Question 1

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 2

An oligopolist differs from a perfect competitor in that

Accepted Answer

A) there is cutthroat competition in perfect competition but little competition in oligopoly because firms have significant market power. 
B) firms in an oligopoly do not produce homogeneous products while firms in perfect competition do. 
C) the market demand curve for a perfectly competitive industry is perfectly elastic but it is downward-sloping in an oligopolistic industry. 
D) there are no entry barriers in perfect competition but there are entry barriers in oligopoly. 
A) there is cutthroat competition in perfect competition but little competition in oligopoly because firms have significant market power. 
B) firms in an oligopoly do not produce homogeneous products while firms in perfect competition do. 
C) the market demand curve for a perfectly competitive industry is perfectly elastic but it is downward-sloping in an oligopolistic industry. 
D) there are no entry barriers in perfect competition but there are entry barriers in oligopoly.

Question 3

According to Porter's Five Competitive Forces Model, similar products produced by different firms within the industry affects a firm's ability to raise prices far more than substitutable products produced outside the industry.

Accepted Answer

A) True 
 B)False

Question 4

Firms in an oligopoly are said to be interdependent.What does this mean?

Accepted Answer

Interdependence among firms means that t

Question 5

Why are decision trees useful to managers who plan business strategies?

Accepted Answer

A) Decision trees explain the level of concentration in an industry. 
B) Decision trees can be used to increase the amount of product differentiation; this enables managers to charge higher prices for their products. 
C) Decision trees provide a systematic way of thinking through the implications of a strategy. 
D) Using a decision tree always leads to a dominant strategy. 
A) Decision trees explain the level of concentration in an industry. 
B) Decision trees can be used to increase the amount of product differentiation; this enables managers to charge higher prices for their products. 
C) Decision trees provide a systematic way of thinking through the implications of a strategy. 
D) Using a decision tree always leads to a dominant strategy.

Question 6

Which of the following is the best example of an oligopolistic industry?

Accepted Answer

A) the wheat market 
B) the pharmaceutical industry 
C) public education 
D) the beauty products industry 
A) the wheat market 
B) the pharmaceutical industry 
C) public education 
D) the beauty products industry

Question 7

Explain why member firms of a cartel like OPEC have incentives to agree to a low cartel production level and then produce more than its quota.

Accepted Answer

A low cartel production level results in

Question 8

Table 14-4
   
Alpha and Beta are the only firms selling gyros in the upscale town of Delphi. Each firm must decide on whether to offer a discount to students to compete for customers. If one firm offers a discount but the other does not, then the firm that offers the discount will increase its profit. Table 14-4 shows the payoff matrix for this game.
-Refer to Table 14-4.How are the firms in this game caught in a prisoner's dilemma?

Accepted Answer

A) They are not in a prisoner's dilemma because there is one clear strategy for each. 
B) They would be more profitable if they refrained from offering a student discount, but each fears that if it does not offer a student discount it will lose customers. 
C) Since each firm is uncertain about the other's behavior, each will adopt a wait-and-see attitude which results in no increase in market share and no new customers. 
D) Only the first mover is caught in a prisoner's dilemma because the second has a chance to observe and respond. 
A) They are not in a prisoner's dilemma because there is one clear strategy for each. 
B) They would be more profitable if they refrained from offering a student discount, but each fears that if it does not offer a student discount it will lose customers. 
C) Since each firm is uncertain about the other's behavior, each will adopt a wait-and-see attitude which results in no increase in market share and no new customers. 
D) Only the first mover is caught in a prisoner's dilemma because the second has a chance to observe and respond.

Question 9

The "Discount Department Stores" industry is highly concentrated.What does this mean?

Accepted Answer

A) There are many large stores such as Walmart, Target, Kohl's, in this industry. 
B) A few large stores account for a significant portion of industry sales. 
C) There is cut-throat competition in this industry because there are no entry barriers. 
D) The sales volume in this industry is consistently high. 
A) There are many large stores such as Walmart, Target, Kohl's, in this industry. 
B) A few large stores account for a significant portion of industry sales. 
C) There is cut-throat competition in this industry because there are no entry barriers. 
D) The sales volume in this industry is consistently high.

