Question 1

The bargaining power of buyers increases if

Accepted Answer

A) there are many large buyers. 
B) the input in question has few substitutes. 
C) the input in question is not a critical component of production. 
D) there are wide variations in the quality of inputs from supplier to supplier. 
A) there are many large buyers. 
B) the input in question has few substitutes. 
C) the input in question is not a critical component of production. 
D) there are wide variations in the quality of inputs from supplier to supplier.

Question 2

Decision trees can only be used to analyze sequential games.

Accepted Answer

A) True 
 B)False

Question 3

Table 12.3
   
Suppose OPEC has only two producers, Saudi Arabia and Nigeria. Saudi Arabia has far more oil reserves and is the lower cost producer compared to Nigeria. The payoff matrix in Table 12.3 shows the profits earned per day by each country. "Low output" corresponds to producing the OPEC assigned quota and "high output" corresponds to producing the maximum capacity beyond the assigned quota.
-Refer to Table 12.3.What is the Nash equilibrium in this game?

Accepted Answer

A) In the Nash equilibrium both Saudi Arabia and Nigeria produce a low output and earn a profit of $100 million and $20 million respectively. 
B) In the Nash equilibrium both Saudi Arabia and Nigeria produce a high output and earn a profit of $60 million and $20 million respectively. 
C) In the Nash equilibrium Saudi Arabia produces a low output and earns a profit of $80 million and Nigeria produces a high output and $30 million respectively. 
D) There is no Nash equilibrium. 
A) In the Nash equilibrium both Saudi Arabia and Nigeria produce a low output and earn a profit of $100 million and $20 million respectively. 
B) In the Nash equilibrium both Saudi Arabia and Nigeria produce a high output and earn a profit of $60 million and $20 million respectively. 
C) In the Nash equilibrium Saudi Arabia produces a low output and earns a profit of $80 million and Nigeria produces a high output and $30 million respectively. 
D) There is no Nash equilibrium.

Question 4

A game in which each player adopts its dominant strategy

Accepted Answer

A) will not lead to an equilibrium. 
B) must be a cooperative game. 
C) could result in a Nash equilibrium. 
D) can never result in a Nash equilibrium. 
A) will not lead to an equilibrium. 
B) must be a cooperative game. 
C) could result in a Nash equilibrium. 
D) can never result in a Nash equilibrium.

Question 5

Explain why OPEC is caught in a prisoner's dilemma?

Accepted Answer

If every member of OPEC cooperates and p

Question 6

The prisoner's dilemma illustrates

Accepted Answer

A) how oligopolists engage in implicit collusion under strategic situations. 
B) why firms will not cooperate if they behave strategically. 
C) why firms have an incentive to cheat on agreements. 
D) how cooperation in strategic situations lead to the economically efficient market outcome. 
A) how oligopolists engage in implicit collusion under strategic situations. 
B) why firms will not cooperate if they behave strategically. 
C) why firms have an incentive to cheat on agreements. 
D) how cooperation in strategic situations lead to the economically efficient market outcome.

Question 7

Table 12.1
   
Godrickporter and Star Connections are the only two airport shuttle and limousine rental service companies in the mid-sized town of Godrick Hollow. Each firm must decide on whether to increase its advertising spending to compete for customers. Table 12.1 shows the payoff matrix for this advertising game.
-Refer to Table 12.1.Is there a dominant strategy for Star Connections and if so, what is it?

Accepted Answer

A) No, its outcome depends on what Godrickporter does. 
B) Yes, Star Connections should increase its advertising spending. 
C) Yes, Star Connections should reduce its advertising spending. 
D) Yes, Star Connections' dominant strategy is to collude with Godrickporter. 
A) No, its outcome depends on what Godrickporter does. 
B) Yes, Star Connections should increase its advertising spending. 
C) Yes, Star Connections should reduce its advertising spending. 
D) Yes, Star Connections' dominant strategy is to collude with Godrickporter.

Question 8

If the painting firms in a city sign a contract outlining a pricing plan, they are involved in

Accepted Answer

A) price competition. 
B) a legal form of business contract in the United States. 
C) collusion. 
D) price regulation. 
A) price competition. 
B) a legal form of business contract in the United States. 
C) collusion. 
D) price regulation.

Question 9

A reason why there is more competition among restaurants than among large discount department stores is that restaurants

Accepted Answer

A) have to cater to a variety of consumer tastes while department stores do not. 
B) unlike department stores, have to abide by government sanitation rules. 
C) unlike department stores, do not have significant economies of scale. 
D)  have more elastic demand for their product compared to department stores. 
A) have to cater to a variety of consumer tastes while department stores do not. 
B) unlike department stores, have to abide by government sanitation rules. 
C) unlike department stores, do not have significant economies of scale. 
D)  have more elastic demand for their product compared to department stores.

Question 10

Table 12.4
  
-Refer to Table 12.4.Suppose the payoff matrix in the above figure represents the payoffs to Saudi Arabia and Yemen for the production of oil.Saudi Arabia and Yemen must decide how much oil to produce.Since the demand for oil is inelastic, relatively low production rates drive up prices and profits.Saudi Arabia, the world's largest and lowest cost producer, is able to influence market price; it has an incentive to keep output low.Yemen, on the other hand, is a relatively high cost producer with much smaller reserves.Assume Saudi Arabia now decides to try to further influence the oil market by offering to pay Yemen $25 million to produce a low output.
a.Create a new payoff matrix that reflects Saudi Arabia's willingness to pay Yemen $25 million to produce a low output.
b.What is the dominant strategy for each country in this new game?
c.What is the new Nash equilibrium?

Accepted Answer

a.See payoff matrix below.
b.T

The bargaining power of buyers increases if

Decision trees can only be used to analyze sequential games.

A game in which each player adopts its dominant strategy

Explain why OPEC is caught in a prisoner's dilemma?

The prisoner's dilemma illustrates

If the painting firms in a city sign a contract outlining a pricing plan, they are involved in

A reason why there is more competition among restaurants than among large discount department stores is that restaurants

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition

Monopoly and Antitrust Policy

The Markets for Labour and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Pricing Strategy

Firms, the Stock Market, and Corporate Governance

Filters

Exam 12: Oligopoly: Firms in Less Competitive Markets

The bargaining power of buyers increases if

Decision trees can only be used to analyze sequential games.

A game in which each player adopts its dominant strategy

Explain why OPEC is caught in a prisoner's dilemma?

The prisoner's dilemma illustrates

If the painting firms in a city sign a contract outlining a pricing plan, they are involved in

A reason why there is more competition among restaurants than among large discount department stores is that restaurants

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition

Monopoly and Antitrust Policy

The Markets for Labour and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Pricing Strategy

Firms, the Stock Market, and Corporate Governance

Filters