Question 1

In an oligopoly,

Accepted Answer

A) the total output produced in the market is higher than the total output that would be produced if the market were a monopoly and higher than the total output that would be produced if the market were perfectly competitive. 
B) the total output produced in the market is higher than the total output that would be produced if the market were a monopoly but lower than the total output that would be produced if the market were perfectly competitive. 
C) the total output produced in the market is lower than the total output that would be produced if the market were a monopoly but higher than the total output that would be produced if the market were perfectly competitive. 
D) the total output produced in the market is lower than the total output that would be produced if the market were a monopoly and lower than the total output that would be produced if the market were perfectly competitive. 
A) the total output produced in the market is higher than the total output that would be produced if the market were a monopoly and higher than the total output that would be produced if the market were perfectly competitive. 
B) the total output produced in the market is higher than the total output that would be produced if the market were a monopoly but lower than the total output that would be produced if the market were perfectly competitive. 
C) the total output produced in the market is lower than the total output that would be produced if the market were a monopoly but higher than the total output that would be produced if the market were perfectly competitive. 
D) the total output produced in the market is lower than the total output that would be produced if the market were a monopoly and lower than the total output that would be produced if the market were perfectly competitive.

Question 2

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 is PM Inc.'s dominant strategy?

Accepted Answer

A) To refrain from advertising regardless of whether Brown Inc.advertises 
B) To advertise only if Brown Inc.advertises 
C) To advertise only if Brown Inc.does not advertise 
D) To advertise regardless of whether Brown Inc.advertises 
A) To refrain from advertising regardless of whether Brown Inc.advertises 
B) To advertise only if Brown Inc.advertises 
C) To advertise only if Brown Inc.does not advertise 
D) To advertise regardless of whether Brown Inc.advertises

Question 3

If duopolists individually pursue their own self-interest when deciding how much to produce,the profit-maximizing price they will charge for their product will be

Accepted Answer

A) less than the monopoly price. 
B) equal to the perfectly competitive market price. 
C) greater than the monopoly price. 
D) possibly less than or greater than the monopoly price. 
A) less than the monopoly price. 
B) equal to the perfectly competitive market price. 
C) greater than the monopoly price. 
D) possibly less than or greater than the monopoly price.

Question 4

What happens when the prisoners' dilemma game is repeated numerous times in an oligopoly market? (i)	The firms may well reach the monopoly outcome.
(ii)	The firms may well reach the competitive outcome.
(iii)	Buyers of the oligopolists' product will likely be worse off as a result.

Accepted Answer

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

Question 5

Explain how the output effect and the price effect influence the production decision of the individual oligopolist.

Accepted Answer

Since the individual oligopolist faces a

Question 6

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.Suppose Xania and Pluntia form a cartel and decide to split the market evenly.What level of production should Pluntia choose to maximize profit assuming Xania will stick to the agreement?

Accepted Answer

A) 50 
B) 150 
C) 250 
D) 350 
A) 50 
B) 150 
C) 250 
D) 350

Question 7

Which government entity is charged with investigating and enforcing antitrust laws?

Accepted Answer

A) The U.S.Justice Department 
B) The U.S.Commerce Department 
C) The U.S.Treasury Department 
D) The Bureau of Alcohol, Tobacco, and Firearms 
A) The U.S.Justice Department 
B) The U.S.Commerce Department 
C) The U.S.Treasury Department 
D) The Bureau of Alcohol, Tobacco, and Firearms

Question 8

There are two types of imperfectly competitive markets:

Accepted Answer

A) monopoly and monopolistic competition. 
B) monopoly and oligopoly. 
C) monopolistic competition and oligopoly. 
D) monopolistic competition and cartels. 
A) monopoly and monopolistic competition. 
B) monopoly and oligopoly. 
C) monopolistic competition and oligopoly. 
D) monopolistic competition and cartels.

Question 9

In a typical cartel agreement,the cartel maximizes profit when it

Accepted Answer

A) behaves as a monopolist. 
B) behaves as a duopolist. 
C) is flexible in enforcing production targets. 
D) behaves as a perfectly competitive firm. 
A) behaves as a monopolist. 
B) behaves as a duopolist. 
C) is flexible in enforcing production targets. 
D) behaves as a perfectly competitive firm.

Question 10

Which of the following would be most likely to contribute to the breakdown of a cartel in a natural resource (e.g.,bauxite)market?

Accepted Answer

A) High prices 
B) Low price elasticity of demand 
C) High compatibility of member interests 
D) Unequal member ownership of the natural resource 
A) High prices 
B) Low price elasticity of demand 
C) High compatibility of member interests 
D) Unequal member ownership of the natural resource

Question 11

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.Which industry has the highest concentration ratio?

Accepted Answer

A) Industry A 
B) Industry B 
C) Industry C 
D) Industry D 
A) Industry A 
B) Industry B 
C) Industry C 
D) Industry D

Question 12

The story of the prisoners' dilemma contains a general lesson that applies to any group trying to maintain cooperation among its members.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following statements is false?