Question 10

Assume that two gyro restaurants, Alpha and Beta, are competing for customers and if they both offer a student discount, they would each earn $60,000 in profits.If neither offers a student discount, they each earn $100,000 in profits.If one offers a student discount and the other doesn't, the restaurant that offers the discount earns $80,000 in profit while the other earns $40,000 in profit.
a.Present the information above in the form of a payoff matrix.Let Beta be the row player and Alpha the column player.
b.Does each firm have a dominant strategy and if so what is it?
c.What is the Nash equilibrium?

Accepted Answer

a.See the table below.
 @#IMG-DLM& 
b.No, there is

Question 11

When Walmart decides to build a new retail store in a town, it will decide to build a large store rather than a small store if the large store is expected to earn a greater economic profit.What other motive would Walmart have for choosing to build a large store?

Accepted Answer

A) A larger store will help Walmart maintain its position as the leading retail company in the world more than a smaller store would. 
B) A larger store will give Walmart greater political influence in the community. 
C) A larger store may deter entry into the town by a rival firm. 
D) Because of economies of scale, the average total cost of production is less for a larger store than a smaller store. 
A) A larger store will help Walmart maintain its position as the leading retail company in the world more than a smaller store would. 
B) A larger store will give Walmart greater political influence in the community. 
C) A larger store may deter entry into the town by a rival firm. 
D) Because of economies of scale, the average total cost of production is less for a larger store than a smaller store.

Question 12

Which of the following is an example of a way in which an oligopolistic firm can escape the prisoner's dilemma?

Accepted Answer

A) producing more of its product 
B) advertising that it will match its rival's price 
C) reneging on a previous tacit agreement with rival firms to charge identical high prices 
D) ignoring the pricing decisions of the other firms 
A) producing more of its product 
B) advertising that it will match its rival's price 
C) reneging on a previous tacit agreement with rival firms to charge identical high prices 
D) ignoring the pricing decisions of the other firms

Question 13

Which of the following is not a barrier to entry?

Accepted Answer

A) an inelastic demand curve 
B) economies of scale 
C) ownership of a key input 
D) a patent 
A) an inelastic demand curve 
B) economies of scale 
C) ownership of a key input 
D) a patent

Question 14

Suppose two firms in a duopoly implicitly collude and charge a high price.How might each firm benefit from advertising that it will match the lowest price offered by its competitor?

Accepted Answer

A) The offer to match prices is a way of deterring entry by other large firms, thereby keeping the market share of the existing firms intact. 
B) The advertisement ensures that the other firm does not cheat. If a firm cheats on the agreement and charges the lower price, the rival firm will retaliate by doing the same. 
C) The offer to match prices is a way of signaling to antitrust authorities that the firms are not engaged in illegal collusion. 
D) The advertisement is meant to suggest to consumers that the offered price is actually the lowest price available. 
A) The offer to match prices is a way of deterring entry by other large firms, thereby keeping the market share of the existing firms intact. 
B) The advertisement ensures that the other firm does not cheat. If a firm cheats on the agreement and charges the lower price, the rival firm will retaliate by doing the same. 
C) The offer to match prices is a way of signaling to antitrust authorities that the firms are not engaged in illegal collusion. 
D) The advertisement is meant to suggest to consumers that the offered price is actually the lowest price available.

Question 15

The De Beers Company blocked competition

Accepted Answer

A) in the diamond market by controlling the output of most of the world's diamond mines. 
B) by controlling the supply of most of the world's high-quality bauxite, the mineral used to produce aluminum. 
C) in the market for fresh and frozen cranberries because it controls about 80 percent of the cranberry crop. 
D) because it has lower production costs than other department stores due to economies of scale. 
A) in the diamond market by controlling the output of most of the world's diamond mines. 
B) by controlling the supply of most of the world's high-quality bauxite, the mineral used to produce aluminum. 
C) in the market for fresh and frozen cranberries because it controls about 80 percent of the cranberry crop. 
D) because it has lower production costs than other department stores due to economies of scale.

Question 16

In game theory, the three key characteristics of a game are

Accepted Answer

A) rules, strategies, and payoffs. 
B) rules, regulations, and payoffs. 
C) winners, losers, and rules. 
D) risks, rewards, and penalties. 
A) rules, strategies, and payoffs. 
B) rules, regulations, and payoffs. 
C) winners, losers, and rules. 
D) risks, rewards, and penalties.

