Question 1

In perfectly contestable markets,large oligopolistic firms end up pricing like

Accepted Answer

A)  monopolistically competitive firms. 
B)  a monopoly. 
C)  competitive firms. 
D)  a cartel. 
A)  monopolistically competitive firms. 
B)  a monopoly. 
C)  competitive firms. 
D)  a cartel.

Question 2

-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 Lil Box decides not to advertise,

Accepted Answer

A)  Big Box should not advertise. 
B)  Big Box should advertise. 
C)  Lil Box will make $6 million. 
D)  Lil Box will make $10 million. 
A)  Big Box should not advertise. 
B)  Big Box should advertise. 
C)  Lil Box will make $6 million. 
D)  Lil Box will make $10 million.

Question 3

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 confesses or does not confess and the second number in each cell refers to the number of years of prison time Tom will receive if he confesses or does not confess.The dominant strategy for Jeri is to ________ and the dominant strategy for Tom is to ________.

Accepted Answer

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

Question 4

Limit pricing is the strategy of raising the price to deter entry.

Accepted Answer

A) True 
 B)False

Question 5

When a company increases output and accepts a lower price to keep new companies from entering the market,it is engaging in

Accepted Answer

A)  cartel team up. 
B)  limit pricing. 
C)  collusion. 
D)  price ceiling. 
A)  cartel team up. 
B)  limit pricing. 
C)  collusion. 
D)  price ceiling.

Question 6

If firms in an oligopoly form a cartel,the outcome is the same as it would be under monopolistic competition.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following firms will find it most useful to engage in advertising?

Accepted Answer

A)  perfectly competitive firms 
B)  monopolistically competitive firms 
C)  monopolies 
D)  members of a cartel 
A)  perfectly competitive firms 
B)  monopolistically competitive firms 
C)  monopolies 
D)  members of a cartel

Question 8

Consider four types of markets: monopoly,perfect competition,oligopoly,and monopolistic competition.If they were ranked from the lowest number of firms to the largest number of firms,the ranking would be:

Accepted Answer

A)  monopoly, oligopoly, monopolistic competition, perfect competition. 
B)  oligopoly, monopoly, monopolistic competition, perfect competition. 
C)  monopoly, monopolistic competition, oligopoly, perfect competition. 
D)  perfect competition, oligopoly, monopoly, monopolistic competition. 
A)  monopoly, oligopoly, monopolistic competition, perfect competition. 
B)  oligopoly, monopoly, monopolistic competition, perfect competition. 
C)  monopoly, monopolistic competition, oligopoly, perfect competition. 
D)  perfect competition, oligopoly, monopoly, monopolistic competition.

Question 9

The beer industry is an example of a oligopolistic industry.

Accepted Answer

A) True 
 B)False

Question 10

In a two-person repeated game,a grim-trigger strategy results in

Accepted Answer

A)  each firm following its own self-interest choice. 
B)  each firm earning economic profits. 
C)  one firm choosing a price so low that no firm earns an economic profit. 
D)  one firm earning economic profits while the other does not. 
A)  each firm following its own self-interest choice. 
B)  each firm earning economic profits. 
C)  one firm choosing a price so low that no firm earns an economic profit. 
D)  one firm earning economic profits while the other does not.

Question 11

-Refer to Figure 12.1.Assume the firms have formed a cartel.If the cartel is maximizing profits,the cartel's profits are

Accepted Answer

A)  $0. 
B)  $1,080. 
C)  $1,800. 
D)  indeterminate from this information. 
A)  $0. 
B)  $1,080. 
C)  $1,800. 
D)  indeterminate from this information.

Question 12

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.In the Nash equilibrium

Accepted Answer

A)  both firms would charge a high price. 
B)  both firms would charge a low price. 
C)  only Zeta would charge a low price. 
D)  only Omega would charge a low price. 
A)  both firms would charge a high price. 
B)  both firms would charge a low price. 
C)  only Zeta would charge a low price. 
D)  only Omega would charge a low price.

Question 13

-Figure 12.2 shows the decision tree for setting price for the only two firms in a market.If both firms follow their dominant strategies

Accepted Answer

A)  both firms will set price high. 
B)  both firms will set price low. 
C)  only one firm will set price low. 
D)  The firms' dominant strategies cannot be determined without more information. 
A)  both firms will set price high. 
B)  both firms will set price low. 
C)  only one firm will set price low. 
D)  The firms' dominant strategies cannot be determined without more information.

Question 14

If a firm uses a grim trigger retaliation strategy,all firms could end up with zero economic profit.

Accepted Answer

A) True 
 B)False

Question 15

Recall the Application about the attempt to form a salt cartel in the 19th century to answer the following question(s).
-Recall the Application.Why did the salt cartel fail to get established,even though it paid new firms not to produce salt for a year?

