Question 1

Consider a college that has only ever had one on-campus bookstore.Over the last two years you have observed that book prices are 20% lower.You conclude that

Accepted Answer

A)  the cost of producing books must have fallen. 
B)  the college ordered the bookstore to lower prices. 
C)  competition from online stores has encouraged the bookstore to behave as an insecure monopolist. 
D)  fewer students are opting to buy books and supply has decreased. 
A)  the cost of producing books must have fallen. 
B)  the college ordered the bookstore to lower prices. 
C)  competition from online stores has encouraged the bookstore to behave as an insecure monopolist. 
D)  fewer students are opting to buy books and supply has decreased.

Question 2

Low-price guarantees worsen the duopolists' dilemma.

Accepted Answer

A) True 
 B)False

Question 3

Oligopoly is a market structure where many firms are competing by selling an identical product.

Accepted Answer

A) True 
 B)False

Question 4

Assume that firms in an oligopoly are currently colluding to set price and output to maximize total industry profit.If the oligopolies are forced to stop colluding,the price charged by the oligopolies would ________ and the total output produced will ________.

Accepted Answer

A)  increase; increase 
B)  increase; decrease 
C)  decrease; increase 
D)  decrease; decrease 
A)  increase; increase 
B)  increase; decrease 
C)  decrease; increase 
D)  decrease; decrease

Question 5

Under tit-for-tat retaliation,a firm will mimic the other firm's choice from the preceding period.

Accepted Answer

A) True 
 B)False

Question 6

-Figure 12.2 shows the decision tree for setting price for the only two firms in a market.How many dominant strategies are there for firm A?

Accepted Answer

A)  0 
B)  1 
C)  2 
D)  It cannot be determined without knowing what firm B does. 
A)  0 
B)  1 
C)  2 
D)  It cannot be determined without knowing what firm B does.

Question 7

In an oligopolistic market,the government may limit the number of firms in a market by issuing patents.

Accepted Answer

A) True 
 B)False

Question 8

Deterring entry into an industry will be more profitable than sharing the market with another firm.

Accepted Answer

A) True 
 B)False

Question 9

What is the advertisers' dilemma?

Accepted Answer

The advertisers' dilemma occurs in marke

Question 10

The type of product sold is what differentiates oligopoly markets from the other three market structure types (perfect competition,monopoly,and monopolistic competition).

Accepted Answer

A) True 
 B)False

Question 11

Low-price guarantees mean lower prices for consumers.

Accepted Answer

A) True 
 B)False

Question 12

According to one rule of thumb,a four-firm concentration ratio of greater than 40 percent for the industry is considered to be an oligopoly.

Accepted Answer

A) True 
 B)False

Question 13

12.3 Simultaneous Decision Making and the Payoff Matrix
  
-Refer to Figure 12.7.The numerical data show daily profits for each of the two firms when they choose a specific pricing strategy.If both firms follow their individual dominant strategy,

Accepted Answer

A)  Omega will earn $300 daily profit and Zeta will earn $100 daily profit. 
B)  Omega will earn $100 daily profit and Zeta will earn $300 daily profit. 
C)  Both firms will earn $200 daily profit. 
D)  Both firms will earn $150 daily profit. 
A)  Omega will earn $300 daily profit and Zeta will earn $100 daily profit. 
B)  Omega will earn $100 daily profit and Zeta will earn $300 daily profit. 
C)  Both firms will earn $200 daily profit. 
D)  Both firms will earn $150 daily profit.

Question 14

In the United States,the price leadership system is

Accepted Answer

A)  illegal. 
B)  unprofitable. 
C)  seldom used. 
D)  legal. 
A)  illegal. 
B)  unprofitable. 
C)  seldom used. 
D)  legal.

Question 15

Explain what a "perfectly contestable" market is.Explain why the outcome in a perfectly contestable market is that firms produce efficiently.

Accepted Answer

A perfectly contestable market

Question 16

In an oligopoly,the behavior of any one firm depends on the reaction it expects of all other firms in the industry.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is the best example of an oligopolistic industry?

Accepted Answer

A)  cleaning services 
B)  airline services 
C)  local water utility 
D)  designer shoes 
A)  cleaning services 
B)  airline services 
C)  local water utility 
D)  designer shoes

Question 18

A duopolists' dilemma occurs when two firms in a market would be better off if

Accepted Answer

A)  both choose the high price but instead each chooses the low price. 
B)  both firms act jointly as a cartel and chooses the best price. 
C)  one firm refuses to participate in the cartel. 
D)  both firms adopt price matching. 
A)  both choose the high price but instead each chooses the low price. 
B)  both firms act jointly as a cartel and chooses the best price. 
C)  one firm refuses to participate in the cartel. 
D)  both firms adopt price matching.

Question 19

-Refer to Figure 12.1.Six firms that produce chewing gum have formed a cartel.The cartel faces the market demand curve given by D.To maximize profits,the cartel should produce ________ packs of chewing gum and the price should be ________.

Accepted Answer

A)  12,000; $.25 
B)  12,000; $.40 
C)  14,000; $.30 
D)  16,000; $.35 
A)  12,000; $.25 
B)  12,000; $.40 
C)  14,000; $.30 
D)  16,000; $.35

Question 20

What does it mean when a firm has a dominant strategy?

Accepted Answer

A dominant strategy exists whe

Consider a college that has only ever had one on-campus bookstore.Over the last two years you have observed that book prices are 20% lower.You conclude that

Low-price guarantees worsen the duopolists' dilemma.

