Question 1

The barrier to entry that allowed Alcoa to make persistent economic profits was ownership of an essential input.

Accepted Answer

A) True 
 B)False

Question 2

The most important barrier to entry is economies of scale.

Accepted Answer

A) True 
 B)False

Question 3

All of the following are characteristics of game theory except

Accepted Answer

A) rules that determine what actions are allowable. 
B) payoffs that are the results of the interaction among players' strategies. 
C) strategies that players employ to attain their objectives. 
D) independence among players. 
A) rules that determine what actions are allowable. 
B) payoffs that are the results of the interaction among players' strategies. 
C) strategies that players employ to attain their objectives. 
D) independence among players.

Question 4

The Brooks Appliance Store and the Lefingwell Appliance Store (both are located in the same city)each sell an identical washer-dryer pair.The owner of each store considered offering the washer-dryer pair for $700, but decided on a price of $500.If this is a Nash equilibrium we can conclude that

Accepted Answer

A) each store owner feared charging the higher price would result in being undercut by the other store charging the lower price. 
B) the owners of the stores feared that charging $700 could be used as evidence of collusion. 
C) charging $500 was the most profitable strategy for each store, regardless of what price was charged by the other store. 
D) the stores were less concerned about making a profit from the washer-dryer pair than they were with attracting customers who would also buy other appliances. 
A) each store owner feared charging the higher price would result in being undercut by the other store charging the lower price. 
B) the owners of the stores feared that charging $700 could be used as evidence of collusion. 
C) charging $500 was the most profitable strategy for each store, regardless of what price was charged by the other store. 
D) the stores were less concerned about making a profit from the washer-dryer pair than they were with attracting customers who would also buy other appliances.

Question 5

Airlines often engage in last-minute price cutting to fill remaining empty seats on a flight because this practice will generally

Accepted Answer

A) prevent rival airlines from competing in that market. 
B) increase marginal revenue more than marginal cost. 
C) maximize marginal revenue. 
D) discourage rivals from matching price cuts. 
A) prevent rival airlines from competing in that market. 
B) increase marginal revenue more than marginal cost. 
C) maximize marginal revenue. 
D) discourage rivals from matching price cuts.

Question 6

A four-firm concentration ratio measures

Accepted Answer

A) the extent to which industry sales are concentrated among the four largest firms in the industry. 
B) the price elasticity of demand among the four largest firms in an industry. 
C) the number of firms in an industry. 
D) the price elasticity of demand in an industry. 
A) the extent to which industry sales are concentrated among the four largest firms in the industry. 
B) the price elasticity of demand among the four largest firms in an industry. 
C) the number of firms in an industry. 
D) the price elasticity of demand in an industry.

Question 7

An oligopolistic industry is characterized by a few large firms acting independently.

Accepted Answer

A) True 
 B)False

Question 8

By the 21st century few people purchased printed encyclopedias.Which of the following competitive forces best explains this?

Accepted Answer

A) competition from substitutes 
B) the bargaining power of buyers 
C) the bargaining power of suppliers 
D) the threat from potential entrants 
A) competition from substitutes 
B) the bargaining power of buyers 
C) the bargaining power of suppliers 
D) the threat from potential entrants

Question 9

Assume that two interior design companies, Alistair and Baine, are competing for customers and if they both advertise, they would each earn $30 million in profits.If neither advertises, they each earn $50 million in profits.If one advertises and the other doesn't, the firm that advertises earns $40 million in profit while the other earns $20 million in profit.
a.Present the information above in the form of a payoff matrix.Let Baine be the row player and Alistair 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 10

Which of the following is most likely to exert the bargaining power of a buyer?

Accepted Answer

A) Barnes and Noble purchases books from publishers for sale in its online stores. 
B) Walmart, the world's largest discount store, seeks vendors to supply products made exclusively for its stores. 
C) Ground beef producers seek to purchase cattle from ranchers. 
D) Cowgirl Creamery, a small cheese producer, seeks a dairy farm for its organic milk supplies. 
A) Barnes and Noble purchases books from publishers for sale in its online stores. 
B) Walmart, the world's largest discount store, seeks vendors to supply products made exclusively for its stores. 
C) Ground beef producers seek to purchase cattle from ranchers. 
D) Cowgirl Creamery, a small cheese producer, seeks a dairy farm for its organic milk supplies.

