Question 1

The concepts of mutual interdependence and game theory illustrate the fact that firms competing in oligopoly

Accepted Answer

A) consider the actions of the rivals before changing the price of their product. 
B) ignore the actions of their rivals when considering price changes. 
C) engage in frequent price changes. 
D) never change prices. 
E) will mutually determine the combined best outcome for all players. 
A) consider the actions of the rivals before changing the price of their product. 
B) ignore the actions of their rivals when considering price changes. 
C) engage in frequent price changes. 
D) never change prices. 
E) will mutually determine the combined best outcome for all players.

Question 2

Suppose a duopoly had reached the monopoly outcome and then the first firm increased its production.If the second firm next increases its production, the second firm's profit ________ and the first firm's profit ________.

Accepted Answer

A) increases; increases 
B) increases; decreases 
C) decreases; increases 
D) decreases; decreases 
E) increases; does not change 
A) increases; increases 
B) increases; decreases 
C) decreases; increases 
D) decreases; decreases 
E) increases; does not change

Question 3

If one firm in a duopoly increases its production by one unit beyond the monopoly output, that firm's profit ________, the other firm's profit ________, and the total profit of the duopoly ________.

Accepted Answer

A) increases; increases; increases 
B) does not change; does not change; does not change 
C) increases; decreases; does not change 
D) increases; does not change; increases 
E) increases; decreases; decreases 
A) increases; increases; increases 
B) does not change; does not change; does not change 
C) increases; decreases; does not change 
D) increases; does not change; increases 
E) increases; decreases; decreases

Question 4

"The duopolists' dilemma occurs when firms in a duopoly coordinate their decisions to achieve the best possible outcome." Is the previous statement correct or incorrect? Why?

Accepted Answer

The statement is incorrect.The

Question 5

The efficient scale of one firm is 20 units and the average total cost at the efficient scale is $30.The quantity demanded in the market as a whole at $30 is 40 units.This market is

Accepted Answer

A) a natural duopoly. 
B) a legal duopoly. 
C) a natural monopoly. 
D) a legal monopoly. 
E) monopolistically competitive. 
A) a natural duopoly. 
B) a legal duopoly. 
C) a natural monopoly. 
D) a legal monopoly. 
E) monopolistically competitive.

Question 6

If the Herfindahl-Hirschman Index in an industry is above 1,800, a merger that increases the Herfindahl-Hirschman Index by over 50 points will

Accepted Answer

A) be allowed by the government. 
B) be challenged by the government. 
C) be encouraged by the government. 
D) increase competition in that industry. 
E) never be allowed to happen. 
A) be allowed by the government. 
B) be challenged by the government. 
C) be encouraged by the government. 
D) increase competition in that industry. 
E) never be allowed to happen.

Question 7

-Suppose Intel and AMD can each charge either $300 or $200 for a CPU (the computing unit of a computer).The above table illustrates the payoffs, in millions of dollars, from each of the four possible outcomes that could occur in their duopoly setting.What must Intel's price be for AMD to earn $220 million in profit?

Accepted Answer

A) $200 
B) $400 
C) $220 
D) either $300 or $400 because AMD earns $220 million in profit either way 
E) None of the above answers is correct because the payoff matrix shows that it is not possible for AMD to earn $220 million in profit 
A) $200 
B) $400 
C) $220 
D) either $300 or $400 because AMD earns $220 million in profit either way 
E) None of the above answers is correct because the payoff matrix shows that it is not possible for AMD to earn $220 million in profit

Question 8

-The figure above shows the market demand curve and the ATC curve for a firm.If all firms in the market have the same ATC curve, the efficient scale for one firm is ________ units per hour.

Accepted Answer

A) 2,000 
B) 4,000 
C) 8,000 
D) 6,000 
E) 10,000 
A) 2,000 
B) 4,000 
C) 8,000 
D) 6,000 
E) 10,000

Question 9

What is game theory and what light does it shed on the duopolists' dilemma?

Accepted Answer

Game theory is a tool economists use to

Question 10

Why do oligopoly firms find it difficult to cooperate and not cheat on a cartel agreement?

