Question 1

In the United States, a collusive agreement to restrict output and increases prices is

Accepted Answer

A)  legal. 
B)  the key tool used by oligopolists. 
C)  illegal. 
D)  the key tool used by monopolistic competitors. 
A)  legal. 
B)  the key tool used by oligopolists. 
C)  illegal. 
D)  the key tool used by monopolistic competitors.

Question 2

The local banking industry currently has a Herfindahl-Hirschman index (HHI) value of 1575 and two of the competing banks have considered merging. Because the merger would raise the HHI by 55 points, the Federal Trade Commission would likely

Accepted Answer

A)  challenge the merger. 
B)  not challenge the merger. 
C)  allow the merger under the condition that HHI does not rise by more than 55 points as promised. 
D)  allow the merger under the condition that the HHI remain at the premerger level of 1575. 
A)  challenge the merger. 
B)  not challenge the merger. 
C)  allow the merger under the condition that HHI does not rise by more than 55 points as promised. 
D)  allow the merger under the condition that the HHI remain at the premerger level of 1575.

Question 3

Two duopoly firms that sell an identical good form a cartel. They decide to collude and fix the price of their good. In this prisoners' dilemma type situation, the likely outcome is

Accepted Answer

A)  both will cheat. 
B)  neither one will cheat. 
C)  only one will cheat. 
D)  It is impossible to say. 
A)  both will cheat. 
B)  neither one will cheat. 
C)  only one will cheat. 
D)  It is impossible to say.

Question 4

Limit pricing is a strategy used by a firm to

Accepted Answer

A)  deter entry. 
B)  enhance short run profits. 
C)  raise its prices. 
D)  lower its costs. 
A)  deter entry. 
B)  enhance short run profits. 
C)  raise its prices. 
D)  lower its costs.

Question 5

A duopoly is a form of

Accepted Answer

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

Question 6

The key feature of an oligopoly is that there

Accepted Answer

A)  are many buyers and sellers. 
B)  is one seller. 
C)  exists product differentiation. 
D)  are only a few sellers. 
A)  are many buyers and sellers. 
B)  is one seller. 
C)  exists product differentiation. 
D)  are only a few sellers.

Question 7

A market in which the Herfindahl-Hirschman Index is 1,000 is regarded by the Federal Trade Commission as

Accepted Answer

A)  moderately concentrated. 
B)  concentrated. 
C)  competitive. 
D)  monopolistic. 
A)  moderately concentrated. 
B)  concentrated. 
C)  competitive. 
D)  monopolistic.

Question 8

The second federal antitrust law was passed in 1914. This antitrust law is the

Accepted Answer

A)  Clayton Act. 
B)  Robinson-Patman Amendment. 
C)  Cellar-Kefauver Amendment. 
D)  Taft-Hartley Act. 
A)  Clayton Act. 
B)  Robinson-Patman Amendment. 
C)  Cellar-Kefauver Amendment. 
D)  Taft-Hartley Act.

Question 9

In a small town the level of demand is capable of supporting only two gas stations. This market is

Accepted Answer

A)  a natural duopoly. 
B)  perfectly competitive because a homogeneous good is being sold. 
C)  operating as if it was a monopoly. 
D)  an example of monopolistic competition. 
A)  a natural duopoly. 
B)  perfectly competitive because a homogeneous good is being sold. 
C)  operating as if it was a monopoly. 
D)  an example of monopolistic competition.

Question 10

A merger will be challenged by the FTC in a market where the Herfindahl-Hirschman Index (HHI) is ________, and the merger would increase it to ________.

Accepted Answer

A)  2,900; 3,100. 
B)  1,700; 1,760 
C)  800; 950 
D)  2,000; 2,040 
A)  2,900; 3,100. 
B)  1,700; 1,760 
C)  800; 950 
D)  2,000; 2,040

Question 11

What is the dilemma faced by firms in collusive agreement to restrict output and boost price?

Accepted Answer

Because there are just a few large firms

Question 12

Under current guidelines, the Federal Trade Commission will likely challenge

Accepted Answer

A)  all mergers if the Herfindahl-Hirschman index (HHI) is greater than 1500. 
B)  a merger if the HHI is between 1500 and 2500 and the merger increases the HHI by 50 points or more. 
C)  a merger if the HHI is between 1500 and 2500 and the merger increases the HHI by 100 points or more. 
D)  a merger if the HHI is below 1500 and the merger increases the HHI by less than 100 points. 
A)  all mergers if the Herfindahl-Hirschman index (HHI) is greater than 1500. 
B)  a merger if the HHI is between 1500 and 2500 and the merger increases the HHI by 50 points or more. 
C)  a merger if the HHI is between 1500 and 2500 and the merger increases the HHI by 100 points or more. 
D)  a merger if the HHI is below 1500 and the merger increases the HHI by less than 100 points.