Accepted Answer

A) The Clayton Act allows triple damages in civil lawsuits in order to encourage lawsuits against conspiring oligopolists. 
B) Many economists defend the practice of resale price maintenance on the grounds that it may help solve a free-rider problem. 
C) Most economists agree that predatory pricing is a profitable business strategy that usually preserves market power. 
D) The U.S.Supreme Court's view that the practice of tying usually allows a firm to extend its market power is not generally supported by economic theory. 
A) The Clayton Act allows triple damages in civil lawsuits in order to encourage lawsuits against conspiring oligopolists. 
B) Many economists defend the practice of resale price maintenance on the grounds that it may help solve a free-rider problem. 
C) Most economists agree that predatory pricing is a profitable business strategy that usually preserves market power. 
D) The U.S.Supreme Court's view that the practice of tying usually allows a firm to extend its market power is not generally supported by economic theory.

Question 14

The cigarette industry consists of large firms that compete vigorously through advertising which is directed at creating fantasy and image.Economists would characterize this industry as

Accepted Answer

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

Question 15

The primary purpose of antitrust legislation is to

Accepted Answer

A) protect small businesses. 
B) protect the competitiveness of U.S.markets. 
C) protect the prices of American-made products. 
D) ensure firms earn only a fair profit. 
A) protect small businesses. 
B) protect the competitiveness of U.S.markets. 
C) protect the prices of American-made products. 
D) ensure firms earn only a fair profit.

Question 16

Table 16-10
Two discount superstores (Ultimate Saver and SuperDuper Saver) in a growing urban area are interested in expanding their market share. Both are interested in expanding the size of their store and parking lot to accommodate potential growth in their customer base. The following game depicts the strategic outcomes that result from the game. Growth-related profits of the two discount superstores are shown in the table below.
  
-Refer to Table 16-10.Suppose the owners of SuperDuper Saver and Ultimate Saver meet for a friendly game of golf one afternoon and happen to discuss a strategy to optimize growth related profit.They should both agree to

Accepted Answer

A) increase their store and parking lot sizes. 
B) refrain from increasing their store and parking lot sizes. 
C) be more competitive in capturing market share. 
D) share the context of their conversation with the Federal Trade Commission. 
A) increase their store and parking lot sizes. 
B) refrain from increasing their store and parking lot sizes. 
C) be more competitive in capturing market share. 
D) share the context of their conversation with the Federal Trade Commission.

Question 17

Which of the following prohibits executives of competing firms from even talking about fixing prices?

Accepted Answer

A) Sherman Act 
B) Clayton Act 
C) Federal Trade Commission 
D) U.S.Justice Department 
A) Sherman Act 
B) Clayton Act 
C) Federal Trade Commission 
D) U.S.Justice Department

Question 18

There are two types of markets in which firms face some competition yet are still able to have some control over the prices of their products.The names given to these market structures are

Accepted Answer

A) monopolistic competition and oligopoly. 
B) duopoly and triopoly. 
C) perfect competition and monopolistic competition. 
D) duopoly and imperfect competition. 
A) monopolistic competition and oligopoly. 
B) duopoly and triopoly. 
C) perfect competition and monopolistic competition. 
D) duopoly and imperfect competition.

Question 19

Scenario 16-2
Imagine that two oil companies, Big Petro Inc. and Gargantuan Gas, own adjacent oil fields. Under the fields is a common pool of oil worth $48 million. Drilling a well to recover oil costs $2 million per well. If each company drills one well, each will get half of the oil and earn a $22 million profit ($24 million in revenue - $2 million in costs). Assume that having X percent of the total wells means that a company will collect X percent of the total revenue.
-Refer to Scenario 16-2.If Big Petro Inc.were to drill a second well,what would its profit be if Gargantuan Gas did not drill a second well?

Accepted Answer

A) $22 million 
B) $24 million 
C) $26 million 
D) $28 million 
A) $22 million 
B) $24 million 
C) $26 million 
D) $28 million

Question 20

The likely outcome of the standard prisoners' dilemma is that

Accepted Answer

A) neither prisoner confesses. 
B) exactly one prisoner confesses. 
C) both prisoners confess. 
D) Not enough information is given to answer this question. 
A) neither prisoner confesses. 
B) exactly one prisoner confesses. 
C) both prisoners confess. 
D) Not enough information is given to answer this question.

Exam 16: Oligopoly

In an oligopoly,

If duopolists individually pursue their own self-interest when deciding how much to produce,the profit-maximizing price they will charge for their product will be

What happens when the prisoners' dilemma game is repeated numerous times in an oligopoly market? (i) The firms may well reach the monopoly outcome. (ii) The firms may well reach the competitive outcome. (iii) Buyers of the oligopolists' product will likely be worse off as a result.

Explain how the output effect and the price effect influence the production decision of the individual oligopolist.

Which government entity is charged with investigating and enforcing antitrust laws?

There are two types of imperfectly competitive markets:

In a typical cartel agreement,the cartel maximizes profit when it

Which of the following would be most likely to contribute to the breakdown of a cartel in a natural resource (e.g.,bauxite)market?

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.Which industry has the highest concentration ratio?

The story of the prisoners' dilemma contains a general lesson that applies to any group trying to maintain cooperation among its members.

Which of the following statements is false?

The cigarette industry consists of large firms that compete vigorously through advertising which is directed at creating fantasy and image.Economists would characterize this industry as

The primary purpose of antitrust legislation is to

Which of the following prohibits executives of competing firms from even talking about fixing prices?

There are two types of markets in which firms face some competition yet are still able to have some control over the prices of their products.The names given to these market structures are

The likely outcome of the standard prisoners' dilemma is that

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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