Question 1

When price is above marginal cost,selling one more unit of output at the going price will increase profit.What is this concept called

Accepted Answer

A) income effect 
B) price effect 
C) output effect 
D) cost effect 
A) income effect 
B) price effect 
C) output effect 
D) cost effect

Question 2

When discount retailers free ride on information about products provided by nondiscount retailers,what is known about the information provided about the products by the discount retailers

Accepted Answer

A) It is less than optimal in quantity. 
B) It is more than optimal in quantity. 
C) It is optimal in quantity. 
D) It is of poor quality and not useful to consumers. 
A) It is less than optimal in quantity. 
B) It is more than optimal in quantity. 
C) It is optimal in quantity. 
D) It is of poor quality and not useful to consumers.

Question 3

Binding agreements concerning production levels between oligopolists can lead the involved firms to what outcome

Accepted Answer

A) monopoly profit 
B) lower prices and more profit 
C) zero profit 
D) higher prices and less profit 
A) monopoly profit 
B) lower prices and more profit 
C) zero profit 
D) higher prices and less profit

Question 4

As the number of firms in a cartel increases,what happens

Accepted Answer

A) The monopoly outcome becomes more likely. 
B) The magnitude of the price effect increases. 
C) Each seller becomes more concerned about its own impact on the market price. 
D) The monopoly outcome becomes less likely. 
A) The monopoly outcome becomes more likely. 
B) The magnitude of the price effect increases. 
C) Each seller becomes more concerned about its own impact on the market price. 
D) The monopoly outcome becomes less likely.

Question 5

Assume that Peach Computers has entered into a resale price maintenance agreement with Computer Super Stores Inc.(CSS Inc.) but not with CompuMart.In this case,what will result

Accepted Answer

A) The wholesale price of Peach computers will be different for CSS Inc.than it is for CompuMart. 
B) Peach computers will not succeed in increasing profits by having a resale price maintenance agreement with all retail outlets that sell its products. 
C) CompuMart will benefit from customers who go to CSS Inc.for information about different computers. 
D) CSS Inc.will sell Peach computers at a lower price than CompuMart. 
A) The wholesale price of Peach computers will be different for CSS Inc.than it is for CompuMart. 
B) Peach computers will not succeed in increasing profits by having a resale price maintenance agreement with all retail outlets that sell its products. 
C) CompuMart will benefit from customers who go to CSS Inc.for information about different computers. 
D) CSS Inc.will sell Peach computers at a lower price than CompuMart.

Question 6

In the textbook,what does the prisoners' dilemma provide insights into

Accepted Answer

A) the difficulty of maintaining cooperation 
B) the benefits of avoiding cooperation 
C) the benefits of government ownership of a monopoly 
D) the ease with which oligopoly firms maintain high prices 
A) the difficulty of maintaining cooperation 
B) the benefits of avoiding cooperation 
C) the benefits of government ownership of a monopoly 
D) the ease with which oligopoly firms maintain high prices

Question 7

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.If Irun fails to live up to the production agreement and overproduces,what can be said about Urun's situation

Accepted Answer

A) Urun will invariably be worse off than before the agreement was broken. 
B) Urun will counter by decreasing its production in order to maintain price stability. 
C) Urun's profit will be maximized by holding its production constant. 
D) Urun will be even worse off if it follows suit and increases production. 
A) Urun will invariably be worse off than before the agreement was broken. 
B) Urun will counter by decreasing its production in order to maintain price stability. 
C) Urun's profit will be maximized by holding its production constant. 
D) Urun will be even worse off if it follows suit and increases production.

Question 8

Because each oligopolist cares about its own profit rather than the collective profit of all the oligopolists,what is the result

Accepted Answer

A) They have incentives to cheat. 
B) Each firm's profit ends up being zero. 
C) Society is worse off. 
D) Collusion is necessary. 
A) They have incentives to cheat. 
B) Each firm's profit ends up being zero. 
C) Society is worse off. 
D) Collusion is necessary.

