Question 1

An equilibrium in which each firm in an oligopoly maximizes profit,given the actions of its rivals,is called

Accepted Answer

A) a general equilibrium. 
B) a dominant equilibrium. 
C) a Nash equilibrium. 
D) an oligopoly equilibrium. 
A) a general equilibrium. 
B) a dominant equilibrium. 
C) a Nash equilibrium. 
D) an oligopoly equilibrium.

Question 2

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 B?

Accepted Answer

A) 5% 
B) 46% 
C) 85% 
D) 95% 
A) 5% 
B) 46% 
C) 85% 
D) 95%

Question 3

Hot-dog vendors on the beach fail to cooperate with one another on the quantity of hot-dogs they should sell to earn monopoly profits.A consequence of their failure is that,relative to the outcome the vendors would like, (i)	the quantity of hot dogs supplied is closer to the socially optimal level.
(ii)	the price of hot dogs is closer to marginal cost.
(iii)	the hot-dog market at the beach is less competitive.

Accepted Answer

A) (i) and (ii) 
B) (ii) and (iii) 
C) (i) and (iii) 
D) (iii) only 
A) (i) and (ii) 
B) (ii) and (iii) 
C) (i) and (iii) 
D) (iii) only

Question 4

Table 16-6
  
-Refer to Table 16-6.This table shows the demand schedule for a particular product.Suppose that the marginal cost to produce this product is constant at $2 per unit and that the fixed cost of producing this product is $10.If the market is served by two duopolists who each,acting in their own self-interest,choose the Nash equilibrium level of production,how much profit will each firm earn?

Accepted Answer

A) $10 
B) $20 
C) $30 
D) $40 
A) $10 
B) $20 
C) $30 
D) $40

Question 5

The Clayton Act of 1914 allows those harmed by illegal arrangements to restrain trade to

Accepted Answer

A) sue for up to two times the damages they incurred. 
B) sue for up to three times the damages they incurred. 
C) sue for up to four times the damages they incurred. 
D) sue for damages, but only for the actual amount of damages they incurred. 
A) sue for up to two times the damages they incurred. 
B) sue for up to three times the damages they incurred. 
C) sue for up to four times the damages they incurred. 
D) sue for damages, but only for the actual amount of damages they incurred.

Question 6

Table 16-15
  
-Refer to Table 16-15.This table shows a game played between two firms,A and B.Each firm must decide how much output to produce.The profits for each firm are shown in the table as (Profit for A,Profit for B).The Nash equilibrium in this game is

Accepted Answer

A) Q=5 for A and Q=5 for B. 
B) Q=5 for A and Q=6 for B. 
C) Q=6 for A and Q=5 for B. 
D) Q=6 for A and Q=6 for B. 
A) Q=5 for A and Q=5 for B. 
B) Q=5 for A and Q=6 for B. 
C) Q=6 for A and Q=5 for B. 
D) Q=6 for A and Q=6 for B.

Question 7

The practice of selling a product to retailers and requiring the retailers to charge a specific price for the product is called

Accepted Answer

A) fixed retail pricing. 
B) resale price maintenance. 
C) cost plus pricing. 
D) unfair trade. 
A) fixed retail pricing. 
B) resale price maintenance. 
C) cost plus pricing. 
D) unfair trade.

Question 8

In a particular town,Metrovision and Cableview are the only two providers of cable TV service.Metrovision and Cableview constitute a

Accepted Answer

A) duopoly, whether they collude or not. 
B) cartel, whether they collude or not. 
C) Nash industry, whether they collude or not. 
D) monopolistically competitive market if they charge the same price. 
A) duopoly, whether they collude or not. 
B) cartel, whether they collude or not. 
C) Nash industry, whether they collude or not. 
D) monopolistically competitive market if they charge the same price.

Question 9

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 firms who each chooses its output independently.If the marginal cost to produce this product is $0,what is the Nash equilibrium production level for each firm?

Accepted Answer

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

Question 10

In a competitive market,strategic interactions among the firms are not important.

Accepted Answer

A) True 
 B)False

Question 11

Table 16-19
Brian and Matt own the only two bicycle repair shops in town. Each must choose between a low price for repair work and a high price. The annual economic profit from each strategy is indicated in the table. The profits are shown as (Matt, Brian) in each cell.
  
-Refer to Table 16-19.Which of the following statements is correct?

Accepted Answer

A) Matt's dominant strategy is to charge a low price. 
B) Brian's dominant strategy is to charge a high price. 
C) The dominant strategy for both Brian and Matt is to charge a low price. 
D) Matt's dominant strategy is to charge a high price. 
A) Matt's dominant strategy is to charge a low price. 
B) Brian's dominant strategy is to charge a high price. 
C) The dominant strategy for both Brian and Matt is to charge a low price. 
D) Matt's dominant strategy is to charge a high price.