Question 11

A consequence of the quota that has been imposed on the importation of sugar into the United States is

Accepted Answer

A) consumers are protected from eating unsafe products made from cheap imported sugar. 
B) competition in the U.S. sugar market is reduced. 
C) the cost of producing cereal, chocolate, and candy products in the United States is reduced. 
D) the market for sugar in the United States has become monopolistically competitive rather than oligopolistic. 
A) consumers are protected from eating unsafe products made from cheap imported sugar. 
B) competition in the U.S. sugar market is reduced. 
C) the cost of producing cereal, chocolate, and candy products in the United States is reduced. 
D) the market for sugar in the United States has become monopolistically competitive rather than oligopolistic.

Question 12

Does the strength of each of the five competitive forces from Michael Porter's model remain constant over time? Briefly explain.

Accepted Answer

The strength of these forces c

Question 13

Decision trees can only be used to analyze sequential games.

Accepted Answer

A) True 
 B)False

Question 14

Table 14-1
   
Godrickporter and Star Connections are the only two airport shuttle and limousine rental service companies in the mid-sized town of Godrick Hollow.Each firm must decide on whether to increase its advertising spending to compete for customers.Table 14-1 shows the payoff matrix for this advertising game.
-Refer to Table 14-1.What is the Nash equilibrium in this game?

Accepted Answer

A) There is no Nash equilibrium. 
B) Godrickporter increases its advertising budget, but Star Connections does not. 
C) Star Connections increases its advertising budget, but Godrickporter does not. 
D) Both Godrickporter and Star Connections increase their advertising budgets. 
A) There is no Nash equilibrium. 
B) Godrickporter increases its advertising budget, but Star Connections does not. 
C) Star Connections increases its advertising budget, but Godrickporter does not. 
D) Both Godrickporter and Star Connections increase their advertising budgets.

Question 15

Assume that the four-firm concentration ratio in an industry is 85 percent.Which of the following statements uses one of the five competitive forces to argue that this industry may be more competitive than its concentration ratio suggests?

Accepted Answer

A) The high concentration may be due to patents owned by the largest firms but competition will increase when patent rights expire. 
B) If high concentration is the result of large firms owning much of the available supply of a key input, the industry will become more competitive when new sources of the input are discovered by other firms. 
C) Even though concentration is high, large firms in the industry may act competitively by spending large sums on advertising. 
D) The threat of entry into this industry can cause firms in the industry to lower their prices and profits in order to deter entry. 
A) The high concentration may be due to patents owned by the largest firms but competition will increase when patent rights expire. 
B) If high concentration is the result of large firms owning much of the available supply of a key input, the industry will become more competitive when new sources of the input are discovered by other firms. 
C) Even though concentration is high, large firms in the industry may act competitively by spending large sums on advertising. 
D) The threat of entry into this industry can cause firms in the industry to lower their prices and profits in order to deter entry.

Question 16

The value of the four-firm concentration ratio that many economists consider indicative of the existence of an oligopoly in a particular industry is

Accepted Answer

A) anything greater than 10 percent. 
B) anything greater than 20 percent. 
C) anything greater than 30 percent. 
D) anything greater than 40 percent. 
A) anything greater than 10 percent. 
B) anything greater than 20 percent. 
C) anything greater than 30 percent. 
D) anything greater than 40 percent.

Question 17

A dominant strategy is

Accepted Answer

A) an equilibrium where each firm chooses the best strategy, given the strategies of other firms. 
B) a strategy chosen by two firms that decide to charge the same price or otherwise not to compete. 
C) a strategy that is obviously the best for each firm that is a party to a business decision. 
D) a strategy that is the best for a firm no matter what strategies other firms use. 
A) an equilibrium where each firm chooses the best strategy, given the strategies of other firms. 
B) a strategy chosen by two firms that decide to charge the same price or otherwise not to compete. 
C) a strategy that is obviously the best for each firm that is a party to a business decision. 
D) a strategy that is the best for a firm no matter what strategies other firms use.

Question 18

Table 14-5
   
Ming and Henri each run one of the two dry cleaning facilities in the town of Scaraby.Both consider offering free pickup and delivery services.Table 14-5 shows the payoff matrix containing the expected quarterly profits for each firm.
-Refer to Table 14-5.Does Ming have a dominant strategy? If yes, what is it?

