Question 1

If a firm, Best Computer Buys, requires its customers to buy software from it whenever the customers purchase a computer, the company's policy is called

Accepted Answer

A) an exclusive deal. 
B) a territorial confinement. 
C) a tying arrangement. 
D) pricing discrimination. 
E) predatory pricing. 
A) an exclusive deal. 
B) a territorial confinement. 
C) a tying arrangement. 
D) pricing discrimination. 
E) predatory pricing.

Question 2

-Two competing firms in a duopoly must decide whether or not to offer consumers a coupon for their good.The payoff matrix above represents the daily profit available to the firms under the different coupon strategies.
a∙What strategies and payoffs are represented by quadrant A?
b∙What strategy will Firm 1 pursue if it believes that Firm 2 is offering a coupon?
c∙What quadrant represents the equilibrium that will result if the firms act independently (compete)?
d∙What quadrant represents the equilibrium that will result if the firms successfully collude?

Accepted Answer

a∙In quadrant A, Firm 1 offers a coupon

Question 3

-In an oligopoly in which the firms have entered into a cartel agreement, the Nash equilibrium exhibits which of the following?

Accepted Answer

A) firms jointly maximizing profits 
B) the firms cheating on the cartel agreement, which benefits society 
C) production at a price and output level close to monopolistic competition in the long run 
D) the firms cheating on the cartel agreement, which harms society 
E) one firm cheating on the cartel agreement and the other firms complying with the cartel agreement. 
A) firms jointly maximizing profits 
B) the firms cheating on the cartel agreement, which benefits society 
C) production at a price and output level close to monopolistic competition in the long run 
D) the firms cheating on the cartel agreement, which harms society 
E) one firm cheating on the cartel agreement and the other firms complying with the cartel agreement.

Question 4

-The only two firms in a market are trying to decide what price to charge.The payoff matrix for this duopoly game is shown above.The payoffs are thousands of dollars of economic profit.In the above game, in the Nash equilibrium,

Accepted Answer

A) Firm A and Firm B are both making $40,000 in economic profit. 
B) Firm A and Firm B are both making $55,000 in economic profit. 
C) Firm A is making $60,000 and Firm B is making $55,000 in economic profit. 
D) Firm A and Firm B are both making $60,000 in economic profit. 
E) Firm A and Firm B are both making $35,000 in economic profit. 
A) Firm A and Firm B are both making $40,000 in economic profit. 
B) Firm A and Firm B are both making $55,000 in economic profit. 
C) Firm A is making $60,000 and Firm B is making $55,000 in economic profit. 
D) Firm A and Firm B are both making $60,000 in economic profit. 
E) Firm A and Firm B are both making $35,000 in economic profit.

Question 5

When oligopolies operate like firms in perfect competition, the firms produce at the point where the

Accepted Answer

A) price is less than the marginal cost. 
B) marginal cost equals the price. 
C) price exceeds the marginal cost by the greatest amount. 
D) price equals the average total cost. 
E) marginal cost equals the average total cost. 
A) price is less than the marginal cost. 
B) marginal cost equals the price. 
C) price exceeds the marginal cost by the greatest amount. 
D) price equals the average total cost. 
E) marginal cost equals the average total cost.

Question 6

-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 lowest price at which a firm could stay in business in the long run is ________ per unit and the quantity demanded in the market at that price is ________ units per hour.

Accepted Answer

A) $20; 4,000 
B) $10; 8,000 
C) $10; 4,000 
D) $20; 2,000 
E) $20; 8,000 
A) $20; 4,000 
B) $10; 8,000 
C) $10; 4,000 
D) $20; 2,000 
E) $20; 8,000

Question 7

Game theory reveals that

Accepted Answer

A) the equilibrium might not be the best solution for the parties involved. 
B) firms in oligopoly are not interdependent. 
C) each player looks after what is best for the industry. 
D) if all firms in an oligopoly take the action that maximizes their profit, then the equilibrium will have the largest possible combined profit of all the firms. 
E) firms in an oligopoly choose their actions without regard for what the other firms might do. 
A) the equilibrium might not be the best solution for the parties involved. 
B) firms in oligopoly are not interdependent. 
C) each player looks after what is best for the industry. 
D) if all firms in an oligopoly take the action that maximizes their profit, then the equilibrium will have the largest possible combined profit of all the firms. 
E) firms in an oligopoly choose their actions without regard for what the other firms might do.

