Question 1

The concept of a Nash equilibrium,when applied to an oligopoly,relies on the notion that Firm A in an oligopoly chooses its own best strategy based on which consideration

Accepted Answer

A) based on the strategies that other firms have chosen 
B) based on the knowledge that other firms are likely to choose their strategies in response to Firm A's choice of a strategy 
C) based on the objective of maximizing the collective profits of all firms in the industry 
D) based on the internal financial information of Firm A 
A) based on the strategies that other firms have chosen 
B) based on the knowledge that other firms are likely to choose their strategies in response to Firm A's choice of a strategy 
C) based on the objective of maximizing the collective profits of all firms in the industry 
D) based on the internal financial information of Firm A

Question 2

When prices exceed marginal cost,the result is a deadweight loss for society.

Accepted Answer

A) True 
 B)False

Question 3

Table 17-5
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 under two scenarios are reflected in the table below.
Table 17-5
​  
-Refer to Table 17-5.For which store is the dominant strategy to increase the size of its store and parking lot

Accepted Answer

A) SuperDuper Saver, but not Ultimate Saver 
B) Ultimate Saver, but not SuperDuper Saver 
C) both SuperDuper Saver and Ultimate Saver 
D) neither SuperDuper Saver and Ultimate Saver 
A) SuperDuper Saver, but not Ultimate Saver 
B) Ultimate Saver, but not SuperDuper Saver 
C) both SuperDuper Saver and Ultimate Saver 
D) neither SuperDuper Saver and Ultimate Saver

Question 4

Which of these characterizations best describes how a tit-for-tat strategy starts and what happens subsequently

Accepted Answer

A) initially conciliatory and then encourages an optimal social outcome among the other players 
B) initially unfriendly and then encourages friendly strategies among players 
C) initially friendly, then penalizes unfriendly players, and forgives them if warranted 
D) initially aggressive, then compensates losing players, and eventually forgives unfriendly players 
A) initially conciliatory and then encourages an optimal social outcome among the other players 
B) initially unfriendly and then encourages friendly strategies among players 
C) initially friendly, then penalizes unfriendly players, and forgives them if warranted 
D) initially aggressive, then compensates losing players, and eventually forgives unfriendly players

Question 5

The three countries of Ophir,Shem,and Turan produce the entire world supply of carbomite.They have signed an agreement to limit their production of carbomite in order to act as a monopolist.Each country is deciding if it should honour the agreement or if it should cheat.If all three countries honour the agreement,each will earn $100 million.If all three countries cheat on the agreement,each will earn $30 million.If two of the countries honour the agreement and one cheats,then the two honouring the agreement will each earn $60 million and the cheater will earn $140 million.If only one country honours the agreement and the other two cheat,then the one honouring the agreement will earn $20 million and the two cheaters will each earn $70 million.To make the most money,what should Ophir do and how much will it earn

Accepted Answer

A) should cheat, and will earn $30 million 
B) should honour the agreement, and will earn $60 million 
C) should cheat, and will earn $140 million 
D) should honour agreement, and will earn 100 million. 
A) should cheat, and will earn $30 million 
B) should honour the agreement, and will earn $60 million 
C) should cheat, and will earn $140 million 
D) should honour agreement, and will earn 100 million.

Question 6

Very often,what is the reason that players can solve the prisoners' dilemma game and reach the most profitable outcome

Accepted Answer

A) Each player tries to capture a large portion of the market share. 
B) The players play the game not once but many times. 
C) The game becomes more competitive. 
D) The game becomes less competitive. 
A) Each player tries to capture a large portion of the market share. 
B) The players play the game not once but many times. 
C) The game becomes more competitive. 
D) The game becomes less competitive.

