Question 1

The Clayton Act

Accepted Answer

A) replaced the Sherman Act. 
B) strengthened the Sherman Act. 
C) was specifically designed to reduce the ability of cartels to organize. 
D) was enforced by the executive, rather than judicial, branch of government. 
A) replaced the Sherman Act. 
B) strengthened the Sherman Act. 
C) was specifically designed to reduce the ability of cartels to organize. 
D) was enforced by the executive, rather than judicial, branch of government.

Question 2

The paradoxical nature of oligopoly can be demonstrated by the fact that,even though the monopoly outcome is best for the oligopolists,

Accepted Answer

A) they collude to set the output level equal to the Nash equilibrium level of output. 
B) they have incentives to increase production above the monopoly outcome. 
C) they do not behave as profit maximizers. 
D) self-interest juxtaposes the profits earned at the Nash equilibrium. 
A) they collude to set the output level equal to the Nash equilibrium level of output. 
B) they have incentives to increase production above the monopoly outcome. 
C) they do not behave as profit maximizers. 
D) self-interest juxtaposes the profits earned at the Nash equilibrium.

Question 3

Table 16-8
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 16-8.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 4

The Sherman Antitrust Act prohibits price-fixing in the sense that

Accepted Answer

A) competing executives cannot even talk about fixing prices. 
B) competing executives can talk about fixing prices, but they cannot take action to fix prices. 
C) a price-fixing agreement can lead to prosecution provided the government can show that the public was not well-served by the agreement. 
D) None of the above is correct.The Sherman Act did not address the matter of price-fixing. 
A) competing executives cannot even talk about fixing prices. 
B) competing executives can talk about fixing prices, but they cannot take action to fix prices. 
C) a price-fixing agreement can lead to prosecution provided the government can show that the public was not well-served by the agreement. 
D) None of the above is correct.The Sherman Act did not address the matter of price-fixing.

Question 5

Briefly contrast the difference between equilibrium market outcomes in a monopoly,oligopoly,and perfect competition.

Accepted Answer

Let: PC = Perfect Co

Question 6

Scenario 16-4
Consider two cigarette companies, PM Inc. and Brown Inc. If neither company advertises, the two companies split the market and earn $50 million each. If they both advertise, they again split the market, but profits are lower by $10 million since each company must bear the cost of advertising. Yet if one company advertises while the other does not, the one that advertises attracts customers from the other. In this case, the company that advertises earns $60 million while the company that does not advertise earns only $30 million.
-Refer to Scenario 16-4.What will these two companies do if they behave as individual profit maximizers?

Accepted Answer

A) Neither company will advertise. 
B) Both companies will advertise. 
C) One company will advertise, the other will not. 
D) There is no way of knowing without knowing how many customers are stolen through advertising. 
A) Neither company will advertise. 
B) Both companies will advertise. 
C) One company will advertise, the other will not. 
D) There is no way of knowing without knowing how many customers are stolen through advertising.

Question 7

An oligopoly would tend to restrict output and drive up price if

Accepted Answer

A) barriers to entering the industry are negligible. 
B) firms engage in informative advertising. 
C) firms produce a standardized product. 
D) firms collude and behave like a monopoly. 
A) barriers to entering the industry are negligible. 
B) firms engage in informative advertising. 
C) firms produce a standardized product. 
D) firms collude and behave like a monopoly.

Question 8

When strategic interactions are important to pricing and production decisions,a typical firm will

Accepted Answer

A) set the price of its product equal to marginal cost. 
B) consider how competing firms might respond to its actions. 
C) generally operate as if it is a monopolist. 
D) consider exiting the market. 
A) set the price of its product equal to marginal cost. 
B) consider how competing firms might respond to its actions. 
C) generally operate as if it is a monopolist. 
D) consider exiting the market.

Question 9

If all of the oligopolists in a market collude to form a cartel,total profit for the cartel is less than that of a monopolist.

Accepted Answer

A) True 
 B)False

Question 10

If there are many firms participating in a market,the market is either

Accepted Answer

A) an oligopoly or monopolistically competitive. 
B) perfectly competitive or monopolistically competitive. 
C) an oligopoly or perfectly competitive. 
D) an oligopoly or a cartel. 
A) an oligopoly or monopolistically competitive. 
B) perfectly competitive or monopolistically competitive. 
C) an oligopoly or perfectly competitive. 
D) an oligopoly or a cartel.

Question 11

Table 16-11
  
-Refer to Table 16-11.This table shows a game played between two players,A and B.The payoffs in the table are shown as (Payoff to A,Payoff to B).Which outcome is the Nash equilibrium in this game?

Accepted Answer

A) Up-Right 
B) Up-Left 
C) Down-Right 
D) Down-Left 
A) Up-Right 
B) Up-Left 
C) Down-Right 
D) Down-Left

Question 12

Why would lack of cooperation between criminal suspects be desirable for society as a whole?