Accepted Answer

A)  Individual firms cheated on the cartel by selling outside the cartel. 
B)  The artificially high price also caused new firms to enter the market. 
C)  Salt consumers found substitutes and brought the price of salt down. 
D)  Both A and B are correct. 
A)  Individual firms cheated on the cartel by selling outside the cartel. 
B)  The artificially high price also caused new firms to enter the market. 
C)  Salt consumers found substitutes and brought the price of salt down. 
D)  Both A and B are correct.

Question 16

The market structure in which the behavior of any given firm depends on the behavior of the other firms in the industry is

Accepted Answer

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

Question 17

The cigarette industry is NOT an example of an oligopolistic industry.

Accepted Answer

A) True 
 B)False

Question 18

Suppose that Sun Beach only has three movie theaters.One movie theater decreases its movie ticket price and later that same day,the other two do the same.Which of the following is true?

Accepted Answer

A)  This is illegal because the movie theaters are colluding. 
B)  This is an example of explicit price fixing. 
C)  The first movie theater to lower price is probably the implicit price leader. 
D)  All of the above are true. 
A)  This is illegal because the movie theaters are colluding. 
B)  This is an example of explicit price fixing. 
C)  The first movie theater to lower price is probably the implicit price leader. 
D)  All of the above are true.

Question 19

The low-price guarantee results in an outcome equivalent to perfect competition.

Accepted Answer

A) True 
 B)False

Question 20

-Figure 12.2 shows the decision tree for setting price for the only two firms in a market.The dominant strategy for firm A

Accepted Answer

A)  is to set price low. 
B)  is to set price high. 
C)  depends on what B does. 
D)  is to do the opposite of whatever B does. 
A)  is to set price low. 
B)  is to set price high. 
C)  depends on what B does. 
D)  is to do the opposite of whatever B does.

In perfectly contestable markets,large oligopolistic firms end up pricing like

-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 Lil Box decides not to advertise,

Limit pricing is the strategy of raising the price to deter entry.

When a company increases output and accepts a lower price to keep new companies from entering the market,it is engaging in

If firms in an oligopoly form a cartel,the outcome is the same as it would be under monopolistic competition.

Which of the following firms will find it most useful to engage in advertising?

Consider four types of markets: monopoly,perfect competition,oligopoly,and monopolistic competition.If they were ranked from the lowest number of firms to the largest number of firms,the ranking would be:

The beer industry is an example of a oligopolistic industry.

In a two-person repeated game,a grim-trigger strategy results in

-Refer to Figure 12.1.Assume the firms have formed a cartel.If the cartel is maximizing profits,the cartel's profits are

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.In the Nash equilibrium

-Figure 12.2 shows the decision tree for setting price for the only two firms in a market.If both firms follow their dominant strategies

If a firm uses a grim trigger retaliation strategy,all firms could end up with zero economic profit.

Recall the Application about the attempt to form a salt cartel in the 19th century to answer the following question(s). -Recall the Application.Why did the salt cartel fail to get established,even though it paid new firms not to produce salt for a year?

The market structure in which the behavior of any given firm depends on the behavior of the other firms in the industry is

The cigarette industry is NOT an example of an oligopolistic industry.

Suppose that Sun Beach only has three movie theaters.One movie theater decreases its movie ticket price and later that same day,the other two do the same.Which of the following is true?

The low-price guarantee results in an outcome equivalent to perfect competition.

-Figure 12.2 shows the decision tree for setting price for the only two firms in a market.The dominant strategy for firm A

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

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Exam 12: Oligopoly and Strategic Behavior

In perfectly contestable markets,large oligopolistic firms end up pricing like

-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 Lil Box decides not to advertise,

Limit pricing is the strategy of raising the price to deter entry.

When a company increases output and accepts a lower price to keep new companies from entering the market,it is engaging in

If firms in an oligopoly form a cartel,the outcome is the same as it would be under monopolistic competition.

Which of the following firms will find it most useful to engage in advertising?

Consider four types of markets: monopoly,perfect competition,oligopoly,and monopolistic competition.If they were ranked from the lowest number of firms to the largest number of firms,the ranking would be:

The beer industry is an example of a oligopolistic industry.

In a two-person repeated game,a grim-trigger strategy results in

-Refer to Figure 12.1.Assume the firms have formed a cartel.If the cartel is maximizing profits,the cartel's profits are

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.In the Nash equilibrium

-Figure 12.2 shows the decision tree for setting price for the only two firms in a market.If both firms follow their dominant strategies

If a firm uses a grim trigger retaliation strategy,all firms could end up with zero economic profit.

Recall the Application about the attempt to form a salt cartel in the 19th century to answer the following question(s). -Recall the Application.Why did the salt cartel fail to get established,even though it paid new firms not to produce salt for a year?

The market structure in which the behavior of any given firm depends on the behavior of the other firms in the industry is

The cigarette industry is NOT an example of an oligopolistic industry.

Suppose that Sun Beach only has three movie theaters.One movie theater decreases its movie ticket price and later that same day,the other two do the same.Which of the following is true?

The low-price guarantee results in an outcome equivalent to perfect competition.

-Figure 12.2 shows the decision tree for setting price for the only two firms in a market.The dominant strategy for firm A

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