Question 12

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 C?

Accepted Answer

A) 29% 
B) 39% 
C) 45% 
D) 56% 
A) 29% 
B) 39% 
C) 45% 
D) 56%

Question 13

Table 16-6
  
-Refer to Table 16-6.This table shows the demand schedule for a particular product.Suppose the market for this product is served by two duopolists who have formed a cartel and are colluding to set the price and quantity in this market.If the marginal cost to produce this product is $2,what price will the cartel set in this market?

Accepted Answer

A) $4 
B) $5 
C) $6 
D) $7 
A) $4 
B) $5 
C) $6 
D) $7

Question 14

Table 16-18
The Chicken Game is named for a contest in which drivers test their courage by driving straight at each other. John and Paul have a common interest to avoid crashing into each other, but they also have a personal, competing interest to not turn first to demonstrate their courage to those observing the contest. The payoff table for this situation is provided below. The payoffs are shown as (John, Paul).
  
-Refer to Table 16-18.How many Nash equilibria are there in this Chicken game?

Accepted Answer

A) 0 
B) 1 
C) 2 
D) 3 
A) 0 
B) 1 
C) 2 
D) 3

Question 15

Table 16-16
Consider a small town that has two grocery stores from which residents can choose to buy a gallon of milk. The store owners each must make a decision to set a high milk price or a low milk price. The payoff table, showing profit per week, is provided below. The profit in each cell is shown as (Store 1, Store 2).
  
-Refer to Table 16-16.If grocery store 1 sets a high price,what price should grocery store 2 set? And what will grocery store 2's payoff equal?

Accepted Answer

A) Low price, $800 
B) High price, $100 
C) Low price, $500 
D) High price, $650 
A) Low price, $800 
B) High price, $100 
C) Low price, $500 
D) High price, $650

Question 16

To increase their individual profits,members of a cartel have an incentive to

Accepted Answer

A) charge a higher price than the other members of the cartel. 
B) increase production above the level agreed upon. 
C) ignore the choices made by the other firms and act as a monopolist. 
D) charge the same price a monopolist would charge. 
A) charge a higher price than the other members of the cartel. 
B) increase production above the level agreed upon. 
C) ignore the choices made by the other firms and act as a monopolist. 
D) charge the same price a monopolist would charge.

Question 17

The "arms race" is similar to which of the following economic scenarios?

Accepted Answer

A) Welfare choice 
B) Cost allocation theory 
C) The competitive game 
D) The prisoners' dilemma 
A) Welfare choice 
B) Cost allocation theory 
C) The competitive game 
D) The prisoners' dilemma

Question 18

Table 16-18
The Chicken Game is named for a contest in which drivers test their courage by driving straight at each other. John and Paul have a common interest to avoid crashing into each other, but they also have a personal, competing interest to not turn first to demonstrate their courage to those observing the contest. The payoff table for this situation is provided below. The payoffs are shown as (John, Paul).
  
-Refer to Table 16-18.If Paul chooses Drive Straight,what will John choose to do and what will John's payoff equal?

Accepted Answer

A) Turn, 5 
B) Drive Straight, 0 
C) Turn, 20 
D) Drive Straight, 5 
A) Turn, 5 
B) Drive Straight, 0 
C) Turn, 20 
D) Drive Straight, 5

Question 19

Cartels are difficult to maintain because

Accepted Answer

A) antitrust laws are difficult to enforce. 
B) cartel agreements are conducive to monopoly outcomes. 
C) there is always tension between cooperation and self-interest in a cartel. 
D) firms pay little attention to the decision made by other firms. 
A) antitrust laws are difficult to enforce. 
B) cartel agreements are conducive to monopoly outcomes. 
C) there is always tension between cooperation and self-interest in a cartel. 
D) firms pay little attention to the decision made by other firms.

Question 20

Outline the purpose of antitrust laws.What do they accomplish?

Accepted Answer

The purpose of antitrust laws

Exam 16: Oligopoly

An equilibrium in which each firm in an oligopoly maximizes profit,given the actions of its rivals,is called

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 B?

The Clayton Act of 1914 allows those harmed by illegal arrangements to restrain trade to

Table 16-15 -Refer to Table 16-15.This table shows a game played between two firms,A and B.Each firm must decide how much output to produce.The profits for each firm are shown in the table as (Profit for A,Profit for B).The Nash equilibrium in this game is

The practice of selling a product to retailers and requiring the retailers to charge a specific price for the product is called

In a particular town,Metrovision and Cableview are the only two providers of cable TV service.Metrovision and Cableview constitute a

In a competitive market,strategic interactions among the firms are not important.

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 C?

To increase their individual profits,members of a cartel have an incentive to

The "arms race" is similar to which of the following economic scenarios?

Cartels are difficult to maintain because

Outline the purpose of antitrust laws.What do they accomplish?

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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