Question 1

In an oligopoly, firms can increase their market power by

Accepted Answer

A) selling to buyers who have market power. 
B) pursuing dominant strategies. 
C) colluding to set prices. 
D) undertaking heavy advertising expenditure. 
A) selling to buyers who have market power. 
B) pursuing dominant strategies. 
C) colluding to set prices. 
D) undertaking heavy advertising expenditure.

Question 2

The barrier to entry that allowed Alcoa to make persistent economic profits was ownership of an essential input.

Accepted Answer

A) True 
 B)False

Question 3

All of the following are ways by which existing firms can deter the entry of new firms into an industry except

Accepted Answer

A) continuously producing new and improved products. 
B) earning less than maximum profit. 
C) advertising products aggressively. 
D) threatening to raise prices. 
A) continuously producing new and improved products. 
B) earning less than maximum profit. 
C) advertising products aggressively. 
D) threatening to raise prices.

Question 4

In a subgame-perfect equilibrium

Accepted Answer

A) the first mover has an advantage over other players. 
B) the last mover has an advantage over other players. 
C) each player's strategy constitutes a Nash equilibrium at every subgame of the original game. 
D) each player has the same response as the others at every subgame of the tree. 
A) the first mover has an advantage over other players. 
B) the last mover has an advantage over other players. 
C) each player's strategy constitutes a Nash equilibrium at every subgame of the original game. 
D) each player has the same response as the others at every subgame of the tree.

Question 5

A member of a cartel like OPEC has an incentive to

Accepted Answer

A) argue for larger production quotas for each member of the cartel. 
B) agree to a low cartel production level and then produce more than its quota. 
C) abide by its individual production quota. 
D) support equal production quotas for each member. 
A) argue for larger production quotas for each member of the cartel. 
B) agree to a low cartel production level and then produce more than its quota. 
C) abide by its individual production quota. 
D) support equal production quotas for each member.

Question 6

Occupational licensing is an example of an entry barrier that improves a country's standard of living.

Accepted Answer

A) True 
 B)False

Question 7

All games share three characteristics.Two of these characteristics are rule and strategies.What is the third characteristic called?

Accepted Answer

A) competition 
B) collusion 
C) results 
D) payoffs 
A) competition 
B) collusion 
C) results 
D) payoffs

Question 8

Table 14-3
   
Suppose OPEC has only two producers, Saudi Arabia and Ecuador. Saudi Arabia has far more oil reserves and is the lower-cost producer compared to Ecuador. The payoff matrix in Table 14-3 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 14-3.Which of the following statements is true?

Accepted Answer

A) The Nash equilibrium is a noncooperative, dominant strategy equilibrium. 
B) The Nash equilibrium is a cooperative equilibrium. 
C) The Nash equilibrium is a collusive equilibrium. 
D) There is no Nash equilibrium in this game because each party pursues its dominant strategy. 
A) The Nash equilibrium is a noncooperative, dominant strategy equilibrium. 
B) The Nash equilibrium is a cooperative equilibrium. 
C) The Nash equilibrium is a collusive equilibrium. 
D) There is no Nash equilibrium in this game because each party pursues its dominant strategy.

Question 9

A large majority of the personal computers (PCs)in the United States use an operating system purchased from Microsoft.Microsoft's relationship with PC manufacturers is an example of which of Porter's competitive forces?

Accepted Answer

A) the threat from new entrants 
B) the bargaining power of suppliers 
C) the bargaining power of buyers 
D) competition from substitute goods or services 
A) the threat from new entrants 
B) the bargaining power of suppliers 
C) the bargaining power of buyers 
D) competition from substitute goods or services

Question 10

Collusion

Accepted Answer

A) is rampant in perfect competition as all firms charge the same price. 
B) reduces market concentration in an industry. 
C) among firms is difficult to maintain because it eliminates long-run economic profit. 
D) is more difficult when there are many firms producing differentiated products in an industry. 
A) is rampant in perfect competition as all firms charge the same price. 
B) reduces market concentration in an industry. 
C) among firms is difficult to maintain because it eliminates long-run economic profit. 
D) is more difficult when there are many firms producing differentiated products in an industry.

Question 11

According to the textbook, the most important barrier to entry is economies of scale.

Accepted Answer

A) True 
 B)False

Question 12

Airlines often engage in last-minute price cutting to fill remaining empty seats on a flight because this practice will generally

Accepted Answer

A) prevent rival airlines from competing in that market. 
B) increase marginal revenue more than marginal cost. 
C) maximize marginal revenue. 
D) discourage rivals from matching price cuts. 
A) prevent rival airlines from competing in that market. 
B) increase marginal revenue more than marginal cost. 
C) maximize marginal revenue. 
D) discourage rivals from matching price cuts.

