Question 1

The prisoners' dilemma provides insights into the

Accepted Answer

A) difficulty of maintaining cooperation. 
B) benefits of avoiding cooperation. 
C) benefits of government ownership of monopoly. 
D) ease with which oligopoly firms maintain high prices. 
A) difficulty of maintaining cooperation. 
B) benefits of avoiding cooperation. 
C) benefits of government ownership of monopoly. 
D) ease with which oligopoly firms maintain high prices.

Question 2

The practice of tying is used to

Accepted Answer

A) enhance the enforcement of antitrust laws. 
B) encourage the enforcement of collusive agreements. 
C) control the retail price of a collection of related products. 
D) package products to sell at a combined price closer to a buyer's total willingness to pay. 
A) enhance the enforcement of antitrust laws. 
B) encourage the enforcement of collusive agreements. 
C) control the retail price of a collection of related products. 
D) package products to sell at a combined price closer to a buyer's total willingness to pay.

Question 3

The Sherman Act made cooperative agreements

Accepted Answer

A) unenforceable outside of established judicial review processes. 
B) enforceable with proper judicial review. 
C) a criminal conspiracy. 
D) a crime, but did not give direction on possible penalties. 
A) unenforceable outside of established judicial review processes. 
B) enforceable with proper judicial review. 
C) a criminal conspiracy. 
D) a crime, but did not give direction on possible penalties.

Question 4

The practice of tying is illegal on the grounds that

Accepted Answer

A) it allows firms to expand their market power. 
B) it allows firms to form collusive arrangements. 
C) it prevents firms from forming collusive agreements. 
D) the Sherman Act explicitly prohibited such agreements. 
A) it allows firms to expand their market power. 
B) it allows firms to form collusive arrangements. 
C) it prevents firms from forming collusive agreements. 
D) the Sherman Act explicitly prohibited such agreements.

Question 5

Martha and Oleg are competitors in a local market and each is trying to decide if it is worthwhile to advertise.If both of them advertise,each will earn a profit of $5,000.If neither of them advertise,each will earn a profit of $10,000.If one advertises and the other doesn't,then the one who advertises will earn a profit of $15,000 and the other will earn $7,000.To make the most money,Martha

Accepted Answer

A) should advertise, and she will earn $5,000. 
B) should advertise, and she will earn $15,000. 
C) should not advertise, and she will earn $10,000. 
D) has no dominant strategy. 
A) should advertise, and she will earn $5,000. 
B) should advertise, and she will earn $15,000. 
C) should not advertise, and she will earn $10,000. 
D) has no dominant strategy.

Question 6

As the number of firms in an oligopoly market

Accepted Answer

A) decreases, the market approaches the cartel outcome. 
B) decreases, the market approaches the competitive market outcome. 
C) increases, the market approaches the competitive market outcome. 
D) increases, the market approaches the monopoly outcome. 
A) decreases, the market approaches the cartel outcome. 
B) decreases, the market approaches the competitive market outcome. 
C) increases, the market approaches the competitive market outcome. 
D) increases, the market approaches the monopoly outcome.

Question 7

Laurel and Janet are competitors in a local market and each is trying to decide if it is worthwhile to advertise.If both of them advertise,each will earn a profit of $5,000.If neither of them advertise,each will earn a profit of $10,000.If one advertises and the other doesn't,then the one who advertises will earn a profit of $12,000 and the other will earn $2,000.In this version of the prisoner's dilemma,if the game is played only once,Laurel should

Accepted Answer

A) advertise, but if the game is to be repeated many times she should probably not advertise. 
B) advertise, and if the game is to be repeated many times she should still probably advertise. 
C) not advertise, but if the game is to be repeated many times she should probably advertise. 
D) not advertise, and if the game is to be repeated many times she should still not advertise. 
A) advertise, but if the game is to be repeated many times she should probably not advertise. 
B) advertise, and if the game is to be repeated many times she should still probably advertise. 
C) not advertise, but if the game is to be repeated many times she should probably advertise. 
D) not advertise, and if the game is to be repeated many times she should still not advertise.