Question 8

-Two firms are introducing an improved version of their toothpastes.They must decide whether or not to advertise their products.The table above gives the payoff matrix in terms of the economic profits they expect in each case.The payoffs are in terms of millions of dollars.
a∙What is the Nash equilibrium for the game?
b∙If they could cooperate, what strategy would they prefer? What would be the payoff?

Accepted Answer

a∙The Nash equilibrium has each firm adv

Question 9

In the Boeing/Airbus oligopoly example discussed in the text, why did Boeing and Airbus have an incentive to produce more planes than the monopoly outcome?

Accepted Answer

Both Boeing and Airbus wanted to produce

Question 10

Under what conditions would it be legal for two bakeries in Minneapolis to explicitly agree to raise their prices by 5 percent?

Accepted Answer

A) if the price rise was not predatory 
B) if the price rise did not measurably increase producer surplus 
C) never 
D) if the price rise did not harm consumers in the long run by reducing competition 
E) if the price rise was necessary to keep one or both bakeries from closing. 
A) if the price rise was not predatory 
B) if the price rise did not measurably increase producer surplus 
C) never 
D) if the price rise did not harm consumers in the long run by reducing competition 
E) if the price rise was necessary to keep one or both bakeries from closing.

Question 11

The major dilemma facing Boeing and Airbus is the

Accepted Answer

A) fact that neither will respond to the behavior of the other. 
B) certainty surrounding the reaction of each firm to the behavior of the other firm. 
C) fact that if each firm separately tries to maximize its profit, it might wind up with less profit that otherwise. 
D) competition from other firms that drives their economic profit to zero. 
E) fact that when they collude to maximize their profit, the other firm's profit might be larger than its profit. 
A) fact that neither will respond to the behavior of the other. 
B) certainty surrounding the reaction of each firm to the behavior of the other firm. 
C) fact that if each firm separately tries to maximize its profit, it might wind up with less profit that otherwise. 
D) competition from other firms that drives their economic profit to zero. 
E) fact that when they collude to maximize their profit, the other firm's profit might be larger than its profit.

Question 12

What is meant by the term "exclusive dealing"? Give an example of an exclusive deal.When is it illegal?

Accepted Answer

Exclusive dealing is a contract that pre

Question 13

-The table above has the market demand schedule in an industry that has two firms in it.The marginal cost of this product is zero because these two firms have exclusive ownership of the resource and it does not cost any additional amount to produce additional units.
a∙If the firms cooperate with each other so that they operate as a monopoly, what price will they charge and what (total)output will they produce?
b∙If the firms cannot cooperate but instead behave as perfect competitors, what will be the price and the (total)output they produce?

Accepted Answer

a∙As a monopoly, the price will be $15 a

Question 14

A Nash equilibrium occurs

Accepted Answer

A) when each player acts without considering the actions of the other player. 
B) when each player takes the best possible action given the action of the other player. 
C) only when players use the tit-for-tat strategy. 
D) only when the game is played in Nashville, TN. 
E) when each player takes the action that makes the combined payoff for all players as large as possible. 
A) when each player acts without considering the actions of the other player. 
B) when each player takes the best possible action given the action of the other player. 
C) only when players use the tit-for-tat strategy. 
D) only when the game is played in Nashville, TN. 
E) when each player takes the action that makes the combined payoff for all players as large as possible.

Question 15

-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 figure shows a ________ can profitably operate.

Accepted Answer

A) natural monopoly in which 1 firm 
B) natural monopoly in which 2 firms 
C) natural oligopoly in which 3 firms 
D) natural oligopoly in which 2 firms 
E) natural oligopoly in which 8 firms 
A) natural monopoly in which 1 firm 
B) natural monopoly in which 2 firms 
C) natural oligopoly in which 3 firms 
D) natural oligopoly in which 2 firms 
E) natural oligopoly in which 8 firms

Question 16

Herb's Inc.has a large share of its market and is tempted to collude with the few firms that are in its market.Herb's operates in

Accepted Answer

A) an oligopoly. 
B) a monopolistically competitive market. 
C) a monopoly market. 
D) a perfectly competitive market. 
E) collusively protected market. 
A) an oligopoly. 
B) a monopolistically competitive market. 
C) a monopoly market. 
D) a perfectly competitive market. 
E) collusively protected market.