Question 13

Antitrust law is the law that regulates ________ and prevents them from becoming ________.

Accepted Answer

A)  oligopolies; monopolies 
B)  monopolies; oligopolies 
C)  monopolistically competitive firms; oligopolies 
D)  oligopolies; monopolistically competitive firms 
A)  oligopolies; monopolies 
B)  monopolies; oligopolies 
C)  monopolistically competitive firms; oligopolies 
D)  oligopolies; monopolistically competitive firms

Question 14

The Clayton Act of 1914 was passed to prohibit, in part, price discrimination if the effect is to substantially lessen competition or create monopoly.

Accepted Answer

A) True 
 B)False

Question 15

The simplest prisoners' dilemma is a game that, in part, requires

Accepted Answer

A)  two players who are able to communicate with each other. 
B)  two players who are unable to communicate with each other. 
C)  monopolistic competition. 
D)  an oligopoly with one very large firm. 
A)  two players who are able to communicate with each other. 
B)  two players who are unable to communicate with each other. 
C)  monopolistic competition. 
D)  an oligopoly with one very large firm.

Question 16

Sears  
-Sears and Wal-Mart must decide whether to lower their prices, based on the economic profits shown in the table above. Which of the following is TRUE?

Accepted Answer

A)  This situation is not a prisoners' dilemma. 
B)  If Sears lowers its prices and Wal-Mart does not, Sears will make a $20 million economic profit. 
C)  If Wal-Mart lowers its prices, Sears should keep its prices high. 
D)  Both Sears and Wal-Mart would jointly be better off if they could each keep their prices high. 
A)  This situation is not a prisoners' dilemma. 
B)  If Sears lowers its prices and Wal-Mart does not, Sears will make a $20 million economic profit. 
C)  If Wal-Mart lowers its prices, Sears should keep its prices high. 
D)  Both Sears and Wal-Mart would jointly be better off if they could each keep their prices high.

Question 17

A trigger strategy is one in which a player

Accepted Answer

A)  cooperates in the current period if the other player cooperated in the previous period, but cheats in the current period only if the other player cheated in the previous period. 
B)  cheats in the current period if the other player cooperated in the previous period, but cooperates in the current period if the other player cheated in the previous period. 
C)  cooperates in the current period if the other player has always cooperated, but cheats forever if the other player ever cheats. 
D)  cheats in the current period if the other player has always cheated, but cooperates forever if the other player has ever cooperated. 
A)  cooperates in the current period if the other player cooperated in the previous period, but cheats in the current period only if the other player cheated in the previous period. 
B)  cheats in the current period if the other player cooperated in the previous period, but cooperates in the current period if the other player cheated in the previous period. 
C)  cooperates in the current period if the other player has always cooperated, but cheats forever if the other player ever cheats. 
D)  cheats in the current period if the other player has always cheated, but cooperates forever if the other player has ever cooperated.

Question 18

Firm A  
-The above payoff matrix shows the economic profits (in millions of dollars) of two firms in a duopoly that have agreed to a cartel agreement to restrict their output and set their prices equal to the monopoly price. Assuming the game is played once, the equilibrium outcome is where

Accepted Answer

A)  both choose the monopoly price. 
B)  both choose the competitive price. 
C)  firm A chooses the monopoly price and firm B chooses the competitive price. 
D)  firm B chooses the monopoly price and firm A chooses the competitive price. 
A)  both choose the monopoly price. 
B)  both choose the competitive price. 
C)  firm A chooses the monopoly price and firm B chooses the competitive price. 
D)  firm B chooses the monopoly price and firm A chooses the competitive price.

Question 19

Collusive agreements tend to break apart because the incentive to cheat is so great.

Accepted Answer

A) True 
 B)False

Question 20

Gateway  
-Dell and Gateway must decide whether to lower their prices, based on the potential economic profits shown in the payoff matrix above. (The profits are in millions of dollars.) In the Nash equilibrium, Dell's profit is ________ million and Gateway's profit is ________ million.

