Question 1

If duopolists individually pursue their own self-interest when deciding how much to produce, the price they are able to charge for their product will be:

Accepted Answer

A)  less than the monopoly price 
B)  greater than the monopoly price 
C)  possibly less than or greater than the monopoly price 
D)  equal to the perfectly competitive market price 
A)  less than the monopoly price 
B)  greater than the monopoly price 
C)  possibly less than or greater than the monopoly price 
D)  equal to the perfectly competitive market price

Question 2

The prisoners' dilemma is an important game to study because:

Accepted Answer

A)  it identifies the fundamental difficulty in maintaining cooperative agreements 
B)  most games present zero-sum alternatives 
C)  strategic decisions faced by prisoners are identical to those faced by firms engaged in competitive agreements 
D)  all of the above are true 
A)  it identifies the fundamental difficulty in maintaining cooperative agreements 
B)  most games present zero-sum alternatives 
C)  strategic decisions faced by prisoners are identical to those faced by firms engaged in competitive agreements 
D)  all of the above are true

Question 3

Raising production will increase total units sold, which will decrease the per unit price of all units sold. This concept is known as the:

Accepted Answer

A)  cost effect 
B)  output effect 
C)  price effect 
D)  income effect 
A)  cost effect 
B)  output effect 
C)  price effect 
D)  income effect

Question 4

Which of the following will weaken OPEC's effect on the world price of oil? (i) member countries increase their own production
(ii) member countries set their level of production in order to capture a larger share of the total profit available
(iii) member countries abide by the regulatory policy set forth under the original collusive agreement

Accepted Answer

A)  (i) and (ii) 
B)  (ii) and (iii) 
C)  (i) and (iii) 
D)  (i) only 
A)  (i) and (ii) 
B)  (ii) and (iii) 
C)  (i) and (iii) 
D)  (i) only

Question 5

An imperfectly market that has only two firms is called:

Accepted Answer

A)  a duopoly 
B)  a split monopoly 
C)  a triopoly 
D)  a binary market 
A)  a duopoly 
B)  a split monopoly 
C)  a triopoly 
D)  a binary market

Question 6

If both countries agree on a certain level of arms in an arms race game, social welfare will increase if both countries keep their end of the bargain.

Accepted Answer

A) True 
 B)False

Question 7

In the prisoner's dilemma game, the dominant strategy is for each player to not confess.

Accepted Answer

A) True 
 B)False

Question 8

Table 16-5
Two discount superstores (Ultimate Saver and SuperDuper Saver) in a growing urban area are interested in expanding their market share. Both are interested in expanding the size of their stores and parking lots to accommodate potential growth in their customer base. The following table depicts the strategic outcomes that result from the game. Growth-related profits of the two discount superstores under two scenarios are shown.
  
-Refer to Table 16-5. If the owners of SuperDuper Saver and Ultimate Saver meet for a friendly game of golf one afternoon and happen to discuss a strategy to optimise their growth-related profits, they should both agree to:

Accepted Answer

A)  share the context of their conversation with the Australian Competition and Consumer Commission 
B)  be more competitive in capturing market share 
C)  not increase their store sizes or parking lots 
D)  increase their store sizes and parking lots 
A)  share the context of their conversation with the Australian Competition and Consumer Commission 
B)  be more competitive in capturing market share 
C)  not increase their store sizes or parking lots 
D)  increase their store sizes and parking lots

Question 9

Table 16-5
Two discount superstores (Ultimate Saver and SuperDuper Saver) in a growing urban area are interested in expanding their market share. Both are interested in expanding the size of their stores and parking lots to accommodate potential growth in their customer base. The following table depicts the strategic outcomes that result from the game. Growth-related profits of the two discount superstores under two scenarios are shown.
  
-Refer to Table 16-5. When this game reaches a Nash equilibrium, the dollar value of growth-related profits will be:

Accepted Answer

A)  Ultimate Saver $275 and SuperDuper Saver $25 
B)  Ultimate Saver $65 and SuperDuper Saver $50 
C)  Ultimate Saver $35 and SuperDuper Saver $250 
D)  Ultimate Saver $135 and SuperDuper Saver $85 
A)  Ultimate Saver $275 and SuperDuper Saver $25 
B)  Ultimate Saver $65 and SuperDuper Saver $50 
C)  Ultimate Saver $35 and SuperDuper Saver $250 
D)  Ultimate Saver $135 and SuperDuper Saver $85

Question 10

Very often, the reason that players can solve the prisoners' dilemma game and reach the most profitable outcome is that:

Accepted Answer

A)  they play the game not once but many times 
B)  the game becomes more competitive 
C)  each player tries to capture a large portion of the market share 
D)  all of the above can result in a solution to the prisoners' dilemma game 
A)  they play the game not once but many times 
B)  the game becomes more competitive 
C)  each player tries to capture a large portion of the market share 
D)  all of the above can result in a solution to the prisoners' dilemma game

Question 11

If duopolists can enforce an agreement, to produce collectively the monopoly output and split the market between the two firms, then the sum of their output will be:

Accepted Answer

A)  be less than the monopoly quantity 
B)  be greater than the monopoly quantity 
C)  be equal to the monopoly quantity 
D)  any of the above are possible 
A)  be less than the monopoly quantity 
B)  be greater than the monopoly quantity 
C)  be equal to the monopoly quantity 
D)  any of the above are possible

Question 12

If there is an increase in the number of firms in an oligopoly, what effect would this have on the market if:
(a) they act independently of each other, and
(b) they collude and enforce a cartel agreement?