Question 9

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.Assume that trade negotiations are repeated each year.In a repeated game scenario,what would be the main difference of the game

Accepted Answer

A) Mexican negotiators will assume that Canadian negotiators will never retaliate for a noncooperative trade policy. 
B) Both parties will assume that the other will choose a strategy that optimizes the total value of the trade relationship. 
C) The Nash equilibrium will provide the largest possible gains to each party. 
D) Each will follow a dominant strategy based entirely on self-interest. 
A) Mexican negotiators will assume that Canadian negotiators will never retaliate for a noncooperative trade policy. 
B) Both parties will assume that the other will choose a strategy that optimizes the total value of the trade relationship. 
C) The Nash equilibrium will provide the largest possible gains to each party. 
D) Each will follow a dominant strategy based entirely on self-interest.

Question 10

Duopolists and oligopolists face different pricing dilemmas.

Accepted Answer

A) True 
 B)False

Question 11

Table 17-3 
Two cigarette manufacturers (Firm A and Firm B) are faced with lawsuits from provinces trying to recover the health-care related expenses associated with cigarette smoking. Both cigarette firms have evidence that indicates that cigarette smoke causes lung cancer (and other related illnesses). Provincial prosecutors do not have access to the same data used by cigarette manufacturers and thus will have difficulty recovering full costs without obtaining at least one cigarette firm study. Each firm has been presented with an opportunity to lower their liability in the suit if they cooperate with attorneys representing the provinces.
 
-Refer to Table 17-3.If both firms follow a dominant strategy,what will Firm A's profits (losses) be

Accepted Answer

A) -$60 
B) -$30 
C) -$15 
D) -$10 
A) -$60 
B) -$30 
C) -$15 
D) -$10

Question 12

While on vacation in Berserk you and another traveller are arrested and accused of spying for Canada.You are,of course,both innocent.Your captors inform you that if you confess,you will receive a sentence of two years while the other traveller will receive a sentence of 20 years.If you both confess you will each receive a sentence of three years.You are also told that the other traveller is being offered the same option.You suspect that there is not enough evidence to convict you unless the other traveller confesses.If you are risk averse,what should you choose to do

Accepted Answer

A) Not confess, because you are innocent even though you may spend 20 years in a Berserk prison. 
B) Not confess, in hopes that your alleged co-conspirator also remains silent. 
C) Confess, because it is always the best solution to this type of game. 
D) Confess, even though you are innocent, to avoid a 20-year sentence. 
A) Not confess, because you are innocent even though you may spend 20 years in a Berserk prison. 
B) Not confess, in hopes that your alleged co-conspirator also remains silent. 
C) Confess, because it is always the best solution to this type of game. 
D) Confess, even though you are innocent, to avoid a 20-year sentence.

Question 13

When firms are faced with making strategic choices in order to maximize profit,what do economists typically use to model their behaviour

Accepted Answer

A) the theory of monopoly 
B) the theory of aggressive competition 
C) game theory 
D) cartel theory 
A) the theory of monopoly 
B) the theory of aggressive competition 
C) game theory 
D) cartel theory

Question 14

What is the role that the Competition Act plays in our market economy

Accepted Answer

A) It was passed to encourage judicial leniency in the review of cooperative agreements. 
B) It was concerned with self-interest-dominated Nash equilibriums in prisoners' dilemma games. 
C) It enhanced the ability to enforce cartel agreements. 
D) It restricted the ability of competitors to engage in cooperative agreements. 
A) It was passed to encourage judicial leniency in the review of cooperative agreements. 
B) It was concerned with self-interest-dominated Nash equilibriums in prisoners' dilemma games. 
C) It enhanced the ability to enforce cartel agreements. 
D) It restricted the ability of competitors to engage in cooperative agreements.

