Question 1

To maximize sales revenue, an oligopoly will expand output until the price is zero.

Accepted Answer

A) True 
 B)False

Question 2

A perfectly contestable market is one in which there are excessive costs to entry and exit.

Accepted Answer

A) True 
 B)False

Question 3

____ is one in which exactly the amount one competitor gains must be lost by other competitors.

Accepted Answer

A) Nash equilibrium 
B) Prisoner's dilemma 
C) A win-win situation 
D) A zero-sum game 
A) Nash equilibrium 
B) Prisoner's dilemma 
C) A win-win situation 
D) A zero-sum game

Question 4

Displayed below is the payoff matrix of firm A for four different strategies, A1, A2, A3, and A4, and the potential retaliatory responses of firm B (B1, B2, B3, B4).?
 
If firm A uses the maximin criterion, which strategy will it choose?

Accepted Answer

A) A1 
B) A2 
C) A3 
D) A4 
A) A1 
B) A2 
C) A3 
D) A4

Question 5

What are the assumptions of the kinked demand curve model?
 What is its main conclusion about oligopoly behavior?

Accepted Answer

The model has two main assumptions: The

Question 6

A common characteristic in oligopolistic markets is

Accepted Answer

A) consideration of rivals' reactions. 
B) standardized products. 
C) high profits. 
D) unused capacity. 
A) consideration of rivals' reactions. 
B) standardized products. 
C) high profits. 
D) unused capacity.

Question 7

Oligopolists use advertising as a way of differentiating their products.

Accepted Answer

A) True 
 B)False

Question 8

If in a given market of more than one producer, there were to exist for a long interval of time a positive gap between price and average cost (P > AC), this would suggest that

Accepted Answer

A) there are many sellers in the industry. 
B) there exists an oligopoly or cartel in the industry. 
C) this is a contestable market. 
D) the firm cannot be a monopolistic competitor. 
A) there are many sellers in the industry. 
B) there exists an oligopoly or cartel in the industry. 
C) this is a contestable market. 
D) the firm cannot be a monopolistic competitor.

Question 9

Which of the following best expresses the attitude toward competition of a firm engaged in tacit collusion with its rivals?

Accepted Answer

A) A rolling stone gathers no moss. 
B) Waste not, want not. 
C) Do unto others as you would have them do unto you. 
D) Ask, and ye shall receive. 
A) A rolling stone gathers no moss. 
B) Waste not, want not. 
C) Do unto others as you would have them do unto you. 
D) Ask, and ye shall receive.

Question 10

Figure 12-3
  
-In Figure 12-3, according to economic theory, the kink in the demand curve will occur at point

Accepted Answer

A) E. 
B) A. 
C) C. 
D) D. 
A) E. 
B) A. 
C) C. 
D) D.

Question 11

The key difference between oligopoly and other market structures is the interdependence among producers.

Accepted Answer

A) True 
 B)False

Question 12

If a market is contestable, then

Accepted Answer

A) long-run economic profits are minimal due to inefficiency. 
B) long-run economic profits are zero. 
C) short-run and long-run economic profits are zero. 
D) positive economic profits are maximized due to the efficient production spurred by the threat of entry. 
A) long-run economic profits are minimal due to inefficiency. 
B) long-run economic profits are zero. 
C) short-run and long-run economic profits are zero. 
D) positive economic profits are maximized due to the efficient production spurred by the threat of entry.

Question 13

Oligopolists behave independently of each other.

Accepted Answer

A) True 
 B)False

Question 14

Figure 12-4
  
-The above matrix (Figure 12-4) displays the possible profit results of two firms, A and B, from following two different possible strategies: charging a high price and charging a low price.In each cell, the first number is the profit of firm A, and the second number is the profit of firm B.
a.Assume that collusion is not possible.Determine the optimal strategy for each firm.Explain why it is the best strategy to follow.
a., explain why firms collude.What are the pitfalls of collusion?
b.Based on your answer to

Accepted Answer

a.The optimal strategy for each is to ch

Question 15

The development of game theory was the work of

Accepted Answer

A) Joan Robinson and Edward Chamberlin. 
B) John von Neumann and Oskar Morgenstern. 
C) Wassily Leontief and Joseph Schumpeter. 
D) John Maynard Keynes. 
A) Joan Robinson and Edward Chamberlin. 
B) John von Neumann and Oskar Morgenstern. 
C) Wassily Leontief and Joseph Schumpeter. 
D) John Maynard Keynes.

Question 16

Which of the following conditions distinguishes the monopolistic competitor from the monopolist?

Accepted Answer

A) profit-maximizing rule 
B) downward slope of demand curve 
C) entry of rivals 
D) short-run economic profits 
A) profit-maximizing rule 
B) downward slope of demand curve 
C) entry of rivals 
D) short-run economic profits

Question 17

Price leadership works only if there is a single, dominant firm in the oligopoly.

Accepted Answer

A) True 
 B)False

Question 18

For the monopolistic competitor, MR = P.

Accepted Answer

A) True 
 B)False

Question 19

Monopolistically competitive firms can earn large profits in the long run.

Accepted Answer

A) True 
 B)False

Question 20

A duopoly is

Accepted Answer

A) a cartel in which all members try to cheat on the cartel. 
B) an industry with only two sellers. 
C) an industry with only two buyers. 
D) a cartel with only two members. 
A) a cartel in which all members try to cheat on the cartel. 
B) an industry with only two sellers. 
C) an industry with only two buyers. 
D) a cartel with only two members.

Exam 12: Between Competition and Monopoly

To maximize sales revenue, an oligopoly will expand output until the price is zero.

A perfectly contestable market is one in which there are excessive costs to entry and exit.

____ is one in which exactly the amount one competitor gains must be lost by other competitors.

Displayed below is the payoff matrix of firm A for four different strategies, A1, A2, A3, and A4, and the potential retaliatory responses of firm B (B1, B2, B3, B4).? If firm A uses the maximin criterion, which strategy will it choose?

What are the assumptions of the kinked demand curve model? What is its main conclusion about oligopoly behavior?

A common characteristic in oligopolistic markets is

Oligopolists use advertising as a way of differentiating their products.

If in a given market of more than one producer, there were to exist for a long interval of time a positive gap between price and average cost (P > AC), this would suggest that

Which of the following best expresses the attitude toward competition of a firm engaged in tacit collusion with its rivals?

Figure 12-3 -In Figure 12-3, according to economic theory, the kink in the demand curve will occur at point

The key difference between oligopoly and other market structures is the interdependence among producers.

If a market is contestable, then

Oligopolists behave independently of each other.

The development of game theory was the work of

Which of the following conditions distinguishes the monopolistic competitor from the monopolist?

Price leadership works only if there is a single, dominant firm in the oligopoly.

For the monopolistic competitor, MR = P.

Monopolistically competitive firms can earn large profits in the long run.

A duopoly is

What Is Economics

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: the Importance of Marginal Analysis

Securities: Business Finance and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets: the Price System

The Shortcomings of Free Markets

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

Is Useconomic Leadership Threatened

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation

Bringing in the Supply Side: Unemployment and Inflation

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

He Financial Crisis and the Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder

Exchange Rates and the Macroeconomy

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