Question 1

-Refer to Figure 12.8.If both firms follow their dominant strategies,Firm B will earn profits equal to

Accepted Answer

A)  $700. 
B)  $500. 
C)  $200. 
D)  $100. 
A)  $700. 
B)  $500. 
C)  $200. 
D)  $100.

Question 2

Oligopoly is a market

Accepted Answer

A)  with one firm and many different products. 
B)  with many firms and a homogeneous product. 
C)  with a few firms and the actions of one firm have a large impact on the others. 
D)  with a few firms and the actions of one firm have a small impact on the others. 
A)  with one firm and many different products. 
B)  with many firms and a homogeneous product. 
C)  with a few firms and the actions of one firm have a large impact on the others. 
D)  with a few firms and the actions of one firm have a small impact on the others.

Question 3

Table 12.1
-Refer to Table 12.1.If Firms L and M were to merge,the four-firm concentration ratio would

Accepted Answer

A)  rise to 71%. 
B)  fall to 82%. 
C)  fall to 40%. 
D)  rise to 82%. 
A)  rise to 71%. 
B)  fall to 82%. 
C)  fall to 40%. 
D)  rise to 82%.

Question 4

-Figure 12.2 shows the decision tree for setting price for the only two firms in a market.One way for both firms to charge a high price is for both firms to

Accepted Answer

A)  play their dominant strategies. 
B)  collude. 
C)  expand output. 
D)  any of the above 
A)  play their dominant strategies. 
B)  collude. 
C)  expand output. 
D)  any of the above

Question 5

Firms in an oligopoly can increase profit by

Accepted Answer

A)  jointly acting to reduce output and increase prices. 
B)  independently acting to increase price. 
C)  acting alone and refusing to join the group. 
D)  none of the above 
A)  jointly acting to reduce output and increase prices. 
B)  independently acting to increase price. 
C)  acting alone and refusing to join the group. 
D)  none of the above

Question 6

Many cartels exist in the United States because cartels and price-fixing are legal under U.S.law.

Accepted Answer

A) True 
 B)False

Question 7

Under a price leadership agreement

Accepted Answer

A)  one firm is implicitly designated the leader, and the others match the leader's price. 
B)  firms form a cartel and charge the monopoly price. 
C)  firms follow a tit-for-tat strategy. 
D)  one firm is voted in as the leader, and the others match the leader's price. 
A)  one firm is implicitly designated the leader, and the others match the leader's price. 
B)  firms form a cartel and charge the monopoly price. 
C)  firms follow a tit-for-tat strategy. 
D)  one firm is voted in as the leader, and the others match the leader's price.

Question 8

-Refer to Figure 12.10.The data in the boxes are the annual profits for each company whether they choose to advertise or not.If Big Box follows its dominant strategy it will earn

Accepted Answer

A)  $4 million. 
B)  $5 million. 
C)  $6 million. 
D)  $10 million. 
A)  $4 million. 
B)  $5 million. 
C)  $6 million. 
D)  $10 million.

Question 9

Table 12.2
-Refer to Table 12.2.Jeri and Tom are arrested for having committed a crime.They are being interrogated individually and need to decide if they should confess or not confess.The police have enough information to put them in jail for 5 years.They also know the pair have committed a more egregious crime but without the help of one of the suspects they will not be able to convict them on this charge.The first number in each cell refers to the number of years of prison time Jeri will receive if she takes that action and the second number in each cell refers to the number of years of prison time Tom will receive if he takes that action.If Jeri and Tom can decide jointly then the best strategy is for Jeri to ________ and Tom to ________.

Accepted Answer

A)  confess; confess 
B)  not confess; not confess 
C)  not confess; confess 
D)  confess; not confess 
A)  confess; confess 
B)  not confess; not confess 
C)  not confess; confess 
D)  confess; not confess

Question 10

The small number of firms 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

-Consider the decision tree depicted in Figure 12.4 concerning a collusive agreement between firms owned by Bob and Donna.Each participant has the option of following the terms of the agreement or cheating on the terms of the agreement,but neither knows what the other will do.What is the dominant strategy for Bob? For Donna? Which strategy should each player choose to maximize potential gain? What do you think the outcome of this game will be? Carefully explain your answers.

Accepted Answer

The dominant strategy for Bob is to chea

Question 12

Because of the advertisers' dilemma,an industry as a whole would,if legal,have an incentive to ________ advertising to ________ competition among sellers.

Accepted Answer

A)  restrict; increase 
B)  encourage; increase 
C)  restrict; reduce 
D)  encourage; reduce 
A)  restrict; increase 
B)  encourage; increase 
C)  restrict; reduce 
D)  encourage; reduce

Question 13

Low-price guarantees are a way to insure that other firms will choose a high price.

Accepted Answer

A) True 
 B)False

Question 14

Recall the Application about how Microsoft responds to the threat of potential competitors to answer the following question(s).
-Recall the Application.Which of the following best represents the way Microsoft keeps other firms from entering the market?

