Question 1

Suppose a perfectly competitive market is taken over by three or four firms.What result would we expect regarding market output and the price of the product

Accepted Answer

A) an increase in market output and an increase in the price of the product 
B) an increase in market output and an decrease in the price of the product 
C) a decrease in market output and an increase in the price of the product 
D) a decrease in market output and a decrease in the price of the product 
A) an increase in market output and an increase in the price of the product 
B) an increase in market output and an decrease in the price of the product 
C) a decrease in market output and an increase in the price of the product 
D) a decrease in market output and a decrease in the price of the product

Question 2

Table 17-4 
Consider trade relations between Canada and Germany. Assume that the leaders of the two countries believe the payoffs to alternative trade policies are as follows:

-Refer to Table 17-4.If both countries follow a dominant strategy,what will the value of trade flow benefits for Germany be

Accepted Answer

A) $30 
B) $80 
C) $280 
D) $290 
A) $30 
B) $80 
C) $280 
D) $290

Question 3

What did the Competition Act do

Accepted Answer

A) It overturned centuries-old views of English and Canadian judges on agreements among competitors. 
B) It had the effect of discouraging private lawsuits against conspiring oligopolists. 
C) It contains civil provisions but not criminal provisions. 
D) It prevented firms in oligopolistic industries from acting either individually or together in ways that make markets less competitive. 
A) It overturned centuries-old views of English and Canadian judges on agreements among competitors. 
B) It had the effect of discouraging private lawsuits against conspiring oligopolists. 
C) It contains civil provisions but not criminal provisions. 
D) It prevented firms in oligopolistic industries from acting either individually or together in ways that make markets less competitive.

Question 4

Scenario 17-2
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 $24 million.Drilling a well to recover oil costs $1 million per well.If each company drills one well, each will get half of the oil and earn a $11 million profit ($12 million in revenue minus $1 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 17-2.If Big Petro Inc.were to drill a second well and Gargantuan Gas also drilled a second well,what would Big Petro Inc.'s profit be

Accepted Answer

A) $7 million 
B) $8 million 
C) $9 million 
D) $10 million 
A) $7 million 
B) $8 million 
C) $9 million 
D) $10 million

Question 5

Emily and Brooklyn are competitors in a local market.Each is trying to decide if it is better to advertise on TV,on radio,or not at all.If they both advertise on TV,each will earn a profit of $5000.If they both advertise on radio,each will earn a profit of $7000.If neither advertises at all,each will earn a profit of $10,000.If one advertises on TV and the other advertises on radio,then the one advertising on TV will earn $8000 and the other will earn $3000.If one advertises on TV and the other does not advertise,then the one advertising on TV will earn $15,000 and the other will earn $2000.If one advertises on radio and the other does not advertise,then the one advertising on radio will earn $12,000 and the other will earn $4000.If both follow their dominant strategy,what will Emily do and what will she earn

Accepted Answer

A) advertise on TV and earn $5000 
B) advertise on radio and earn $7000 
C) not advertise and earn $10,000 
D) advertise on TV and earn $15,000 
A) advertise on TV and earn $5000 
B) advertise on radio and earn $7000 
C) not advertise and earn $10,000 
D) advertise on TV and earn $15,000

Question 6

Why there are many controversies over anticompetition laws

Accepted Answer

A) The proper scope of competition policy is not well defined. 
B) Anticompetition laws focus on granting certain firms the option to form a cartel but not all the firms. 
C) Policymakers have the difficult task of determining whether some firms' decisions have legitimate purposes even though they appear anti-competitive. 
D) Some illegal strategies can be welfare enhancing. 
A) The proper scope of competition policy is not well defined. 
B) Anticompetition laws focus on granting certain firms the option to form a cartel but not all the firms. 
C) Policymakers have the difficult task of determining whether some firms' decisions have legitimate purposes even though they appear anti-competitive. 
D) Some illegal strategies can be welfare enhancing.

Question 7

Table 17-2
The information in the table depicts the total demand for wireless Internet subscriptions in a small urban market. Assume that each wireless Internet operator pays a fixed cost of $100,000 (per year) to provide wireless Internet in the market area and that the marginal cost of providing the wireless Internet service to a household is zero.