Accepted Answer

A) The suspects are able to choose optimal outcomes for themselves by acting in their own self interest. 
B) The prisoners' dilemma safeguards the criminals' constitutional rights. 
C) More criminals will be convicted. 
D) None of the above is correct. 
A) The suspects are able to choose optimal outcomes for themselves by acting in their own self interest. 
B) The prisoners' dilemma safeguards the criminals' constitutional rights. 
C) More criminals will be convicted. 
D) None of the above is correct.

Question 13

If a person can prove that she was damaged by an illegal arrangement to restrain trade,that person can sue and recover

Accepted Answer

A) the damages she sustained, as provided for in the Sherman Act. 
B) the damages she sustained, as provided for in the Clayton Act. 
C) three times the damages she sustained, as provided for in the Sherman Act. 
D) three times the damages she sustained, as provided for in the Clayton Act. 
A) the damages she sustained, as provided for in the Sherman Act. 
B) the damages she sustained, as provided for in the Clayton Act. 
C) three times the damages she sustained, as provided for in the Sherman Act. 
D) three times the damages she sustained, as provided for in the Clayton Act.

Question 14

Table 16-5
  
-Refer to Table 16-5.This table shows the demand schedule for a particular product.Suppose the market for this product is served by two firm who collude and form a cartel.What price will the cartel charge in this market if the marginal cost of production is $0?

Accepted Answer

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

Question 15

As the number of firms in an oligopoly increases,

Accepted Answer

A) each seller becomes more concerned about its impact on the market price. 
B) the output effect decreases. 
C) the total quantity of output produced by firms in the market gets closer to the socially efficient quantity. 
D) the oligopoly has more market power and firms earn a greater profit. 
A) each seller becomes more concerned about its impact on the market price. 
B) the output effect decreases. 
C) the total quantity of output produced by firms in the market gets closer to the socially efficient quantity. 
D) the oligopoly has more market power and firms earn a greater profit.

Question 16

What do economists call a market structure in which there are many firms selling products that are similar but not identical?

Accepted Answer

A) Perfect competition 
B) Monopoly 
C) Monopolistic competition 
D) Oligopoly 
A) Perfect competition 
B) Monopoly 
C) Monopolistic competition 
D) Oligopoly

Question 17

When prisoners' dilemma games are repeated over and over,sometimes the threat of penalty causes both parties to cooperate.

Accepted Answer

A) True 
 B)False

Question 18

Firms do not need to be concerned about striking a balance between the price effect and the output effect when making production decisions in which of the following types of markets?

Accepted Answer

A) Oligopoly 
B) Duopoly 
C) Monopoly 
D) Competitive markets 
A) Oligopoly 
B) Duopoly 
C) Monopoly 
D) Competitive markets

Question 19

Who wrote,"People of the same trade seldom meet together,but the conversation ends in a conspiracy against the public,or in some diversion to raise prices."?

Accepted Answer

A) Thomas Jefferson 
B) Adam Smith 
C) Bill Gates 
D) Robert Axelrod 
A) Thomas Jefferson 
B) Adam Smith 
C) Bill Gates 
D) Robert Axelrod

Question 20

A typical firm in the U.S.economy would be classified as

Accepted Answer

A) perfectly competitive. 
B) imperfectly competitive. 
C) a duopolist. 
D) an oligopolist. 
A) perfectly competitive. 
B) imperfectly competitive. 
C) a duopolist. 
D) an oligopolist.

Exam 16: Oligopoly

The Clayton Act

The paradoxical nature of oligopoly can be demonstrated by the fact that,even though the monopoly outcome is best for the oligopolists,

The Sherman Antitrust Act prohibits price-fixing in the sense that

Briefly contrast the difference between equilibrium market outcomes in a monopoly,oligopoly,and perfect competition.

An oligopoly would tend to restrict output and drive up price if

When strategic interactions are important to pricing and production decisions,a typical firm will

If all of the oligopolists in a market collude to form a cartel,total profit for the cartel is less than that of a monopolist.

If there are many firms participating in a market,the market is either

Table 16-11 -Refer to Table 16-11.This table shows a game played between two players,A and B.The payoffs in the table are shown as (Payoff to A,Payoff to B).Which outcome is the Nash equilibrium in this game?

Why would lack of cooperation between criminal suspects be desirable for society as a whole?

If a person can prove that she was damaged by an illegal arrangement to restrain trade,that person can sue and recover

Table 16-5 -Refer to Table 16-5.This table shows the demand schedule for a particular product.Suppose the market for this product is served by two firm who collude and form a cartel.What price will the cartel charge in this market if the marginal cost of production is $0?

As the number of firms in an oligopoly increases,

What do economists call a market structure in which there are many firms selling products that are similar but not identical?

When prisoners' dilemma games are repeated over and over,sometimes the threat of penalty causes both parties to cooperate.

Firms do not need to be concerned about striking a balance between the price effect and the output effect when making production decisions in which of the following types of markets?

Who wrote,"People of the same trade seldom meet together,but the conversation ends in a conspiracy against the public,or in some diversion to raise prices."?

A typical firm in the U.S.economy would be classified as

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Applications

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 Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short Run Trade Off Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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