Question 1

Explain how the output effect and the price effect influence the production decision of the individual oligopolist.

Accepted Answer

Since the individual oligopolist faces a

Question 2

The Sherman Antitrust Act

Accepted Answer

A)  was passed to encourage judicial leniency in the review of cooperative agreements. 
B)  was concerned with self-interest dominated Nash equilibriums in prisoners' dilemma games. 
C)  enhanced the ability to enforce cartel agreements. 
D)  restricted the ability of competitors to engage in cooperative agreements. 
A)  was passed to encourage judicial leniency in the review of cooperative agreements. 
B)  was concerned with self-interest dominated Nash equilibriums in prisoners' dilemma games. 
C)  enhanced the ability to enforce cartel agreements. 
D)  restricted the ability of competitors to engage in cooperative agreements.

Question 3

Which government entity is charged with investigating and enforcing antitrust laws?

Accepted Answer

A)  the U.S.Justice Department 
B)  the U.S.Commerce Department 
C)  the U.S.Treasury Department 
D)  the Bureau of Alcohol,Tobacco,and Firearms 
A)  the U.S.Justice Department 
B)  the U.S.Commerce Department 
C)  the U.S.Treasury Department 
D)  the Bureau of Alcohol,Tobacco,and Firearms

Question 4

One way that public policy encourages cooperation among oligopolists is through antitrust law.

Accepted Answer

A) True 
 B)False

Question 5

In studying oligopolistic markets,economists assume that

Accepted Answer

A)  there is no conflict or tension between cooperation and self-interest. 
B)  it is easy for a group of firms to cooperate and thereby establish and maintain a monopoly outcome. 
C)  each oligopolist cares only about its own profit. 
D)  strategic decisions do not play a role in such markets. 
A)  there is no conflict or tension between cooperation and self-interest. 
B)  it is easy for a group of firms to cooperate and thereby establish and maintain a monopoly outcome. 
C)  each oligopolist cares only about its own profit. 
D)  strategic decisions do not play a role in such markets.

Question 6

The prisoners' dilemma game

Accepted Answer

A)  provides insight into why cooperation is individually rational. 
B)  provides insight into why cooperation is difficult. 
C)  is a game in which neither player has a dominant strategy. 
D)  is a game in which exactly one of the two players has a dominant strategy. 
A)  provides insight into why cooperation is individually rational. 
B)  provides insight into why cooperation is difficult. 
C)  is a game in which neither player has a dominant strategy. 
D)  is a game in which exactly one of the two players has a dominant strategy.

Question 7

Nike and Reebok (athletic shoe companies)are considering whether or not to advertise during the Super Bowl.Devise a simple prisoners' dilemma game to demonstrate the strategic considerations that are relevant to this decision.Does the repeated game scenario differ from a single period game? Is it possible that a repeated game (without collusive agreements)could lead to an outcome that is better than a single-period game? Explain the circumstances in which this may be true.

Accepted Answer

The answer should show that if both shoe

Question 8

In the prisoners' dilemma game,one prisoner is always better off confessing,no matter what the other prisoner does.

Accepted Answer

A) True 
 B)False

Question 9

Although the practice of predatory pricing is a common claim in antitrust suits,some economists are skeptical of this argument because they believe

Accepted Answer

A)  the evidence of its practice is nearly impossible to collect. 
B)  predatory pricing is not a profitable business strategy. 
C)  even though predatory pricing is a profitable business strategy,it is on balance beneficial to society. 
D)  predatory pricing actually attracts new firms to the industry. 
A)  the evidence of its practice is nearly impossible to collect. 
B)  predatory pricing is not a profitable business strategy. 
C)  even though predatory pricing is a profitable business strategy,it is on balance beneficial to society. 
D)  predatory pricing actually attracts new firms to the industry.

Question 10

In the prisoners' dilemma game with Bonnie and Clyde as the players,the likely outcome is

Accepted Answer

A)  a very good outcome for both players. 
B)  a very good outcome for Bonnie,but a bad outcome for Clyde. 
C)  a very good outcome for Clyde,but a bad outcome for Bonnie. 
D)  a bad outcome for both players. 
A)  a very good outcome for both players. 
B)  a very good outcome for Bonnie,but a bad outcome for Clyde. 
C)  a very good outcome for Clyde,but a bad outcome for Bonnie. 
D)  a bad outcome for both players.