Question 8

The game that oligopolists play in trying to reach the oligopoly outcome is similar to the game that the two prisoners play in the prisoners' dilemma.

Accepted Answer

A) True 
 B)False

Question 9

When firms are faced with making strategic choices in order to maximize profit,economists typically use

Accepted Answer

A) the theory of monopoly to model their behavior. 
B) the theory of aggressive competition to model their behavior. 
C) game theory to model their behavior. 
D) cartel theory to model their behavior. 
A) the theory of monopoly to model their behavior. 
B) the theory of aggressive competition to model their behavior. 
C) game theory to model their behavior. 
D) cartel theory to model their behavior.

Question 10

A special kind of imperfectly competitive market that has only two firms is called

Accepted Answer

A) a two-tier competitive structure. 
B) an incidental monopoly. 
C) a doublet. 
D) a duopoly. 
A) a two-tier competitive structure. 
B) an incidental monopoly. 
C) a doublet. 
D) a duopoly.

Question 11

Firms in industries that have competitors but,at the same time,do not face so much competition that they are price takers,are operating in either a(n)

Accepted Answer

A) oligopoly or perfectly competitive market. 
B) oligopoly or monopoly market. 
C) oligopoly or monopolistically competitive market. 
D) monopoly or monopolistically competitive market. 
A) oligopoly or perfectly competitive market. 
B) oligopoly or monopoly market. 
C) oligopoly or monopolistically competitive market. 
D) monopoly or monopolistically competitive market.

Question 12

Table 16-14
  
-Refer to Table 16-14.This table shows a game played between two firms,A and B.In this game each firm must decide how much output to produce.The profit for each firm is given in the table as (Profit for A,Profit for B).In this game

Accepted Answer

A) neither player has a dominant strategy. 
B) both players have a dominant strategy. 
C) A has a dominant strategy, but B does not have a dominant strategy. 
D) B has a dominant strategy, but A does not have a dominant strategy. 
A) neither player has a dominant strategy. 
B) both players have a dominant strategy. 
C) A has a dominant strategy, but B does not have a dominant strategy. 
D) B has a dominant strategy, but A does not have a dominant strategy.

Question 13

When individuals are damaged by an illegal arrangement to restrain trade,which law allows them to pursue civil action and recover up to three times the damages sustained?

Accepted Answer

A) Trade Damage Act 
B) Clayton Act 
C) Sherman Act 
D) No law allows individuals to pursue civil action and recover up to three times the damages sustained. 
A) Trade Damage Act 
B) Clayton Act 
C) Sherman Act 
D) No law allows individuals to pursue civil action and recover up to three times the damages sustained.

Question 14

In a duopoly situation,the logic of self-interest results in a total output level that

Accepted Answer

A) equals the output level that would prevail in a competitive market. 
B) equals the output level that would prevail in a monopoly. 
C) exceeds the monopoly level of output, but falls short of the competitive level of output. 
D) falls short of the monopoly level of output. 
A) equals the output level that would prevail in a competitive market. 
B) equals the output level that would prevail in a monopoly. 
C) exceeds the monopoly level of output, but falls short of the competitive level of output. 
D) falls short of the monopoly level of output.

Question 15

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.When this game reaches a Nash equilibrium,the value of trade flow benefits will be

Accepted Answer

A) United States $35 b and China $285 b. 
B) United States $65 b and China $75 b. 
C) United States $140 b and China $5 b. 
D) United States $130 b and China $275 b. 
A) United States $35 b and China $285 b. 
B) United States $65 b and China $75 b. 
C) United States $140 b and China $5 b. 
D) United States $130 b and China $275 b.