Question 17

In an oligopoly market,

Accepted Answer

A) the pricing decisions of all other firms have no effect on an individual firm. 
B) individual firms pay no attention to the behavior of other firms. 
C) advertising of one firm has no effect on all other firms. 
D) one firm's pricing decision affects all the other firms. 
A) the pricing decisions of all other firms have no effect on an individual firm. 
B) individual firms pay no attention to the behavior of other firms. 
C) advertising of one firm has no effect on all other firms. 
D) one firm's pricing decision affects all the other firms.

Question 18

An equilibrium in a game in which players pursue their own self-interests and do not cooperate is called a

Accepted Answer

A) cartel equilibrium. 
B) noncooperative equilibrium. 
C) prisoner's dilemma equilibrium. 
D) dominant strategy equilibrium. 
A) cartel equilibrium. 
B) noncooperative equilibrium. 
C) prisoner's dilemma equilibrium. 
D) dominant strategy equilibrium.

Question 19

What is an oligopoly? Give two examples of oligopolistic industries in the United States.

Accepted Answer

Oligopoly is a market structur

Question 20

Oligopolies are difficult to analyze because

Accepted Answer

A) the firms are so large. 
B) demand and cost curves do not exist for these types of industries. 
C) how firms respond to a price change by a rival is uncertain. 
D) oligopolies are a recent development so economists have not had time to develop models. 
A) the firms are so large. 
B) demand and cost curves do not exist for these types of industries. 
C) how firms respond to a price change by a rival is uncertain. 
D) oligopolies are a recent development so economists have not had time to develop models.

A game in which each player adopts its dominant strategy

An oligopolist differs from a perfect competitor in that

According to Porter's Five Competitive Forces Model, similar products produced by different firms within the industry affects a firm's ability to raise prices far more than substitutable products produced outside the industry.

Firms in an oligopoly are said to be interdependent.What does this mean?

Why are decision trees useful to managers who plan business strategies?

Which of the following is the best example of an oligopolistic industry?

Explain why member firms of a cartel like OPEC have incentives to agree to a low cartel production level and then produce more than its quota.

The "Discount Department Stores" industry is highly concentrated.What does this mean?

When Walmart decides to build a new retail store in a town, it will decide to build a large store rather than a small store if the large store is expected to earn a greater economic profit.What other motive would Walmart have for choosing to build a large store?

Which of the following is an example of a way in which an oligopolistic firm can escape the prisoner's dilemma?

Which of the following is not a barrier to entry?

Suppose two firms in a duopoly implicitly collude and charge a high price.How might each firm benefit from advertising that it will match the lowest price offered by its competitor?

The De Beers Company blocked competition

In game theory, the three key characteristics of a game are

In an oligopoly market,

An equilibrium in a game in which players pursue their own self-interests and do not cooperate is called a

What is an oligopoly? Give two examples of oligopolistic industries in the United States.

Oligopolies are difficult to analyze because

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

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Exam 14: Oligopoly: Firms in Less Competitive Markets

A game in which each player adopts its dominant strategy

An oligopolist differs from a perfect competitor in that

According to Porter's Five Competitive Forces Model, similar products produced by different firms within the industry affects a firm's ability to raise prices far more than substitutable products produced outside the industry.

Firms in an oligopoly are said to be interdependent.What does this mean?

Why are decision trees useful to managers who plan business strategies?

Which of the following is the best example of an oligopolistic industry?

Explain why member firms of a cartel like OPEC have incentives to agree to a low cartel production level and then produce more than its quota.

The "Discount Department Stores" industry is highly concentrated.What does this mean?

When Walmart decides to build a new retail store in a town, it will decide to build a large store rather than a small store if the large store is expected to earn a greater economic profit.What other motive would Walmart have for choosing to build a large store?

Which of the following is an example of a way in which an oligopolistic firm can escape the prisoner's dilemma?

Which of the following is not a barrier to entry?

Suppose two firms in a duopoly implicitly collude and charge a high price.How might each firm benefit from advertising that it will match the lowest price offered by its competitor?

The De Beers Company blocked competition

In game theory, the three key characteristics of a game are

In an oligopoly market,

An equilibrium in a game in which players pursue their own self-interests and do not cooperate is called a

What is an oligopoly? Give two examples of oligopolistic industries in the United States.

Oligopolies are difficult to analyze because

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