Accepted Answer

If there is an increase in the number of

Question 13

Individual profit earned by Dave, an oligopolist, depends on which of the following? (i) the quantity that Dave produces
(ii) the quantity that the other firms in the market produce
(iii) the price Dave can sell his product for in the market

Accepted Answer

A)  (i) and (ii) 
B)  (ii) and (iii) 
C)  (iii) only 
D)  (i), (ii) and (iii) 
A)  (i) and (ii) 
B)  (ii) and (iii) 
C)  (iii) only 
D)  (i), (ii) and (iii)

Question 14

What is the output effect and the price effect? How do these effects influence the output decision of an oligopolist?

Accepted Answer

The output effect is the increase in pro

Question 15

A prisoners' dilemma game demonstrates how cooperative action is often not rational even though:

Accepted Answer

A)  cooperation would make everyone worse off 
B)  cooperation would make everyone better off 
C)  prisoners are not capable of individual choice 
D)  all of the above can be demonstrated with a prisoners' dilemma game 
A)  cooperation would make everyone worse off 
B)  cooperation would make everyone better off 
C)  prisoners are not capable of individual choice 
D)  all of the above can be demonstrated with a prisoners' dilemma game

Question 16

Game theory is not necessary for understanding competitive markets but is quite useful in understanding the behaviour of:

Accepted Answer

A)  oligopolies 
B)  monopolies 
C)  oligarchies 
D)  competitive markets 
A)  oligopolies 
B)  monopolies 
C)  oligarchies 
D)  competitive markets

Question 17

In what type of market do the actions of any one seller have a significant impact on the profits of all other sellers?

Accepted Answer

A)  a monopoly 
B)  an oligopoly 
C)  perfect competition 
D)  monopolistic competition 
A)  a monopoly 
B)  an oligopoly 
C)  perfect competition 
D)  monopolistic competition

Question 18

Imagine that two oil companies, Big Petro Inc. and Gargantuan Gas, own adjacent oil fields. Under the fields is a common pool of oil worth $24 million. Drilling a well to recover oil costs $2 million per well. If each company drills one well, each will get half of the oil and earn a $10 million profit ($12 million in revenue - $2 million in costs). If a company has X per cent of the total wells, then it will collect X per cent of the total revenue.
-According to the information provided, if Big Petro Inc. were to drill a second well, what would its profit be if Gargantuan Gas did not drill a second well?

Accepted Answer

A)  $14 million 
B)  $12 million 
C)  $10 million 
D)  $8 million 
A)  $14 million 
B)  $12 million 
C)  $10 million 
D)  $8 million

Question 19

In a prisoners' dilemma, cooperation between the prisoners is easy to maintain and is individually rational.

Accepted Answer

A) True 
 B)False

Question 20

Total profit for an oligopolist is more than that of a perfectly competitive firm.

Accepted Answer

A) True 
 B)False

Exam 16: Business Strategy

If duopolists individually pursue their own self-interest when deciding how much to produce, the price they are able to charge for their product will be:

The prisoners' dilemma is an important game to study because:

Raising production will increase total units sold, which will decrease the per unit price of all units sold. This concept is known as the:

An imperfectly market that has only two firms is called:

If both countries agree on a certain level of arms in an arms race game, social welfare will increase if both countries keep their end of the bargain.

In the prisoner's dilemma game, the dominant strategy is for each player to not confess.

Very often, the reason that players can solve the prisoners' dilemma game and reach the most profitable outcome is that:

If duopolists can enforce an agreement, to produce collectively the monopoly output and split the market between the two firms, then the sum of their output will be:

If there is an increase in the number of firms in an oligopoly, what effect would this have on the market if: (a) they act independently of each other, and (b) they collude and enforce a cartel agreement?

Individual profit earned by Dave, an oligopolist, depends on which of the following? (i) the quantity that Dave produces (ii) the quantity that the other firms in the market produce (iii) the price Dave can sell his product for in the market

What is the output effect and the price effect? How do these effects influence the output decision of an oligopolist?

A prisoners' dilemma game demonstrates how cooperative action is often not rational even though:

Game theory is not necessary for understanding competitive markets but is quite useful in understanding the behaviour of:

In what type of market do the actions of any one seller have a significant impact on the profits of all other sellers?

In a prisoners' dilemma, cooperation between the prisoners is easy to maintain and is individually rational.

Total profit for an oligopolist is more than that of a perfectly competitive firm.

Ten Lessons From Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand and Government Policies

Consumers, Producers and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Competition Policy

Monopolistic Competition

The Markets for the Factors of Production

Earnings, Unions and Discrimination

Income Inequity and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment and the Financial System

The Natural Rate of Unemployment

The Monetary System

Inflation: Its Causes and Costs

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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