Question 11

Game theory is necessary for understanding

Accepted Answer

A)  all market structures. 
B)  competition and oligopoly,but it is not necessary for understanding monopoly. 
C)  monopoly and oligopoly,but it is not necessary for understanding competition. 
D)  oligopoly,but it is not necessary for understanding monopoly or competition. 
A)  all market structures. 
B)  competition and oligopoly,but it is not necessary for understanding monopoly. 
C)  monopoly and oligopoly,but it is not necessary for understanding competition. 
D)  oligopoly,but it is not necessary for understanding monopoly or competition.

Question 12

Who wrote,"People of the same trade seldom meet together,but the conversation ends in a conspiracy against the public,or in some diversion to raise prices."?

Accepted Answer

A)  Thomas Jefferson 
B)  Adam Smith 
C)  Bill Gates 
D)  Robert Axelrod 
A)  Thomas Jefferson 
B)  Adam Smith 
C)  Bill Gates 
D)  Robert Axelrod

Question 13

Economists claim that a resale price maintenance agreement is not anti-competitive because

Accepted Answer

A)  suppliers are never able to exercise noncompetitive market power. 
B)  if a supplier has market power,it will be likely to exert that power through wholesale price rather than retail price. 
C)  retail markets are inherently noncompetitive. 
D)  retail cartel agreements cannot increase retail profits. 
A)  suppliers are never able to exercise noncompetitive market power. 
B)  if a supplier has market power,it will be likely to exert that power through wholesale price rather than retail price. 
C)  retail markets are inherently noncompetitive. 
D)  retail cartel agreements cannot increase retail profits.

Question 14

Figure 17-2.John and Michael are roommates.On a particular day,their apartment needs to be cleaned.Each person has to decide whether to take part in cleaning.At the end of the day,either the apartment will be completely clean (if one or both roommates take part in cleaning),or it will remain dirty (if neither roommate cleans).With happiness measured on a scale of 1 (very unhappy)to 10 (very happy),the possible outcomes are as follows:  
-Refer to Figure 17-2.The dominant strategy for John is to

Accepted Answer

A)  clean,and the dominant strategy for Michael is to clean. 
B)  clean,and the dominant strategy for Michael is to refrain from cleaning. 
C)  refrain from cleaning,and the dominant strategy for Michael is to clean. 
D)  refrain from cleaning,and the dominant strategy for Michael is to refrain from cleaning. 
A)  clean,and the dominant strategy for Michael is to clean. 
B)  clean,and the dominant strategy for Michael is to refrain from cleaning. 
C)  refrain from cleaning,and the dominant strategy for Michael is to clean. 
D)  refrain from cleaning,and the dominant strategy for Michael is to refrain from cleaning.

Question 15

Table 17-2.The table shows the town of Pittsville's demand schedule for gasoline.For simplicity,assume the town's gasoline seller(s)incur no costs in selling gasoline.
  
-Refer to Table 17-2.Suppose there are exactly two sellers of gasoline in Pittsville: Exxoff and BQ.If Exxoff sells 300 gallons and BQ sells 400 gallons,then

Accepted Answer

A)  Exxoff's profit is $900 and BQ's profit is $1,200. 
B)  Exxoff's profit is $2,100 and BQ's profit is $2,400. 
C)  there is an excess demand for gasoline in Pittsville. 
D)  there is an excess supply of gasoline in Pittsville. 
A)  Exxoff's profit is $900 and BQ's profit is $1,200. 
B)  Exxoff's profit is $2,100 and BQ's profit is $2,400. 
C)  there is an excess demand for gasoline in Pittsville. 
D)  there is an excess supply of gasoline in Pittsville.

Question 16

Table 17-17.Consider a small town that has two grocery stores from which residents can choose to buy a gallon of milk.The store owners each must make a decision to set a high milk price or a low milk price.The payoff table,showing profit per week,is provided below.The profit in each cell is shown as (Store 1,Store 2).
  
-Refer to Table 17-17.What is grocery store 2's dominant strategy?