Accepted Answer

A)  $10; $10 
B)  $15; $15 
C)  $5; $20 
D)  $20; $5 
A)  $10; $10 
B)  $15; $15 
C)  $5; $20 
D)  $20; $5

In the United States, a collusive agreement to restrict output and increases prices is

The local banking industry currently has a Herfindahl-Hirschman index (HHI) value of 1575 and two of the competing banks have considered merging. Because the merger would raise the HHI by 55 points, the Federal Trade Commission would likely

Two duopoly firms that sell an identical good form a cartel. They decide to collude and fix the price of their good. In this prisoners' dilemma type situation, the likely outcome is

Limit pricing is a strategy used by a firm to

A duopoly is a form of

The key feature of an oligopoly is that there

A market in which the Herfindahl-Hirschman Index is 1,000 is regarded by the Federal Trade Commission as

The second federal antitrust law was passed in 1914. This antitrust law is the

In a small town the level of demand is capable of supporting only two gas stations. This market is

A merger will be challenged by the FTC in a market where the Herfindahl-Hirschman Index (HHI) is , and the merger would increase it to .

What is the dilemma faced by firms in collusive agreement to restrict output and boost price?

Under current guidelines, the Federal Trade Commission will likely challenge

Antitrust law is the law that regulates and prevents them from becoming .

The Clayton Act of 1914 was passed to prohibit, in part, price discrimination if the effect is to substantially lessen competition or create monopoly.

The simplest prisoners' dilemma is a game that, in part, requires

Sears -Sears and Wal-Mart must decide whether to lower their prices, based on the economic profits shown in the table above. Which of the following is TRUE?

A trigger strategy is one in which a player

Firm A -The above payoff matrix shows the economic profits (in millions of dollars) of two firms in a duopoly that have agreed to a cartel agreement to restrict their output and set their prices equal to the monopoly price. Assuming the game is played once, the equilibrium outcome is where

Collusive agreements tend to break apart because the incentive to cheat is so great.

Gateway -Dell and Gateway must decide whether to lower their prices, based on the potential economic profits shown in the payoff matrix above. (The profits are in millions of dollars.) In the Nash equilibrium, Dell's profit is million and Gateway's profit is million.

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

In the United States, a collusive agreement to restrict output and increases prices is

The local banking industry currently has a Herfindahl-Hirschman index (HHI) value of 1575 and two of the competing banks have considered merging. Because the merger would raise the HHI by 55 points, the Federal Trade Commission would likely

Two duopoly firms that sell an identical good form a cartel. They decide to collude and fix the price of their good. In this prisoners' dilemma type situation, the likely outcome is

Limit pricing is a strategy used by a firm to

A duopoly is a form of

The key feature of an oligopoly is that there

A market in which the Herfindahl-Hirschman Index is 1,000 is regarded by the Federal Trade Commission as

The second federal antitrust law was passed in 1914. This antitrust law is the

In a small town the level of demand is capable of supporting only two gas stations. This market is

A merger will be challenged by the FTC in a market where the Herfindahl-Hirschman Index (HHI) is ________, and the merger would increase it to ________.

What is the dilemma faced by firms in collusive agreement to restrict output and boost price?

Under current guidelines, the Federal Trade Commission will likely challenge

Antitrust law is the law that regulates ________ and prevents them from becoming ________.

The Clayton Act of 1914 was passed to prohibit, in part, price discrimination if the effect is to substantially lessen competition or create monopoly.

The simplest prisoners' dilemma is a game that, in part, requires

Sears -Sears and Wal-Mart must decide whether to lower their prices, based on the economic profits shown in the table above. Which of the following is TRUE?

A trigger strategy is one in which a player

Firm A -The above payoff matrix shows the economic profits (in millions of dollars) of two firms in a duopoly that have agreed to a cartel agreement to restrict their output and set their prices equal to the monopoly price. Assuming the game is played once, the equilibrium outcome is where

Collusive agreements tend to break apart because the incentive to cheat is so great.

Gateway -Dell and Gateway must decide whether to lower their prices, based on the potential economic profits shown in the payoff matrix above. (The profits are in millions of dollars.) In the Nash equilibrium, Dell's profit is ________ million and Gateway's profit is ________ million.

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

A merger will be challenged by the FTC in a market where the Herfindahl-Hirschman Index (HHI) is , and the merger would increase it to .

Antitrust law is the law that regulates and prevents them from becoming .

Gateway -Dell and Gateway must decide whether to lower their prices, based on the potential economic profits shown in the payoff matrix above. (The profits are in millions of dollars.) In the Nash equilibrium, Dell's profit is million and Gateway's profit is million.