Accepted Answer

Firms in an oligopoly have large market

Question 11

For a duopoly, the maximum total profit is reached when the duopoly produces

Accepted Answer

A) the same amount of output as the competitive outcome. 
B) the same amount of output as the monopoly outcome. 
C) an amount of output that lies between the competitive outcome and the monopoly outcome. 
D) more output than the competitive outcome. 
E) less output than the monopoly outcome. 
A) the same amount of output as the competitive outcome. 
B) the same amount of output as the monopoly outcome. 
C) an amount of output that lies between the competitive outcome and the monopoly outcome. 
D) more output than the competitive outcome. 
E) less output than the monopoly outcome.

Question 12

In a cartel, how does the number of firms affect the likelihood that the cartel will be able to successfully maintain a high price?

Accepted Answer

The more firms that are involved in the

Question 13

The figure above shows the market for airplanes.
-Suppose the airplane market is an oligopoly.According to the figure above, if the firms act as a monopolist, the quantity produced will be ________ planes per week and if the firms act as competitors the quantity produced will be ________ planes per week.

Accepted Answer

A) 6; 12 
B) 12; 6 
C) 0; 6 
D) 12; 0 
E) None of the above answers is correct. 
A) 6; 12 
B) 12; 6 
C) 0; 6 
D) 12; 0 
E) None of the above answers is correct.

Question 14

Explain what a cartel is and the difficulties faced in maintaining a cartel.

Accepted Answer

A cartel is a group of firms acting toge

Question 15

A group of firms acting together to limit output, raise price, and increase economic profit is a called a

Accepted Answer

A) duopoly. 
B) monopolistic oligopoly. 
C) competitive oligopoly. 
D) cartel. 
E) multi-firm competitive monopoly. 
A) duopoly. 
B) monopolistic oligopoly. 
C) competitive oligopoly. 
D) cartel. 
E) multi-firm competitive monopoly.

Question 16

Describe the Department of Justice's claims against Microsoft.

Accepted Answer

The Department of Justice claims that Mi

Question 17

A collusive agreement to form a cartel is difficult to maintain because

Accepted Answer

A) each member firm can increase its own profits by cutting its price and selling more. 
B) forming a cartel is legal but frowned upon throughout the world. 
C) supply will decrease because of the high cartel price. 
D) demanders will rebel once they realize a cartel has been formed. 
E) each firm can increase its profit if it decreases its production even more than the decrease set by the cartel. 
A) each member firm can increase its own profits by cutting its price and selling more. 
B) forming a cartel is legal but frowned upon throughout the world. 
C) supply will decrease because of the high cartel price. 
D) demanders will rebel once they realize a cartel has been formed. 
E) each firm can increase its profit if it decreases its production even more than the decrease set by the cartel.

Question 18

Even though four firms can profitably sell hotdogs downtown, the government licenses only two firms.This market is a

Accepted Answer

A) natural duopoly. 
B) legal duopoly. 
C) natural monopoly. 
D) legal monopoly. 
E) market-limited oligopoly. 
A) natural duopoly. 
B) legal duopoly. 
C) natural monopoly. 
D) legal monopoly. 
E) market-limited oligopoly.

Question 19

Which of the following are characteristics of an oligopoly?
i. The HHI for an oligopoly is between 100 and 1800.
ii. There are a few firms that compete.
iii. The firms can increase their profit by forming a cartel.

Accepted Answer

A) i and ii 
B) i and iii 
C) ii and iii 
D) i, ii, and iii 
E) i only. 
A) i and ii 
B) i and iii 
C) ii and iii 
D) i, ii, and iii 
E) i only.

Question 20

A cartel is a collusive agreement among a number of firms that is designed to

Accepted Answer

A) expand output and lower prices but not to a predatory level. 
B) restrict output and lower prices to a predatory level. 
C) restrict output and raise prices. 
D) expand output and raise prices. 
E) expand output and lower prices to a predatory level. 
A) expand output and lower prices but not to a predatory level. 
B) restrict output and lower prices to a predatory level. 
C) restrict output and raise prices. 
D) expand output and raise prices. 
E) expand output and lower prices to a predatory level.

The concepts of mutual interdependence and game theory illustrate the fact that firms competing in oligopoly

Suppose a duopoly had reached the monopoly outcome and then the first firm increased its production.If the second firm next increases its production, the second firm's profit and the first firm's profit .

