Question 1

Larger cartels have a greater probability of reaching the monopoly outcome than do smaller cartels.

Accepted Answer

A) True 
 B)False

Question 2

When an oligopoly market reaches a Nash equilibrium,

Accepted Answer

A) the market price will be different for each firm. 
B) the firms will not have behaved as profit maximizers. 
C) a firm will have chosen its best strategy, given the strategies chosen by other firms in the market. 
D) a firm will not take into account the strategies of competing firms. 
A) the market price will be different for each firm. 
B) the firms will not have behaved as profit maximizers. 
C) a firm will have chosen its best strategy, given the strategies chosen by other firms in the market. 
D) a firm will not take into account the strategies of competing firms.

Question 3

Table 16-1
The following table shows the percentage of output supplied by the top eight firms in four different industries.
  
-Refer to Table 16-1.What is the concentration ratio in Industry D?

Accepted Answer

A) 32% 
B) 56% 
C) 60% 
D) 65% 
A) 32% 
B) 56% 
C) 60% 
D) 65%

Question 4

The U.S.market for locomotives is divided between two producers: General Electric has 70 percent of the market and General Motors has 30 percent.This market is an example of

Accepted Answer

A) monopolistic competition. 
B) a collusive monopoly. 
C) a duopoly. 
D) a cartel. 
A) monopolistic competition. 
B) a collusive monopoly. 
C) a duopoly. 
D) a cartel.

Question 5

An equilibrium occurs in a game when

Accepted Answer

A) price equals marginal cost. 
B) quantity supplied equals quantity demanded. 
C) all independent strategies counterbalance all dominant strategies. 
D) all players follow a strategy that they have no incentive to change. 
A) price equals marginal cost. 
B) quantity supplied equals quantity demanded. 
C) all independent strategies counterbalance all dominant strategies. 
D) all players follow a strategy that they have no incentive to change.

Question 6

In markets characterized by oligopoly,

Accepted Answer

A) the oligopolists earn the highest profit when they cooperate and behave like a monopolist. 
B) collusive agreements will always prevail. 
C) collective profits are always lower with cartel arrangements than they are without cartel arrangements. 
D) pursuit of self-interest by profit-maximizing firms always maximizes collective profits in the market. 
A) the oligopolists earn the highest profit when they cooperate and behave like a monopolist. 
B) collusive agreements will always prevail. 
C) collective profits are always lower with cartel arrangements than they are without cartel arrangements. 
D) pursuit of self-interest by profit-maximizing firms always maximizes collective profits in the market.

Question 7

Assume that demand for a product that is produced at zero marginal cost is reflected in the table below.
   
a.What is the profit-maximizing level of production for a group of oligopolistic firms that operate as a cartel?
b.Assume that this market is characterized by a duopoly in which collusive agreements are illegal.What market price and quantity will be associated with a profit-maximizing Nash equilibrium?

Accepted Answer

a. Q = 120

Question 8

Table 16-9
Each year the United States considers renewal of Most Favored Nation (MFN) trading status with China. Historically, legislators have made threats of not renewing MFN status because of human rights abuses in China. The non renewal of MFN trading status is likely to involve some retaliatory measures by China. The payoff table below shows the potential economic gains associated with a game in which China may impose trade sanctions against U.S. firms and the United States may not renew MFN status with China. The table contains the dollar value of all trade-flow benefits to the United States and China.
  
-Refer to Table 16-9.If both countries follow a dominant strategy,the value of trade flow benefits for the United States will be

Accepted Answer

A) $35 
B) $65 b. 
C) $130 b. 
D) $140 b. 
A) $35 
B) $65 b. 
C) $130 b. 
D) $140 b.

Question 9

Table 16-17
Amy and Heather are two college roommates who both prefer a clean common space in their dorm room, but neither enjoys cleaning. The roommates must each make a decision to either clean or not clean the dorm room's common space. The payoff table for this situation is provided below. The payoffs in each cell are shown as (Amy, Heather).
  
-Refer to Table 16-17.If Heather chooses Clean,what will Amy choose to do? And if Heather chooses Clean,what will Amy's payoff equal?

Accepted Answer

A) Clean $75 
B) Don't clean, $100 
C) Clean, $15 
D) Don't clean, $20 
A) Clean $75 
B) Don't clean, $100 
C) Clean, $15 
D) Don't clean, $20

Question 10

According to the Clayton Act

Accepted Answer

A) lawyers are given an incentive to reduce the number of cases involving cooperative arrangements. 
B) individuals can sue to recover damages from illegal cooperative agreements. 
C) the government was able to incarcerate the CEO of a firm for illegal pricing arrangements. 
D) private lawsuits are discouraged. 
A) lawyers are given an incentive to reduce the number of cases involving cooperative arrangements. 
B) individuals can sue to recover damages from illegal cooperative agreements. 
C) the government was able to incarcerate the CEO of a firm for illegal pricing arrangements. 
D) private lawsuits are discouraged.

Question 11

Table 16-7
Suppose the countries of Xania and Pluntia share the world supply of water. Suppose that the marginal cost of bottling water is a constant $4 per gallon, and the demand for water is described by the following schedule:
  
-Refer to Table 16-7.If Xania and Pluntia formed a cartel and decided to split the market evenly,what would Pluntia's production be if Pluntia maintained the agreement?

Accepted Answer

A) 50 
B) 100 
C) 150 
D) 200 
A) 50 
B) 100 
C) 150 
D) 200

Exam 16: Oligopoly

Larger cartels have a greater probability of reaching the monopoly outcome than do smaller cartels.

When an oligopoly market reaches a Nash equilibrium,

Table 16-1 The following table shows the percentage of output supplied by the top eight firms in four different industries. -Refer to Table 16-1.What is the concentration ratio in Industry D?

The U.S.market for locomotives is divided between two producers: General Electric has 70 percent of the market and General Motors has 30 percent.This market is an example of

An equilibrium occurs in a game when

In markets characterized by oligopoly,

According to the Clayton Act

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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