Question 17

Boeing and Airbus have entered into a cartel agreement that will enable them to boost their profits.What occurs if Boeing decides to cheat on the agreement?
I∙Boeing lowers the price of its airplanes.
Ii∙The total industry output increases.
Iii∙The total profits in the airplane industry will decrease.

Accepted Answer

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

Question 18

According to Section 2 of the Sherman Act, which of the following is a felony?

Accepted Answer

A) mergers of a vertical nature 
B) horizontal mergers 
C) attempts to monopolize an industry 
D) price increases among competing firms that occur simultaneously 
E) using the HHI to justify a merger 
A) mergers of a vertical nature 
B) horizontal mergers 
C) attempts to monopolize an industry 
D) price increases among competing firms that occur simultaneously 
E) using the HHI to justify a merger

Question 19

What are the merger rules used by the Federal Trade Commission to help decide whether firms are allowed to merge?

Accepted Answer

The Federal Trade Commission uses guidel

Question 20

-Long-run economic profits are most likely to be earned in

Accepted Answer

A) perfect competition and oligopoly. 
B) perfect competition and monopoly. 
C) monopoly and oligopoly. 
D) oligopoly and monopolistic competition. 
E) perfect competition and monopolistic competition. 
A) perfect competition and oligopoly. 
B) perfect competition and monopoly. 
C) monopoly and oligopoly. 
D) oligopoly and monopolistic competition. 
E) perfect competition and monopolistic competition.

If a firm, Best Computer Buys, requires its customers to buy software from it whenever the customers purchase a computer, the company's policy is called

-In an oligopoly in which the firms have entered into a cartel agreement, the Nash equilibrium exhibits which of the following?

-The only two firms in a market are trying to decide what price to charge.The payoff matrix for this duopoly game is shown above.The payoffs are thousands of dollars of economic profit.In the above game, in the Nash equilibrium,

When oligopolies operate like firms in perfect competition, the firms produce at the point where the

-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 lowest price at which a firm could stay in business in the long run is per unit and the quantity demanded in the market at that price is units per hour.

Game theory reveals that

In the Boeing/Airbus oligopoly example discussed in the text, why did Boeing and Airbus have an incentive to produce more planes than the monopoly outcome?

Under what conditions would it be legal for two bakeries in Minneapolis to explicitly agree to raise their prices by 5 percent?

The major dilemma facing Boeing and Airbus is the

What is meant by the term "exclusive dealing"? Give an example of an exclusive deal.When is it illegal?

A Nash equilibrium occurs

-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 figure shows a ________ can profitably operate.

Herb's Inc.has a large share of its market and is tempted to collude with the few firms that are in its market.Herb's operates in

According to Section 2 of the Sherman Act, which of the following is a felony?

What are the merger rules used by the Federal Trade Commission to help decide whether firms are allowed to merge?

-Long-run economic profits are most likely to be earned in

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

If a firm, Best Computer Buys, requires its customers to buy software from it whenever the customers purchase a computer, the company's policy is called

-In an oligopoly in which the firms have entered into a cartel agreement, the Nash equilibrium exhibits which of the following?

-The only two firms in a market are trying to decide what price to charge.The payoff matrix for this duopoly game is shown above.The payoffs are thousands of dollars of economic profit.In the above game, in the Nash equilibrium,

When oligopolies operate like firms in perfect competition, the firms produce at the point where the

Game theory reveals that

In the Boeing/Airbus oligopoly example discussed in the text, why did Boeing and Airbus have an incentive to produce more planes than the monopoly outcome?

Under what conditions would it be legal for two bakeries in Minneapolis to explicitly agree to raise their prices by 5 percent?

The major dilemma facing Boeing and Airbus is the

What is meant by the term "exclusive dealing"? Give an example of an exclusive deal.When is it illegal?

A Nash equilibrium occurs

-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 figure shows a ________ can profitably operate.

Herb's Inc.has a large share of its market and is tempted to collude with the few firms that are in its market.Herb's operates in

According to Section 2 of the Sherman Act, which of the following is a felony?

What are the merger rules used by the Federal Trade Commission to help decide whether firms are allowed to merge?

-Long-run economic profits are most likely to be earned in

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