Oligopoly is a market structure where many firms are competing by selling an identical product.

Assume that firms in an oligopoly are currently colluding to set price and output to maximize total industry profit.If the oligopolies are forced to stop colluding,the price charged by the oligopolies would and the total output produced will .

Under tit-for-tat retaliation,a firm will mimic the other firm's choice from the preceding period.

-Figure 12.2 shows the decision tree for setting price for the only two firms in a market.How many dominant strategies are there for firm A?

In an oligopolistic market,the government may limit the number of firms in a market by issuing patents.

Deterring entry into an industry will be more profitable than sharing the market with another firm.

What is the advertisers' dilemma?

The type of product sold is what differentiates oligopoly markets from the other three market structure types (perfect competition,monopoly,and monopolistic competition).

Low-price guarantees mean lower prices for consumers.

According to one rule of thumb,a four-firm concentration ratio of greater than 40 percent for the industry is considered to be an oligopoly.

12.3 Simultaneous Decision Making and the Payoff Matrix -Refer to Figure 12.7.The numerical data show daily profits for each of the two firms when they choose a specific pricing strategy.If both firms follow their individual dominant strategy,

In the United States,the price leadership system is

Explain what a "perfectly contestable" market is.Explain why the outcome in a perfectly contestable market is that firms produce efficiently.

In an oligopoly,the behavior of any one firm depends on the reaction it expects of all other firms in the industry.

Which of the following is the best example of an oligopolistic industry?

A duopolists' dilemma occurs when two firms in a market would be better off if

-Refer to Figure 12.1.Six firms that produce chewing gum have formed a cartel.The cartel faces the market demand curve given by D.To maximize profits,the cartel should produce packs of chewing gum and the price should be .

What does it mean when a firm has a dominant strategy?

Introduction: What Is Economics

The Key Principles of Economics

Exchange and Markets

Demand,supply,and Market Equilibrium

Elasticity: a Measure of Responsiveness

Market Efficiency and Government Intervention

Consumer Choice: Utility Theory and Insights From Neuroscience

Production Technology and Cost

Perfect Competition

Monopoly and Price Discrimination

Market Entry and Monopolistic Competition

Controlling Market Power: Antitrust and Regulation

Imperfect Information: Adverse Selection and Moral Hazard

Public Goods and Public Choice

External Costs and Environmental Policy

The Labor Market and the Distribution of Income

International Trade and Public Policy

Filters

Exam 12: Oligopoly and Strategic Behavior

Consider a college that has only ever had one on-campus bookstore.Over the last two years you have observed that book prices are 20% lower.You conclude that

Low-price guarantees worsen the duopolists' dilemma.

Oligopoly is a market structure where many firms are competing by selling an identical product.

Assume that firms in an oligopoly are currently colluding to set price and output to maximize total industry profit.If the oligopolies are forced to stop colluding,the price charged by the oligopolies would ________ and the total output produced will ________.

Under tit-for-tat retaliation,a firm will mimic the other firm's choice from the preceding period.

-Figure 12.2 shows the decision tree for setting price for the only two firms in a market.How many dominant strategies are there for firm A?

In an oligopolistic market,the government may limit the number of firms in a market by issuing patents.

Deterring entry into an industry will be more profitable than sharing the market with another firm.

What is the advertisers' dilemma?

The type of product sold is what differentiates oligopoly markets from the other three market structure types (perfect competition,monopoly,and monopolistic competition).

Low-price guarantees mean lower prices for consumers.

According to one rule of thumb,a four-firm concentration ratio of greater than 40 percent for the industry is considered to be an oligopoly.

12.3 Simultaneous Decision Making and the Payoff Matrix -Refer to Figure 12.7.The numerical data show daily profits for each of the two firms when they choose a specific pricing strategy.If both firms follow their individual dominant strategy,

In the United States,the price leadership system is

Explain what a "perfectly contestable" market is.Explain why the outcome in a perfectly contestable market is that firms produce efficiently.

In an oligopoly,the behavior of any one firm depends on the reaction it expects of all other firms in the industry.

Which of the following is the best example of an oligopolistic industry?

A duopolists' dilemma occurs when two firms in a market would be better off if

-Refer to Figure 12.1.Six firms that produce chewing gum have formed a cartel.The cartel faces the market demand curve given by D.To maximize profits,the cartel should produce ________ packs of chewing gum and the price should be ________.

What does it mean when a firm has a dominant strategy?

Introduction: What Is Economics

The Key Principles of Economics

Exchange and Markets

Demand,supply,and Market Equilibrium

Elasticity: a Measure of Responsiveness

Market Efficiency and Government Intervention

Consumer Choice: Utility Theory and Insights From Neuroscience

Production Technology and Cost

Perfect Competition

Monopoly and Price Discrimination

Market Entry and Monopolistic Competition

Controlling Market Power: Antitrust and Regulation

Imperfect Information: Adverse Selection and Moral Hazard

Public Goods and Public Choice

External Costs and Environmental Policy

The Labor Market and the Distribution of Income

International Trade and Public Policy

Filters

Assume that firms in an oligopoly are currently colluding to set price and output to maximize total industry profit.If the oligopolies are forced to stop colluding,the price charged by the oligopolies would and the total output produced will .

-Refer to Figure 12.1.Six firms that produce chewing gum have formed a cartel.The cartel faces the market demand curve given by D.To maximize profits,the cartel should produce packs of chewing gum and the price should be .