Question 16

Scenario 16-1
Assume that the countries of Irun and Urun are the only two producers of crude oil. Further assume that both countries have entered into an agreement to maintain certain production levels in order to maximize profits. In the world market for oil, the demand curve is downward sloping.
-Refer to Scenario 16-1.The agreed-upon production level between the two countries will invariably be

Accepted Answer

A) lower than the Nash equilibrium level. 
B) equal to the Nash equilibrium level. 
C) equal to the duopoly market equilibrium level. 
D) higher than the duopoly market equilibrium level. 
A) lower than the Nash equilibrium level. 
B) equal to the Nash equilibrium level. 
C) equal to the duopoly market equilibrium level. 
D) higher than the duopoly market equilibrium level.

Question 17

When an industry has many firms,the industry is

Accepted Answer

A) an oligopoly if the firms sell differentiated products, but it is monopolistically competitive if the firms sell identical products. 
B) an oligopoly if the firms sell differentiated products, but it is perfectly competitive if the firms sell identical products. 
C) monopolistically competitive if the firms sell differentiated products, but it is perfectly competitive if the firms sell identical products. 
D) perfectly competitive if the firms sell differentiated products, but it is monopolistically competitive if the firms sell identical products. 
A) an oligopoly if the firms sell differentiated products, but it is monopolistically competitive if the firms sell identical products. 
B) an oligopoly if the firms sell differentiated products, but it is perfectly competitive if the firms sell identical products. 
C) monopolistically competitive if the firms sell differentiated products, but it is perfectly competitive if the firms sell identical products. 
D) perfectly competitive if the firms sell differentiated products, but it is monopolistically competitive if the firms sell identical products.

Question 18

When all consumers are charged the same price and that price exceeds marginal cost,the result is a deadweight loss for society.

Accepted Answer

A) True 
 B)False

Question 19

Table 16-4
Imagine a small town in which only two residents, Tony and Jill, own wells that produce safe drinking water. Each week Tony and Jill work together to decide how many gallons of water to pump, to bring the water to town, and to sell it at whatever price the market will bear. To keep things simple, suppose that Tony and Jill can pump as much water as they want without cost so that the marginal cost of water equals zero.
The weekly town demand schedule and total revenue schedule for water is shown in the table below.
  
-Refer to Table 16-4.Suppose the town enacts new antitrust laws that prohibit Tony and Jill from operating as a monopolist.What will the new price of water end up being once the Nash equilibrium is reached?

Accepted Answer

A) $3 
B) $4 
C) $5 
D) $6 
A) $3 
B) $4 
C) $5 
D) $6

Question 20

Consider a market served by a monopolist,Firm A.A new firm,Firm B,enters the market and,as a result,Firm A lowers its price to try to drive Firm B out of the market.This practice is known as

Accepted Answer

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

Exam 16: Oligopoly

The prisoners' dilemma provides insights into the

The practice of tying is used to

The Sherman Act made cooperative agreements

The practice of tying is illegal on the grounds that

As the number of firms in an oligopoly market

The game that oligopolists play in trying to reach the oligopoly outcome is similar to the game that the two prisoners play in the prisoners' dilemma.

When firms are faced with making strategic choices in order to maximize profit,economists typically use

A special kind of imperfectly competitive market that has only two firms is called

Firms in industries that have competitors but,at the same time,do not face so much competition that they are price takers,are operating in either a(n)

Table 16-14 -Refer to Table 16-14.This table shows a game played between two firms,A and B.In this game each firm must decide how much output to produce.The profit for each firm is given in the table as (Profit for A,Profit for B).In this game

When individuals are damaged by an illegal arrangement to restrain trade,which law allows them to pursue civil action and recover up to three times the damages sustained?

In a duopoly situation,the logic of self-interest results in a total output level that

When an industry has many firms,the industry is

When all consumers are charged the same price and that price exceeds marginal cost,the result is a deadweight loss for society.

Consider a market served by a monopolist,Firm A.A new firm,Firm B,enters the market and,as a result,Firm A lowers its price to try to drive Firm B out of the market.This practice is known 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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