Accepted Answer

A)  Grocery store 2 does not have a dominant strategy. 
B)  Grocery store 2 should always set a low price. 
C)  Grocery store 2 should always set a high price. 
D)  Grocery store 2 should set a low price when grocery store 1 sets a low price,and grocery store 2 should set a high price when grocery store 1 sets a high price. 
A)  Grocery store 2 does not have a dominant strategy. 
B)  Grocery store 2 should always set a low price. 
C)  Grocery store 2 should always set a high price. 
D)  Grocery store 2 should set a low price when grocery store 1 sets a low price,and grocery store 2 should set a high price when grocery store 1 sets a high price.

Question 17

Acme Computer Co.sells computers to retail stores for $400.If Acme requires the retailers to charge customers $500 for the computers,then it is engaging in

Accepted Answer

A)  resale price maintenance. 
B)  predatory pricing. 
C)  tying. 
D)  monopolistic competition. 
A)  resale price maintenance. 
B)  predatory pricing. 
C)  tying. 
D)  monopolistic competition.

Question 18

Table 17-4.The information in the table below shows the total demand for high-speed Internet subscriptions in a small urban market.Assume that each company that provides these subscriptions incurs an annual fixed cost of $200,000 (per year)and that the marginal cost of providing an additional subscription is always $80.
  
-Refer to Table 17-4.Assume there are two high-speed Internet service providers that operate in this market.If they are able to collude on the quantity of subscriptions that will be sold and on the price that will be charged for subscriptions,then their agreement will stipulate that

Accepted Answer

A)  each firm will charge a price of $120 and each firm will sell 5,000 subscriptions. 
B)  each firm will charge a price of $160 and each firm will sell 4,000 subscriptions. 
C)  each firm will charge a price of $100 and each firm will sell 3,000 subscriptions. 
D)  each firm will charge a price of $200 and each firm will sell 3,000 subscriptions. 
A)  each firm will charge a price of $120 and each firm will sell 5,000 subscriptions. 
B)  each firm will charge a price of $160 and each firm will sell 4,000 subscriptions. 
C)  each firm will charge a price of $100 and each firm will sell 3,000 subscriptions. 
D)  each firm will charge a price of $200 and each firm will sell 3,000 subscriptions.

Question 19

In a game,a dominant strategy is

Accepted Answer

A)  the best strategy for a player to follow only if other players are cooperative. 
B)  the best strategy for a player to follow,regardless of the strategies followed by other players. 
C)  a strategy that must appear in every game. 
D)  a strategy that leads to one player's interests dominating the interests of the other players. 
A)  the best strategy for a player to follow only if other players are cooperative. 
B)  the best strategy for a player to follow,regardless of the strategies followed by other players. 
C)  a strategy that must appear in every game. 
D)  a strategy that leads to one player's interests dominating the interests of the other players.

Question 20

Game theory is important for the understanding of

Accepted Answer

A)  competitive markets. 
B)  monopolies. 
C)  oligopolies. 
D)  all market structures. 
A)  competitive markets. 
B)  monopolies. 
C)  oligopolies. 
D)  all market structures.

Exam 17: Oligopoly

Explain how the output effect and the price effect influence the production decision of the individual oligopolist.

The Sherman Antitrust Act

Which government entity is charged with investigating and enforcing antitrust laws?

One way that public policy encourages cooperation among oligopolists is through antitrust law.

In studying oligopolistic markets,economists assume that

The prisoners' dilemma game

In the prisoners' dilemma game,one prisoner is always better off confessing,no matter what the other prisoner does.

Although the practice of predatory pricing is a common claim in antitrust suits,some economists are skeptical of this argument because they believe

In the prisoners' dilemma game with Bonnie and Clyde as the players,the likely outcome is

Game theory is necessary for understanding

Who wrote,"People of the same trade seldom meet together,but the conversation ends in a conspiracy against the public,or in some diversion to raise prices."?

Economists claim that a resale price maintenance agreement is not anti-competitive because

Acme Computer Co.sells computers to retail stores for $400.If Acme requires the retailers to charge customers $500 for the computers,then it is engaging in

In a game,a dominant strategy is

Game theory is important for the understanding of

Ten Principles of 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

Monopolistic Competition

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality 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 Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

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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