Question 15

In which way would a group of oligopolists generally be better off acting collectively

Accepted Answer

A) as if they were each seeking to maximize their own individual profits 
B) in a manner that would prohibit collusive agreements 
C) as a single monopolist 
D) as a single perfectly competitive firm 
A) as if they were each seeking to maximize their own individual profits 
B) in a manner that would prohibit collusive agreements 
C) as a single monopolist 
D) as a single perfectly competitive firm

Question 16

If there are many firms participating in a market,what could the market be

Accepted Answer

A) either an oligopoly or monopolistically competitive 
B) either perfectly competitive or monopolistically competitive 
C) either an oligopoly or perfectly competitive 
D) either an oligopoly or monopoly 
A) either an oligopoly or monopolistically competitive 
B) either perfectly competitive or monopolistically competitive 
C) either an oligopoly or perfectly competitive 
D) either an oligopoly or monopoly

Question 17

Total profit for an oligopolist is less than that of a perfectly competitive firm.

Accepted Answer

A) True 
 B)False

Question 18

When deciding whether the market is an oligopoly or not,there is no magical number of firms that defines an oligopoly.

Accepted Answer

A) True 
 B)False

Question 19

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.Parliament passed a law that banned cigarette advertising on television.If cigarette companies are profit maximizers,what is most likely

Accepted Answer

A) Neither company opposed the ban on advertising. 
B) Brown Inc.sued the federal government on grounds that the ban constitutes a civil rights violation. 
C) Both companies sued the federal government on grounds that the ban constitutes a civil rights violation. 
D) Both companies retaliated with black-market operations. 
A) Neither company opposed the ban on advertising. 
B) Brown Inc.sued the federal government on grounds that the ban constitutes a civil rights violation. 
C) Both companies sued the federal government on grounds that the ban constitutes a civil rights violation. 
D) Both companies retaliated with black-market operations.

Question 20

In the case of oligopoly markets,self-interest prevents cooperation and leads to an inferior outcome for the firms that are involved.

Accepted Answer

A) True 
 B)False

When price is above marginal cost,selling one more unit of output at the going price will increase profit.What is this concept called

When discount retailers free ride on information about products provided by nondiscount retailers,what is known about the information provided about the products by the discount retailers

Binding agreements concerning production levels between oligopolists can lead the involved firms to what outcome

As the number of firms in a cartel increases,what happens

Assume that Peach Computers has entered into a resale price maintenance agreement with Computer Super Stores Inc.(CSS Inc.) but not with CompuMart.In this case,what will result

In the textbook,what does the prisoners' dilemma provide insights into

Because each oligopolist cares about its own profit rather than the collective profit of all the oligopolists,what is the result

Duopolists and oligopolists face different pricing dilemmas.

When firms are faced with making strategic choices in order to maximize profit,what do economists typically use to model their behaviour

What is the role that the Competition Act plays in our market economy

In which way would a group of oligopolists generally be better off acting collectively

If there are many firms participating in a market,what could the market be

Total profit for an oligopolist is less than that of a perfectly competitive firm.

When deciding whether the market is an oligopoly or not,there is no magical number of firms that defines an oligopoly.

In the case of oligopoly markets,self-interest prevents cooperation and leads to an inferior outcome for the firms that are involved.

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

When price is above marginal cost,selling one more unit of output at the going price will increase profit.What is this concept called

When discount retailers free ride on information about products provided by nondiscount retailers,what is known about the information provided about the products by the discount retailers

Binding agreements concerning production levels between oligopolists can lead the involved firms to what outcome

As the number of firms in a cartel increases,what happens

Assume that Peach Computers has entered into a resale price maintenance agreement with Computer Super Stores Inc.(CSS Inc.) but not with CompuMart.In this case,what will result

In the textbook,what does the prisoners' dilemma provide insights into

Because each oligopolist cares about its own profit rather than the collective profit of all the oligopolists,what is the result

Duopolists and oligopolists face different pricing dilemmas.

When firms are faced with making strategic choices in order to maximize profit,what do economists typically use to model their behaviour

What is the role that the Competition Act plays in our market economy

In which way would a group of oligopolists generally be better off acting collectively

If there are many firms participating in a market,what could the market be

Total profit for an oligopolist is less than that of a perfectly competitive firm.

When deciding whether the market is an oligopoly or not,there is no magical number of firms that defines an oligopoly.

In the case of oligopoly markets,self-interest prevents cooperation and leads to an inferior outcome for the firms that are involved.

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