-Refer to Table 17-2.Assume that there are two profit-maximizing wireless Internet companies operating in this market.Further assume that they are able to "collude" on price and quantity of wireless Internet subscriptions to sell.As part of their collusive agreement they decide to take an equal share of the market.How much profit will each company make

Accepted Answer

A) $40,000 
B) $170,000 
C) $210,000 
D) $380,000 
A) $40,000 
B) $170,000 
C) $210,000 
D) $380,000

Question 8

If Jeans Co.were to require every store that carried their clothing to charge customers 20 percent more than the store's cost for each item of clothing,what would Jeans Co.be practicing

Accepted Answer

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

Question 9

Oligopolists are aware that increases in the quantity of output they produce will do which of the following

Accepted Answer

A) reduce the price of their product, and in this respect they are like monopolists 
B) reduce the price of their product, and in this respect they are like competitive firms 
C) increase the price of their product, and in this respect they are like monopolists 
D) increase the price of their product, and in this respect they are like competitive firms 
A) reduce the price of their product, and in this respect they are like monopolists 
B) reduce the price of their product, and in this respect they are like competitive firms 
C) increase the price of their product, and in this respect they are like monopolists 
D) increase the price of their product, and in this respect they are like competitive firms

Question 10

Scenario 17-4
Assume that a local bank sells two services, chequing accounts and ATM card services.Mr.Leung is willing to pay $10 a month for the bank to service his chequing account and $6 a month for unlimited use of his ATM card.Ms.Gardner is willing to pay only $6 for a chequing account, but is willing to pay $10 for unlimited use of her ATM card.Assume that each customer uses only one service and that the bank can provide each of these services at zero marginal cost.
-Refer to Scenario 17-4.How much additional profit per customer does the bank make when it switches to use of a tying strategy to price a chequing account and the ATM service

Accepted Answer

A) $6 
B) $12 
C) $16 
D) $20 
A) $6 
B) $12 
C) $16 
D) $20

Question 11

Scenario 17-4
Assume that a local bank sells two services, chequing accounts and ATM card services.Mr.Leung is willing to pay $10 a month for the bank to service his chequing account and $6 a month for unlimited use of his ATM card.Ms.Gardner is willing to pay only $6 for a chequing account, but is willing to pay $10 for unlimited use of her ATM card.Assume that each customer uses only one service and that the bank can provide each of these services at zero marginal cost.
-Refer to Scenario 17-4.If the bank is able to use tying to price a chequing account and the ATM service,what is the profit-maximizing price to charge for the tied good

Accepted Answer

A) $6 
B) $12 
C) $16 
D) $20 
A) $6 
B) $12 
C) $16 
D) $20

Question 12

Table 17-4 
Consider trade relations between Canada and Germany. Assume that the leaders of the two countries believe the payoffs to alternative trade policies are as follows:

-Refer to Table 17-4.Pursuing its own best interests,when will Germany impose trade sanctions or high tariffs against Canadian firms

Accepted Answer

A) only if Canada plays a high tariff strategy with Germany 
B) only if Canada plays a low tariff strategy with Germany 
C) regardless of the strategy that Canada plays 
D) under no circumstances 
A) only if Canada plays a high tariff strategy with Germany 
B) only if Canada plays a low tariff strategy with Germany 
C) regardless of the strategy that Canada plays 
D) under no circumstances

Question 13

The argument that consumers will not be willing to pay any more for two items sold together as they would for the two items sold separately is used to justify the legality of which of the following

Accepted Answer

A) resale price maintenance 
B) tying 
C) predatory pricing 
D) free-riding 
A) resale price maintenance 
B) tying 
C) predatory pricing 
D) free-riding

Question 14

For the oligopolist that does not collude with its competitors,there are two factors that affect the decision to raise production.What are these factors

Accepted Answer

A) the input effect and the output effect 
B) the production effect and the cost effect 
C) the output effect and the price effect 
D) the cost effect and the price effect 
A) the input effect and the output effect 
B) the production effect and the cost effect 
C) the output effect and the price effect 
D) the cost effect and the price effect

Question 15

What happens when an oligopoly grows very large

Accepted Answer

A) The output effect disappears. 
B) The price effect disappears. 
C) The input effect disappears. 
D) The cost effect disappears. 
A) The output effect disappears. 
B) The price effect disappears. 
C) The input effect disappears. 
D) The cost effect disappears.

Question 16

What happens to the outcomes of the game "the prisoner`s dilemma" if this game is played repeatedly?

Accepted Answer

In a game repeated many times,

Question 17

What is one characteristic of an oligopoly market structure

Accepted Answer

A) Firms in the industry are typically characterized by very diverse product lines. 
B) Firms in the industry have some degree of market power. 
C) Products typically sell at a price that reflects their marginal cost of production. 
D) The actions of one seller have no impact on the profitability of other sellers. 
A) Firms in the industry are typically characterized by very diverse product lines. 
B) Firms in the industry have some degree of market power. 
C) Products typically sell at a price that reflects their marginal cost of production. 
D) The actions of one seller have no impact on the profitability of other sellers.