Accepted Answer

A)  Microsoft buys out small firms that have the potential to make a similar product. 
B)  Microsoft uses limit pricing to deter entry. 
C)  Microsoft has a patent that prohibits any firm from producing a similar product. 
D)  Microsoft is a pure monopoly where it is impossible for other firms to enter the market. 
A)  Microsoft buys out small firms that have the potential to make a similar product. 
B)  Microsoft uses limit pricing to deter entry. 
C)  Microsoft has a patent that prohibits any firm from producing a similar product. 
D)  Microsoft is a pure monopoly where it is impossible for other firms to enter the market.

Question 15

A single firm selling its output in a contestable market can raise its prices and

Accepted Answer

A)  insure higher profits. 
B)  guarantee monopoly profits. 
C)  give other firms the incentive to enter that market. 
D)  keep other firms out of the industry with its market power. 
A)  insure higher profits. 
B)  guarantee monopoly profits. 
C)  give other firms the incentive to enter that market. 
D)  keep other firms out of the industry with its market power.

Question 16

A payoff matrix shows each possible outcome of a game and the consequences for each player.

Accepted Answer

A) True 
 B)False

Question 17

The house slipper industry is an example of an oligopolistic industry.

Accepted Answer

A) True 
 B)False

Question 18

Assuming that firms do not collude,compare the market outcome under oligopoly with the outcome under monopoly.

Accepted Answer

An oligopoly market will produce an outp

Question 19

What is one way that firms can overcome the duopolists' dilemma and promote cartel pricing?

Accepted Answer

A)  One firm can guarantee it will match a lower price of a competitor. 
B)  Firms can come to an agreement to be at Nash equilibrium. 
C)  Firms create a cartel to control prices. 
D)  none of the above 
A)  One firm can guarantee it will match a lower price of a competitor. 
B)  Firms can come to an agreement to be at Nash equilibrium. 
C)  Firms create a cartel to control prices. 
D)  none of the above

Question 20

In a duopoly,low-price guarantees

Accepted Answer

A)  lead to higher prices. 
B)  lead to lower prices. 
C)  make cartel pricing possible. 
D)  Both A and C are correct. 
A)  lead to higher prices. 
B)  lead to lower prices. 
C)  make cartel pricing possible. 
D)  Both A and C are correct.

-Refer to Figure 12.8.If both firms follow their dominant strategies,Firm B will earn profits equal to

Oligopoly is a market

Table 12.1 -Refer to Table 12.1.If Firms L and M were to merge,the four-firm concentration ratio would

-Figure 12.2 shows the decision tree for setting price for the only two firms in a market.One way for both firms to charge a high price is for both firms to

Firms in an oligopoly can increase profit by

Many cartels exist in the United States because cartels and price-fixing are legal under U.S.law.

Under a price leadership agreement

-Refer to Figure 12.10.The data in the boxes are the annual profits for each company whether they choose to advertise or not.If Big Box follows its dominant strategy it will earn

The small number of firms is what differentiates oligopoly markets from the other three market structure types (perfect competition,monopoly,and monopolistic competition).

Because of the advertisers' dilemma,an industry as a whole would,if legal,have an incentive to advertising to competition among sellers.

Low-price guarantees are a way to insure that other firms will choose a high price.

Recall the Application about how Microsoft responds to the threat of potential competitors to answer the following question(s). -Recall the Application.Which of the following best represents the way Microsoft keeps other firms from entering the market?

A single firm selling its output in a contestable market can raise its prices and

A payoff matrix shows each possible outcome of a game and the consequences for each player.

The house slipper industry is an example of an oligopolistic industry.

Assuming that firms do not collude,compare the market outcome under oligopoly with the outcome under monopoly.

What is one way that firms can overcome the duopolists' dilemma and promote cartel pricing?

In a duopoly,low-price guarantees

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

-Refer to Figure 12.8.If both firms follow their dominant strategies,Firm B will earn profits equal to

Oligopoly is a market

Table 12.1 -Refer to Table 12.1.If Firms L and M were to merge,the four-firm concentration ratio would

-Figure 12.2 shows the decision tree for setting price for the only two firms in a market.One way for both firms to charge a high price is for both firms to

Firms in an oligopoly can increase profit by

Many cartels exist in the United States because cartels and price-fixing are legal under U.S.law.

Under a price leadership agreement

-Refer to Figure 12.10.The data in the boxes are the annual profits for each company whether they choose to advertise or not.If Big Box follows its dominant strategy it will earn

The small number of firms is what differentiates oligopoly markets from the other three market structure types (perfect competition,monopoly,and monopolistic competition).

Because of the advertisers' dilemma,an industry as a whole would,if legal,have an incentive to ________ advertising to ________ competition among sellers.

Low-price guarantees are a way to insure that other firms will choose a high price.

Recall the Application about how Microsoft responds to the threat of potential competitors to answer the following question(s). -Recall the Application.Which of the following best represents the way Microsoft keeps other firms from entering the market?

A single firm selling its output in a contestable market can raise its prices and

A payoff matrix shows each possible outcome of a game and the consequences for each player.

The house slipper industry is an example of an oligopolistic industry.

Assuming that firms do not collude,compare the market outcome under oligopoly with the outcome under monopoly.

What is one way that firms can overcome the duopolists' dilemma and promote cartel pricing?

In a duopoly,low-price guarantees

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

Because of the advertisers' dilemma,an industry as a whole would,if legal,have an incentive to advertising to competition among sellers.