setting a ________ price.

The concepts of mutual interdependence and game theory illustrate the fact that firms competing in oligopoly

To determine if a market is an oligopoly,we need to determine if

If firms in an oligopolistic industry consistently cut their price to sell more output,what price and output will result?

-Intel and AMD are a duopoly that produce CPU chips.Intel and AMD can conduct R&D or they can not conduct R&D.The table above shows the payoff matrix for the two firms.If AMD is playing a tit-for-tat strategy,then if Intel conducted R&D last period,AMD

The possible alternatives for an oligopoly range from the monopoly case with ________ to the perfectly competitive case with ________.

There are two bookstores in a college town.If another bookstore opened,each of the stores would incur an economic loss.This bookstore market is

The first antitrust law in the United States was the

The focus of antitrust legislation is to

In the case of two recently proposed mergers,PepsiCo buying 7-Up and Coca-Cola buying Dr.Pepper,the government blocked

The Federal Trade Commission uses ________ to help determine whether to challenge a possible merger.

If a few oil-producing countries in the Middle East decide to jointly limit the production of oil,

A cartel is a group of firms

If price fixing is necessary because without it a firm will go bankrupt,is the price fixing legal?

Suppose that an industry has an HHI of 1,900.Two firms in the industry want to merge.Under which conditions will the Federal Trade Commission challenge the merger?

Why are cartels among firms usually kept secret?

The prisoners' dilemma is similar to the problem faced by firms in an oligopoly in the United States because

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets With Private Information

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition

Markets for Factors of Production

Economic Inequality

Filters

Predatory pricing occurs when a firm sets a price to drive competitors out of business with the intention of then setting a price.

The possible alternatives for an oligopoly range from the monopoly case with to the perfectly competitive case with .