Question 18

Table 17-2
The information in the table depicts the total demand for wireless Internet subscriptions in a small urban market. Assume that each wireless Internet operator pays a fixed cost of $100,000 (per year) to provide wireless Internet in the market area and that the marginal cost of providing the wireless Internet service to a household is zero.

-Refer to Table 17-2.If there is only one wireless internet company in this market,what price would it charge for a wireless Internet subscription to maximize its profit

Accepted Answer

A) $60 
B) $90 
C) $120 
D) $150 
A) $60 
B) $90 
C) $120 
D) $150

Question 19

Suppose that Firm A and Firm B are two of the largest producers of a special pool-cleaning robot. Suppose that the marginal cost of making such a robot is constant at $1,000 per unit and there is no start-up cost. The demand for the robot is described by the following schedule.
a.  If the market for the robots was perfectly competitive, what would the price and quantity be?
b.  If there were only one supplier of robots, what would the price and quantity be?
c.  If two firms formed a cartel, what would be the price and quantity? If two firms split the market evenly, what would be Firm A’s production and profit?
d.  What would happen to Firm A’s profit if it increased its production by 1,000 while Firm B stuck to the cartel agreement?

Accepted Answer

In order to answer this question, we nee

Question 20

In a two-person repeated game,how does a tit-for-tat strategy start and then what happens

Accepted Answer

A) initial cooperation and then each player mimics the other player's last move 
B) initial cooperation and then each player is unresponsive to the strategic moves of the other player 
C) initial non-cooperation and then each player pursues his or her own self-interest 
D) initial non-cooperation and then each player cooperates when the other player demonstrates a desire for the cooperative solution 
A) initial cooperation and then each player mimics the other player's last move 
B) initial cooperation and then each player is unresponsive to the strategic moves of the other player 
C) initial non-cooperation and then each player pursues his or her own self-interest 
D) initial non-cooperation and then each player cooperates when the other player demonstrates a desire for the cooperative solution

Suppose a perfectly competitive market is taken over by three or four firms.What result would we expect regarding market output and the price of the product

Table 17-4 Consider trade relations between Canada and Germany. Assume that the leaders of the two countries believe the payoffs to alternative trade policies are as follows: -Refer to Table 17-4.If both countries follow a dominant strategy,what will the value of trade flow benefits for Germany be

What did the Competition Act do

Why there are many controversies over anticompetition laws

If Jeans Co.were to require every store that carried their clothing to charge customers 20 percent more than the store's cost for each item of clothing,what would Jeans Co.be practicing

Oligopolists are aware that increases in the quantity of output they produce will do which of the following

The argument that consumers will not be willing to pay any more for two items sold together as they would for the two items sold separately is used to justify the legality of which of the following

For the oligopolist that does not collude with its competitors,there are two factors that affect the decision to raise production.What are these factors

What happens when an oligopoly grows very large

What happens to the outcomes of the game "the prisoner`s dilemma" if this game is played repeatedly?

What is one characteristic of an oligopoly market structure

In a two-person repeated game,how does a tit-for-tat strategy start and then what happens

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

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Exam 17: Oligopoly

Suppose a perfectly competitive market is taken over by three or four firms.What result would we expect regarding market output and the price of the product

Table 17-4 Consider trade relations between Canada and Germany. Assume that the leaders of the two countries believe the payoffs to alternative trade policies are as follows: -Refer to Table 17-4.If both countries follow a dominant strategy,what will the value of trade flow benefits for Germany be

What did the Competition Act do

Why there are many controversies over anticompetition laws

If Jeans Co.were to require every store that carried their clothing to charge customers 20 percent more than the store's cost for each item of clothing,what would Jeans Co.be practicing

Oligopolists are aware that increases in the quantity of output they produce will do which of the following

The argument that consumers will not be willing to pay any more for two items sold together as they would for the two items sold separately is used to justify the legality of which of the following

For the oligopolist that does not collude with its competitors,there are two factors that affect the decision to raise production.What are these factors

What happens when an oligopoly grows very large

What happens to the outcomes of the game "the prisoner`s dilemma" if this game is played repeatedly?

What is one characteristic of an oligopoly market structure

In a two-person repeated game,how does a tit-for-tat strategy start and then what happens

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