Accepted Answer

A) Yes, Ming's dominant strategy is to offer free pickup and delivery. 
B) No, Ming does not a dominant strategy - his best outcome depends on what Henri does. 
C) Yes, Ming's dominant strategy is to not to offer free pickup and delivery. 
D) Yes, Ming's dominant strategy is to wait to see what Henri does first. 
A) Yes, Ming's dominant strategy is to offer free pickup and delivery. 
B) No, Ming does not a dominant strategy - his best outcome depends on what Henri does. 
C) Yes, Ming's dominant strategy is to not to offer free pickup and delivery. 
D) Yes, Ming's dominant strategy is to wait to see what Henri does first.

Question 19

Collusion

Accepted Answer

A) is rampant in perfect competition as all firms charge the same price. 
B) reduces market concentration in an industry. 
C) among firms is difficult to maintain because it eliminates long-run economic profit. 
D) is more difficult when there are many firms producing differentiated products in an industry. 
A) is rampant in perfect competition as all firms charge the same price. 
B) reduces market concentration in an industry. 
C) among firms is difficult to maintain because it eliminates long-run economic profit. 
D) is more difficult when there are many firms producing differentiated products in an industry.

Question 20

Patents, tariffs, and quotas are all examples of

Accepted Answer

A) government-imposed barriers. 
B) economic regulations that increase efficiency. 
C) entry barriers that improve a country's standard of living. 
D) entry barriers that protect consumers. 
A) government-imposed barriers. 
B) economic regulations that increase efficiency. 
C) entry barriers that improve a country's standard of living. 
D) entry barriers that protect consumers.

The barrier to entry that allowed Alcoa to make persistent economic profits was ownership of an essential input.

The most important barrier to entry is economies of scale.

All of the following are characteristics of game theory except

The Brooks Appliance Store and the Lefingwell Appliance Store (both are located in the same city)each sell an identical washer-dryer pair.The owner of each store considered offering the washer-dryer pair for $700, but decided on a price of $500.If this is a Nash equilibrium we can conclude that

Airlines often engage in last-minute price cutting to fill remaining empty seats on a flight because this practice will generally

A four-firm concentration ratio measures

An oligopolistic industry is characterized by a few large firms acting independently.

By the 21st century few people purchased printed encyclopedias.Which of the following competitive forces best explains this?

Which of the following is most likely to exert the bargaining power of a buyer?

A consequence of the quota that has been imposed on the importation of sugar into the United States is

Does the strength of each of the five competitive forces from Michael Porter's model remain constant over time? Briefly explain.

Decision trees can only be used to analyze sequential games.

Assume that the four-firm concentration ratio in an industry is 85 percent.Which of the following statements uses one of the five competitive forces to argue that this industry may be more competitive than its concentration ratio suggests?

The value of the four-firm concentration ratio that many economists consider indicative of the existence of an oligopoly in a particular industry is

A dominant strategy is

Collusion

Patents, tariffs, and quotas are all examples of

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 More Realistic Setting

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Filters

Exam 14: Oligopoly: Firms in Less Competitive Markets

The barrier to entry that allowed Alcoa to make persistent economic profits was ownership of an essential input.

The most important barrier to entry is economies of scale.

All of the following are characteristics of game theory except

The Brooks Appliance Store and the Lefingwell Appliance Store (both are located in the same city)each sell an identical washer-dryer pair.The owner of each store considered offering the washer-dryer pair for $700, but decided on a price of $500.If this is a Nash equilibrium we can conclude that

Airlines often engage in last-minute price cutting to fill remaining empty seats on a flight because this practice will generally

A four-firm concentration ratio measures

An oligopolistic industry is characterized by a few large firms acting independently.

By the 21st century few people purchased printed encyclopedias.Which of the following competitive forces best explains this?

Which of the following is most likely to exert the bargaining power of a buyer?

A consequence of the quota that has been imposed on the importation of sugar into the United States is

Does the strength of each of the five competitive forces from Michael Porter's model remain constant over time? Briefly explain.

Decision trees can only be used to analyze sequential games.

Assume that the four-firm concentration ratio in an industry is 85 percent.Which of the following statements uses one of the five competitive forces to argue that this industry may be more competitive than its concentration ratio suggests?

The value of the four-firm concentration ratio that many economists consider indicative of the existence of an oligopoly in a particular industry is

A dominant strategy is

Collusion

Patents, tariffs, and quotas are all examples of

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 More Realistic Setting

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Filters