Question 1

Which of the following is characteristic of oligopoly, but NOT of monopolistic competition?

Accepted Answer

A)  The choices made by one firm have a significant effect on other firms. 
B)  Each firm faces a downward-sloping demand curve. 
C)  Firms are profit-maximizers. 
D)  There is more than one firm in the industry. 
A)  The choices made by one firm have a significant effect on other firms. 
B)  Each firm faces a downward-sloping demand curve. 
C)  Firms are profit-maximizers. 
D)  There is more than one firm in the industry.

Question 2

In what type of market is a cartel possible?

Accepted Answer

A)  a market in which there are only a few firms and barriers to entry exist 
B)  a market in which firms sell a homogeneous good 
C)  a market in which firms sell a differentiated good 
D)  a market in which there are many firms 
A)  a market in which there are only a few firms and barriers to entry exist 
B)  a market in which firms sell a homogeneous good 
C)  a market in which firms sell a differentiated good 
D)  a market in which there are many firms

Question 3

Is collusion possible in monopolistic competition? Why or why not?

Accepted Answer

Collusion is not possible in monopolisti

Question 4

An industry is made up of 8 firms with the following percent market shares: 29, 20, 11, 10, 9, 8, 7, 6. The firms with 8 and 7 percent market share are proposing to merge. What is the new Herfindahl-Hirschman index if the merger takes place?

Accepted Answer

A)  225 
B)  1462 
C)  1692 
D)  1804 
A)  225 
B)  1462 
C)  1692 
D)  1804

Question 5

Jane  
-The payoff matrix of economic profits above displays the possible outcomes for Bob and Jane who are involved in game of whether or not to advertise. After each player chooses his or her best strategy and sees the result

Accepted Answer

A)  only Bob would like to change his decision. 
B)  neither player would be willing to change his or her decision unless the other player also changes his or her decision. 
C)  if Jane does not change her decision, Bob would like to change his. 
D)  if Bob does not change his decision, Jane would like to change hers. 
A)  only Bob would like to change his decision. 
B)  neither player would be willing to change his or her decision unless the other player also changes his or her decision. 
C)  if Jane does not change her decision, Bob would like to change his. 
D)  if Bob does not change his decision, Jane would like to change hers.

Question 6

Kellogg's and General Mills are two of the dominant breakfast cereal manufactures in the U.S. Each firm can either sign or not sign an exclusive contract with an Olympian gold-medal athlete to appear on the cover of a cereal box. Both Kellogg's and General Mills have signed athletes in 2008, Michael Phelps and Nastia Liukin, respectively. What does this suggest about the outcome of the oligopoly game?

Accepted Answer

A)  The highest profits are when both companies sign. 
B)  The best outcome, in terms of profit, is where both companies sign. 
C)  The Nash equilibrium must be that both companies sign. 
D)  The Nash equilibrium must be that both companies sign and this always leads to the highest profits. 
A)  The highest profits are when both companies sign. 
B)  The best outcome, in terms of profit, is where both companies sign. 
C)  The Nash equilibrium must be that both companies sign. 
D)  The Nash equilibrium must be that both companies sign and this always leads to the highest profits.

Question 7

Price wars can be the result of

Accepted Answer

A)  a cooperative equilibrium. 
B)  a firm playing a tit-for-tat strategy in which last period the competitors complied with a collusive agreement. 
C)  new firms entering the industry and immediately agreeing to abide by a collusive agreement. 
D)  new firms entering an industry and all firms then finding themselves in a prisoners' dilemma. 
A)  a cooperative equilibrium. 
B)  a firm playing a tit-for-tat strategy in which last period the competitors complied with a collusive agreement. 
C)  new firms entering the industry and immediately agreeing to abide by a collusive agreement. 
D)  new firms entering an industry and all firms then finding themselves in a prisoners' dilemma.

Question 8

"Because firms in an oligopoly are so large, they do not need to consider each other's actions." Is the previous statement correct or incorrect? Explain your answer.

Accepted Answer

The statement is incorrect. Oligopoly is

Question 9

Limit pricing in a contestable market sets the price at the highest level that ________.

Accepted Answer

A)  maximizes the profit of an entrant 
B)  maximizes the profit of the existing firm 
C)  maximizes the profit of both the existing firm and the entering firm 
D)  inflicts a loss on an entrant 
A)  maximizes the profit of an entrant 
B)  maximizes the profit of the existing firm 
C)  maximizes the profit of both the existing firm and the entering firm 
D)  inflicts a loss on an entrant

Question 10

The Herfindahl-Hirschman Index will indicate that a contestable market is ________.