Question 7

Scenario 17-3
Consider two cigarette companies, PM Inc.and Brown Inc.If neither company advertises, the two companies split the market.If they both advertise, they again split the market, but profits are lower, 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.
-Refer to Scenario 17-3.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 8

On what grounds is the practice of tying illegal

Accepted Answer

A) It allows firms to expand their market power. 
B) It allows firms to form collusive arrangements. 
C) It prevents firms from forming collusive agreements. 
D) It creates monopolies. 
A) It allows firms to expand their market power. 
B) It allows firms to form collusive arrangements. 
C) It prevents firms from forming collusive agreements. 
D) It creates monopolies.

Question 9

How does the Competition Act prohibit price-fixing

Accepted Answer

A) Competing executives cannot even talk about fixing prices. 
B) Competing executives can talk about fixing prices, but they cannot take action to fix prices. 
C) A price-fixing agreement can lead to prosecution provided the government can show that the public was not well-served by the agreement. 
D) Activities such as bid rigging price discrimination and predatory pricing are all subject to prosecution but resale price maintenance is allowed. 
A) Competing executives cannot even talk about fixing prices. 
B) Competing executives can talk about fixing prices, but they cannot take action to fix prices. 
C) A price-fixing agreement can lead to prosecution provided the government can show that the public was not well-served by the agreement. 
D) Activities such as bid rigging price discrimination and predatory pricing are all subject to prosecution but resale price maintenance is allowed.

Question 10

In which market is tying becoming increasingly important

Accepted Answer

A) crude oil 
B) long-distance phone calls 
C) computer software 
D) wheat 
A) crude oil 
B) long-distance phone calls 
C) computer software 
D) wheat

Question 11

An oligopoly is a market with only a few sellers,each offering a similar or identical product.

Accepted Answer

A) True 
 B)False

Question 12

In order to be successful,what must a cartel do

Accepted Answer

A) They must find a way to encourage their members to produce more than they would otherwise produce. 
B) They must agree on the total level of production for the cartel, but they need not agree on the amount produced by each member. 
C) They must agree on the total level of production and on the amount produced by each member. 
D) They must agree on the prices charged by each member, but they need not agree on amounts produced. 
A) They must find a way to encourage their members to produce more than they would otherwise produce. 
B) They must agree on the total level of production for the cartel, but they need not agree on the amount produced by each member. 
C) They must agree on the total level of production and on the amount produced by each member. 
D) They must agree on the prices charged by each member, but they need not agree on amounts produced.

Question 13

Which of these situations produces the largest profits for oligopolists

Accepted Answer

A) They reach a Nash equilibrium. 
B) They reach the monopoly outcome. 
C) They reach the competitive outcome. 
D) They produce a quantity of output that lies between the competitive outcome and the monopoly outcome. 
A) They reach a Nash equilibrium. 
B) They reach the monopoly outcome. 
C) They reach the competitive outcome. 
D) They produce a quantity of output that lies between the competitive outcome and the monopoly outcome.

Question 14

On what basis do economists claim that a resale price maintenance agreement is NOT anti-competitive

Accepted Answer

A) Suppliers cannot exercise noncompetitive market power. 
B) If a supplier has market power, it will be likely to exert that power through wholesale price rather than retail price. 
C) Retail markets are inherently noncompetitive. 
D) Retail cartel agreements cannot increase retail profits. 
A) Suppliers cannot exercise noncompetitive market power. 
B) If a supplier has market power, it will be likely to exert that power through wholesale price rather than retail price. 
C) Retail markets are inherently noncompetitive. 
D) Retail cartel agreements cannot increase retail profits.

Question 15

What are markets with only a few sellers,each offering a product similar or identical to the others,typically called

Accepted Answer

A) competitive markets 
B) monopoly markets 
C) monopolistically competitive markets 
D) oligopoly markets 
A) competitive markets 
B) monopoly markets 
C) monopolistically competitive markets 
D) oligopoly markets

Question 16

Scenario 17-1
Assume that the countries of Irun and Urun are the only two producers of crude oil.Further assume that both countries have entered into an agreement to maintain certain production levels in order to maximize profits.In the world market for oil, the demand curve is downward sloping.
-Refer to Scenario 17-1.What will invariably be the agreed-upon production level between the two countries

Accepted Answer

A) lower than the Nash equilibrium level 
B) equal to the Nash equilibrium level 
C) equal to the duopoly market equilibrium level 
D) higher than the duopoly market equilibrium level 
A) lower than the Nash equilibrium level 
B) equal to the Nash equilibrium level 
C) equal to the duopoly market equilibrium level 
D) higher than the duopoly market equilibrium level

Question 17

What is the practice of tying used to do

Accepted Answer

A) enhance the enforcement of antitrust laws 
B) encourage the enforcement of collusive agreements 
C) control the retail price of a collection of related products 
D) package products to sell at a combined price closer to a buyer's total willingness to pay 
A) enhance the enforcement of antitrust laws 
B) encourage the enforcement of collusive agreements 
C) control the retail price of a collection of related products 
D) package products to sell at a combined price closer to a buyer's total willingness to pay

Question 18

What are typical firms in our economy classified as

Accepted Answer

A) perfectly competitive firms 
B) imperfectly competitive firms 
C) oligopolists 
D) free trade firms 
A) perfectly competitive firms 
B) imperfectly competitive firms 
C) oligopolists 
D) free trade firms

Question 19

As a legitimate means of discouraging the problem of free riders,what do economists suggest using

Accepted Answer

A) tying 
B) resale price maintenance 
C) marginal cost pricing 
D) cost plus pricing 
A) tying 
B) resale price maintenance 
C) marginal cost pricing 
D) cost plus pricing

Question 20

Given that there are approximately 12 companies currently selling cars in Canada,what is the car market classified as

Accepted Answer

A) perfectly competitive 
B) monopolistically competitive 
C) oligopolistic 
D) monopoly 
A) perfectly competitive 
B) monopolistically competitive 
C) oligopolistic 
D) monopoly

The concept of a Nash equilibrium,when applied to an oligopoly,relies on the notion that Firm A in an oligopoly chooses its own best strategy based on which consideration

When prices exceed marginal cost,the result is a deadweight loss for society.

Which of these characterizations best describes how a tit-for-tat strategy starts and what happens subsequently

Very often,what is the reason that players can solve the prisoners' dilemma game and reach the most profitable outcome

On what grounds is the practice of tying illegal

How does the Competition Act prohibit price-fixing

In which market is tying becoming increasingly important

An oligopoly is a market with only a few sellers,each offering a similar or identical product.

In order to be successful,what must a cartel do

Which of these situations produces the largest profits for oligopolists

On what basis do economists claim that a resale price maintenance agreement is NOT anti-competitive

What are markets with only a few sellers,each offering a product similar or identical to the others,typically called

What is the practice of tying used to do

What are typical firms in our economy classified as

As a legitimate means of discouraging the problem of free riders,what do economists suggest using

Given that there are approximately 12 companies currently selling cars in Canada,what is the car market classified as

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

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

Filters

Exam 17: Oligopoly

The concept of a Nash equilibrium,when applied to an oligopoly,relies on the notion that Firm A in an oligopoly chooses its own best strategy based on which consideration

When prices exceed marginal cost,the result is a deadweight loss for society.

Which of these characterizations best describes how a tit-for-tat strategy starts and what happens subsequently

Very often,what is the reason that players can solve the prisoners' dilemma game and reach the most profitable outcome

On what grounds is the practice of tying illegal

How does the Competition Act prohibit price-fixing

In which market is tying becoming increasingly important

An oligopoly is a market with only a few sellers,each offering a similar or identical product.

In order to be successful,what must a cartel do

Which of these situations produces the largest profits for oligopolists

On what basis do economists claim that a resale price maintenance agreement is NOT anti-competitive

What are markets with only a few sellers,each offering a product similar or identical to the others,typically called

What is the practice of tying used to do

What are typical firms in our economy classified as

As a legitimate means of discouraging the problem of free riders,what do economists suggest using

Given that there are approximately 12 companies currently selling cars in Canada,what is the car market classified as

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

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

Filters