If one firm in a duopoly increases its production by one unit beyond the monopoly output, that firm's profit , the other firm's profit , and the total profit of the duopoly .

"The duopolists' dilemma occurs when firms in a duopoly coordinate their decisions to achieve the best possible outcome." Is the previous statement correct or incorrect? Why?

The efficient scale of one firm is 20 units and the average total cost at the efficient scale is $30.The quantity demanded in the market as a whole at $30 is 40 units.This market is

If the Herfindahl-Hirschman Index in an industry is above 1,800, a merger that increases the Herfindahl-Hirschman Index by over 50 points will

-The figure above shows the market demand curve and the ATC curve for a firm.If all firms in the market have the same ATC curve, the efficient scale for one firm is ________ units per hour.

What is game theory and what light does it shed on the duopolists' dilemma?

Why do oligopoly firms find it difficult to cooperate and not cheat on a cartel agreement?

For a duopoly, the maximum total profit is reached when the duopoly produces

In a cartel, how does the number of firms affect the likelihood that the cartel will be able to successfully maintain a high price?

The figure above shows the market for airplanes. -Suppose the airplane market is an oligopoly.According to the figure above, if the firms act as a monopolist, the quantity produced will be planes per week and if the firms act as competitors the quantity produced will be planes per week.

Explain what a cartel is and the difficulties faced in maintaining a cartel.

A group of firms acting together to limit output, raise price, and increase economic profit is a called a

Describe the Department of Justice's claims against Microsoft.

A collusive agreement to form a cartel is difficult to maintain because

Even though four firms can profitably sell hotdogs downtown, the government licenses only two firms.This market is a

Which of the following are characteristics of an oligopoly? i. The HHI for an oligopoly is between 100 and 1800. ii. There are a few firms that compete. iii. The firms can increase their profit by forming a cartel.

A cartel is a collusive agreement among a number of firms that is designed to

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets With Private Information

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition

Markets for Factors of Production

Economic Inequality

Filters

Exam 18: Oligopoly

The concepts of mutual interdependence and game theory illustrate the fact that firms competing in oligopoly

Suppose a duopoly had reached the monopoly outcome and then the first firm increased its production.If the second firm next increases its production, the second firm's profit ________ and the first firm's profit ________.

If one firm in a duopoly increases its production by one unit beyond the monopoly output, that firm's profit ________, the other firm's profit ________, and the total profit of the duopoly ________.

"The duopolists' dilemma occurs when firms in a duopoly coordinate their decisions to achieve the best possible outcome." Is the previous statement correct or incorrect? Why?

The efficient scale of one firm is 20 units and the average total cost at the efficient scale is $30.The quantity demanded in the market as a whole at $30 is 40 units.This market is

If the Herfindahl-Hirschman Index in an industry is above 1,800, a merger that increases the Herfindahl-Hirschman Index by over 50 points will

-The figure above shows the market demand curve and the ATC curve for a firm.If all firms in the market have the same ATC curve, the efficient scale for one firm is ________ units per hour.

What is game theory and what light does it shed on the duopolists' dilemma?

Why do oligopoly firms find it difficult to cooperate and not cheat on a cartel agreement?

For a duopoly, the maximum total profit is reached when the duopoly produces

In a cartel, how does the number of firms affect the likelihood that the cartel will be able to successfully maintain a high price?

Explain what a cartel is and the difficulties faced in maintaining a cartel.

A group of firms acting together to limit output, raise price, and increase economic profit is a called a

Describe the Department of Justice's claims against Microsoft.

A collusive agreement to form a cartel is difficult to maintain because

Even though four firms can profitably sell hotdogs downtown, the government licenses only two firms.This market is a

Which of the following are characteristics of an oligopoly? i. The HHI for an oligopoly is between 100 and 1800. ii. There are a few firms that compete. iii. The firms can increase their profit by forming a cartel.

A cartel is a collusive agreement among a number of firms that is designed to

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets With Private Information

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition

Markets for Factors of Production

Economic Inequality

Filters

Suppose a duopoly had reached the monopoly outcome and then the first firm increased its production.If the second firm next increases its production, the second firm's profit and the first firm's profit .

If one firm in a duopoly increases its production by one unit beyond the monopoly output, that firm's profit , the other firm's profit , and the total profit of the duopoly .