Accepted Answer

A)  a sequential market 
B)  competitive 
C)  uncompetitive 
D)  a prisoners' dilemma 
A)  a sequential market 
B)  competitive 
C)  uncompetitive 
D)  a prisoners' dilemma

Question 11

Player A  
-The problem for the prisoners in the prisoners' dilemma game in the above table is that

Accepted Answer

A)  the Nash equilibrium is not the best outcome. 
B)  there is no equilibrium outcome. 
C)  neither prisoner has a workable strategy. 
D)  None of the above answers is correct. 
A)  the Nash equilibrium is not the best outcome. 
B)  there is no equilibrium outcome. 
C)  neither prisoner has a workable strategy. 
D)  None of the above answers is correct.

Question 12

American  
-There are two can companies, American and National, which have entered into a collusive agreement. The payoff matrix of economic profits is above. If National is able to cheat on the agreement but American complies with the agreement, what amount of economic profit is made by National?

Accepted Answer

A)  $2,000 
B)  $3,000 
C)  $4,000 
D)  $6,000 
A)  $2,000 
B)  $3,000 
C)  $4,000 
D)  $6,000

Question 13

Market share in the Widget industry  
-Using the market shares in the table above, if Big W wants to buy Widgette, the Federal Trade Commission will probably

Accepted Answer

A)  approve the merger because the industry is moderately concentrated and the increase in the Herfindahl-Hirschman index (HHI) is small enough. 
B)  block the merger because the industry is moderately concentrated (HHI between 1,500 and 2,500) and the increase in the HHI is too much. 
C)  approve the merger because the industry is highly concentrated (HHI exceeds 2,500) but the increase in the HHI is small enough. 
D)  block the merger because the industry is highly concentrated (HHI exceeds 2,500) and the increase in the HHI is too much. 
A)  approve the merger because the industry is moderately concentrated and the increase in the Herfindahl-Hirschman index (HHI) is small enough. 
B)  block the merger because the industry is moderately concentrated (HHI between 1,500 and 2,500) and the increase in the HHI is too much. 
C)  approve the merger because the industry is highly concentrated (HHI exceeds 2,500) but the increase in the HHI is small enough. 
D)  block the merger because the industry is highly concentrated (HHI exceeds 2,500) and the increase in the HHI is too much.

Question 14

The Sherman Act of 1890 was passed to prohibit

Accepted Answer

A)  combinations, trusts, or conspiracies to restrict interstate or international trade. 
B)  monopolization or attempts to monopolize interstate or international trade. 
C)  both of the above. 
D)  neither of the above. 
A)  combinations, trusts, or conspiracies to restrict interstate or international trade. 
B)  monopolization or attempts to monopolize interstate or international trade. 
C)  both of the above. 
D)  neither of the above.

Question 15

When two firms collude to maximize profit the total quantity produced by both firms taken together is determined at the quantity where ________.

Accepted Answer

A)  excess capacity is minimized 
B)  industry marginal cost equals industry marginal revenue 
C)  the price equals the industry's marginal cost 
D)  excess capacity is as large as possible zero 
A)  excess capacity is minimized 
B)  industry marginal cost equals industry marginal revenue 
C)  the price equals the industry's marginal cost 
D)  excess capacity is as large as possible zero

Question 16

Which of the following games provides the best way to model price wars?

Accepted Answer

A)  a repeated duopoly game 
B)  a game of chicken 
C)  a sequential entry game in a noncontestable market 
D)  a sequential entry game in a contestable market 
A)  a repeated duopoly game 
B)  a game of chicken 
C)  a sequential entry game in a noncontestable market 
D)  a sequential entry game in a contestable market

Question 17

In the prisoners' dilemma game, each player has only one possible strategy.

Accepted Answer

A) True 
 B)False

Question 18

Adkins Air is the only seller offering service directly from Milwaukee to Greensboro. The market is contestable. Thus the Nash Equilibrium for a game between Adkins Air and a potential entrant is when the potential entrant

Accepted Answer

A)  enters and Adkins earns a normal profit. 
B)  enters and Adkins earns an economic profit. 
C)  does not enter and Adkins earns a normal profit. 
D)  does not enter and Adkins earns an economic profit. 
A)  enters and Adkins earns a normal profit. 
B)  enters and Adkins earns an economic profit. 
C)  does not enter and Adkins earns a normal profit. 
D)  does not enter and Adkins earns an economic profit.