Question 13

Economists use game theory to analyze oligopolies because

Accepted Answer

A) real markets are too complicated to analyze without using games. 
B) it is more enjoyable for economists and students to learn by playing games. 
C) game theory helps us to understand why interactions among firms are crucial in determining profitable business strategies. 
D) game theory is useful in understanding the actions of firms that are price takers. 
A) real markets are too complicated to analyze without using games. 
B) it is more enjoyable for economists and students to learn by playing games. 
C) game theory helps us to understand why interactions among firms are crucial in determining profitable business strategies. 
D) game theory is useful in understanding the actions of firms that are price takers.

Question 14

A dominant strategy is

Accepted Answer

A) an equilibrium where each firm chooses the best strategy, given the strategies of other firms. 
B) a strategy chosen by two firms that decide to charge the same price or otherwise not to compete. 
C) a strategy that is obviously the best for each firm that is a party to a business decision. 
D) a strategy that is the best for a firm no matter what strategies other firms use. 
A) an equilibrium where each firm chooses the best strategy, given the strategies of other firms. 
B) a strategy chosen by two firms that decide to charge the same price or otherwise not to compete. 
C) a strategy that is obviously the best for each firm that is a party to a business decision. 
D) a strategy that is the best for a firm no matter what strategies other firms use.

Question 15

Why does a prisoner's dilemma lead to a noncooperative equilibrium?

Accepted Answer

A) because each player had agreed before the game started to minimize the harm that he can inflict on the other players 
B) because each player is uncertain how other players will play the game 
C) because players must choose from a limited number of non-dominant strategies 
D) because each rational player has a dominant strategy to play a certain way regardless of what other players do 
A) because each player had agreed before the game started to minimize the harm that he can inflict on the other players 
B) because each player is uncertain how other players will play the game 
C) because players must choose from a limited number of non-dominant strategies 
D) because each rational player has a dominant strategy to play a certain way regardless of what other players do

Question 16

What is the dominant strategy in the prisoner's dilemma?

Accepted Answer

A) Each prisoner confesses because this is the rational action to pursue. 
B) Do nothing in the hope that the other prisoner will also do nothing. 
C) Do not confess because the other prisoner will most likely confess. 
D) There is no dominant strategy. 
A) Each prisoner confesses because this is the rational action to pursue. 
B) Do nothing in the hope that the other prisoner will also do nothing. 
C) Do not confess because the other prisoner will most likely confess. 
D) There is no dominant strategy.

Question 17

Patents, tariffs, and quotas are all examples of

Accepted Answer

A) government-imposed barriers. 
B) economic regulations that increase efficiency. 
C) entry barriers that improve a country's standard of living. 
D) entry barriers that protect consumers. 
A) government-imposed barriers. 
B) economic regulations that increase efficiency. 
C) entry barriers that improve a country's standard of living. 
D) entry barriers that protect consumers.

In an oligopoly, firms can increase their market power by

The barrier to entry that allowed Alcoa to make persistent economic profits was ownership of an essential input.

All of the following are ways by which existing firms can deter the entry of new firms into an industry except

In a subgame-perfect equilibrium

A member of a cartel like OPEC has an incentive to

Occupational licensing is an example of an entry barrier that improves a country's standard of living.

All games share three characteristics.Two of these characteristics are rule and strategies.What is the third characteristic called?

A large majority of the personal computers (PCs)in the United States use an operating system purchased from Microsoft.Microsoft's relationship with PC manufacturers is an example of which of Porter's competitive forces?

Collusion

According to the textbook, the most important barrier to entry is economies of scale.

Airlines often engage in last-minute price cutting to fill remaining empty seats on a flight because this practice will generally

Economists use game theory to analyze oligopolies because

A dominant strategy is

Why does a prisoner's dilemma lead to a noncooperative equilibrium?

What is the dominant strategy in the prisoner's dilemma?

Patents, tariffs, and quotas are all examples of

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

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Filters

Exam 14: Oligopoly: Firms in Less Competitive Markets

In an oligopoly, firms can increase their market power by

The barrier to entry that allowed Alcoa to make persistent economic profits was ownership of an essential input.

All of the following are ways by which existing firms can deter the entry of new firms into an industry except

In a subgame-perfect equilibrium

A member of a cartel like OPEC has an incentive to

Occupational licensing is an example of an entry barrier that improves a country's standard of living.

All games share three characteristics.Two of these characteristics are rule and strategies.What is the third characteristic called?

A large majority of the personal computers (PCs)in the United States use an operating system purchased from Microsoft.Microsoft's relationship with PC manufacturers is an example of which of Porter's competitive forces?

Collusion

According to the textbook, the most important barrier to entry is economies of scale.

Airlines often engage in last-minute price cutting to fill remaining empty seats on a flight because this practice will generally

Economists use game theory to analyze oligopolies because

A dominant strategy is

Why does a prisoner's dilemma lead to a noncooperative equilibrium?

What is the dominant strategy in the prisoner's dilemma?

Patents, tariffs, and quotas are all examples of

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

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Filters