Question 19

With barriers to the entry of new firms

Accepted Answer

A)  a cartel is guaranteed to earn an economic profit greater than zero. 
B)  a cartel's members have no incentive to cheat. 
C)  the cartel will likely earn an economic profit greater than zero. 
D)  industry supply will expand if the firms form a cartel. 
A)  a cartel is guaranteed to earn an economic profit greater than zero. 
B)  a cartel's members have no incentive to cheat. 
C)  the cartel will likely earn an economic profit greater than zero. 
D)  industry supply will expand if the firms form a cartel.

Question 20

Game theory is a tool for studying ________.

Accepted Answer

A)  Nash behavior 
B)  payoff dilemmas 
C)  rational dilemmas 
D)  strategic behavior 
A)  Nash behavior 
B)  payoff dilemmas 
C)  rational dilemmas 
D)  strategic behavior

Which of the following is characteristic of oligopoly, but NOT of monopolistic competition?

In what type of market is a cartel possible?

Is collusion possible in monopolistic competition? Why or why not?

An industry is made up of 8 firms with the following percent market shares: 29, 20, 11, 10, 9, 8, 7, 6. The firms with 8 and 7 percent market share are proposing to merge. What is the new Herfindahl-Hirschman index if the merger takes place?

Jane -The payoff matrix of economic profits above displays the possible outcomes for Bob and Jane who are involved in game of whether or not to advertise. After each player chooses his or her best strategy and sees the result

Price wars can be the result of

"Because firms in an oligopoly are so large, they do not need to consider each other's actions." Is the previous statement correct or incorrect? Explain your answer.

Limit pricing in a contestable market sets the price at the highest level that ________.

The Herfindahl-Hirschman Index will indicate that a contestable market is ________.

Player A -The problem for the prisoners in the prisoners' dilemma game in the above table is that

American -There are two can companies, American and National, which have entered into a collusive agreement. The payoff matrix of economic profits is above. If National is able to cheat on the agreement but American complies with the agreement, what amount of economic profit is made by National?

Market share in the Widget industry -Using the market shares in the table above, if Big W wants to buy Widgette, the Federal Trade Commission will probably

The Sherman Act of 1890 was passed to prohibit

When two firms collude to maximize profit the total quantity produced by both firms taken together is determined at the quantity where ________.

Which of the following games provides the best way to model price wars?

In the prisoners' dilemma game, each player has only one possible strategy.

Adkins Air is the only seller offering service directly from Milwaukee to Greensboro. The market is contestable. Thus the Nash Equilibrium for a game between Adkins Air and a potential entrant is when the potential entrant

With barriers to the entry of new firms

Game theory is a tool for studying ________.

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Public Choices, Public Goods, and Healthcare

Externalities

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters

Exam 15: Oligopoly

Which of the following is characteristic of oligopoly, but NOT of monopolistic competition?

In what type of market is a cartel possible?

Is collusion possible in monopolistic competition? Why or why not?

An industry is made up of 8 firms with the following percent market shares: 29, 20, 11, 10, 9, 8, 7, 6. The firms with 8 and 7 percent market share are proposing to merge. What is the new Herfindahl-Hirschman index if the merger takes place?

Jane -The payoff matrix of economic profits above displays the possible outcomes for Bob and Jane who are involved in game of whether or not to advertise. After each player chooses his or her best strategy and sees the result

Price wars can be the result of

"Because firms in an oligopoly are so large, they do not need to consider each other's actions." Is the previous statement correct or incorrect? Explain your answer.

Limit pricing in a contestable market sets the price at the highest level that ________.

The Herfindahl-Hirschman Index will indicate that a contestable market is ________.

Player A -The problem for the prisoners in the prisoners' dilemma game in the above table is that

American -There are two can companies, American and National, which have entered into a collusive agreement. The payoff matrix of economic profits is above. If National is able to cheat on the agreement but American complies with the agreement, what amount of economic profit is made by National?

Market share in the Widget industry -Using the market shares in the table above, if Big W wants to buy Widgette, the Federal Trade Commission will probably

The Sherman Act of 1890 was passed to prohibit

When two firms collude to maximize profit the total quantity produced by both firms taken together is determined at the quantity where ________.

Which of the following games provides the best way to model price wars?

In the prisoners' dilemma game, each player has only one possible strategy.

Adkins Air is the only seller offering service directly from Milwaukee to Greensboro. The market is contestable. Thus the Nash Equilibrium for a game between Adkins Air and a potential entrant is when the potential entrant

With barriers to the entry of new firms

Game theory is a tool for studying ________.

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Public Choices, Public Goods, and Healthcare

Externalities

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters