Question 1

In a collusive oligopoly,joint profits are maximized when a price leader establishes price based on:

Accepted Answer

A)  its own demand and cost schedules. 
B)  the market demand for the product and the marginal costs of the various firms. 
C)  the market demand for the product and its own marginal cost schedule. 
D)  the demand curve faced by a typical competitor and its own marginal cost curve. 
A)  its own demand and cost schedules. 
B)  the market demand for the product and the marginal costs of the various firms. 
C)  the market demand for the product and its own marginal cost schedule. 
D)  the demand curve faced by a typical competitor and its own marginal cost curve.

Question 2

Equilibrium price and quantity for a collusive oligopoly are determined according to the intersection of the ____ curve and the horizontal sum of the short-run ____ curves for the oligopolists.

Accepted Answer

A)  total revenue; total cost 
B)  marginal revenue; marginal cost 
C)  average revenue; average cost 
D)  marginal revenue; average total cost 
A)  total revenue; total cost 
B)  marginal revenue; marginal cost 
C)  average revenue; average cost 
D)  marginal revenue; average total cost

Question 3

An example of an oligopoly is:

Accepted Answer

A)  the restaurant industry. 
B)  the wheat market. 
C)  the cigarette industry. 
D)  the beef industry. 
A)  the restaurant industry. 
B)  the wheat market. 
C)  the cigarette industry. 
D)  the beef industry.

Question 4

Which of the following best reflects a network externality?

Accepted Answer

A)  Price of a good affecting a purchase decision. 
B)  Number of other people purchasing the good influencing the quantity demanded. 
C)  Proven quality of a product influencing the quantity demanded. 
D)  Price of a related good affecting a purchase decision. 
A)  Price of a good affecting a purchase decision. 
B)  Number of other people purchasing the good influencing the quantity demanded. 
C)  Proven quality of a product influencing the quantity demanded. 
D)  Price of a related good affecting a purchase decision.

Question 5

Three airlines account for most of the air traffic in and out of a local city.If the three airlines joined together in setting fares and air travel schedules,economists would say that they were acting as:

Accepted Answer

A)  monopolistic competitors, as each firm would have to differentiate its airline services from its rivals. 
B)  perfect competitors, as each firm would sell travel services at the same fares as the other airlines. 
C)  a cartel, as the three airlines together would attempt to coordinate policies in the local market to jointly maximize profits. 
D)  none of the above 
A)  monopolistic competitors, as each firm would have to differentiate its airline services from its rivals. 
B)  perfect competitors, as each firm would sell travel services at the same fares as the other airlines. 
C)  a cartel, as the three airlines together would attempt to coordinate policies in the local market to jointly maximize profits. 
D)  none of the above

Question 6

Exhibit 15-3 Prior to the year 2000,the United States considered renewal of Most Favored Nation (MFN)trading status with China annually (Most Favored Nation trading status is now called Normal Trade Relations).Historically,legislators made threats of not renewing MFN status because of alleged human rights abuses in China.The nonrenewable of MFN trading status would likely have triggered retaliatory measures by China.The game below reflects the potential economic gains from trade in a scenario in which China chooses whether to impose trade sanctions against U.S.firms and the United States chooses whether to renew MFN status with China.
  Refer to Exhibit 15-3.If both countries follow a dominant strategy,the gains from trade for China will be:

Accepted Answer

A)  $285. 
B)  $275. 
C)  $75. 
D)  $5. 
A)  $285. 
B)  $275. 
C)  $75. 
D)  $5.

Question 7

If the firms in an oligopoly collude,the results will approximate what other type of industry?

Accepted Answer

A)  perfect competition 
B)  monopolistic competition 
C)  monopoly 
D)  none of the above 
A)  perfect competition 
B)  monopolistic competition 
C)  monopoly 
D)  none of the above

Question 8

Why should consumers be concerned about collusive agreements? What legal remedies are available now?

Accepted Answer

Collusive agreements are basically agree

Question 9

Under which one of the following market structures are sellers most likely to consider the reaction of rival sellers when they set the price of their product?

Accepted Answer

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

Question 10

The U.S.commercial airline industry is a good example of an oligopolistic market.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following industries most closely approximates the oligopoly model?

Accepted Answer

A)  dry cleaning 
B)  fast food 
C)  automobile manufacturing 
D)  agricultural produce 
A)  dry cleaning 
B)  fast food 
C)  automobile manufacturing 
D)  agricultural produce

Question 12

Exhibit 15-3 Prior to the year 2000,the United States considered renewal of Most Favored Nation (MFN)trading status with China annually (Most Favored Nation trading status is now called Normal Trade Relations).Historically,legislators made threats of not renewing MFN status because of alleged human rights abuses in China.The nonrenewable of MFN trading status would likely have triggered retaliatory measures by China.The game below reflects the potential economic gains from trade in a scenario in which China chooses whether to impose trade sanctions against U.S.firms and the United States chooses whether to renew MFN status with China.
  Refer to Exhibit 15-3.If both countries follow a dominant strategy,the gains from trade for the United Sates will be:

Accepted Answer

A)  $130. 
B)  $65. 
C)  $140. 
D)  $35. 
A)  $130. 
B)  $65. 
C)  $140. 
D)  $35.

Question 13

Which of the following could result in a negative network externality?

Accepted Answer

A)  snob effect; standardization 
B)  bandwagon effect; congestion 
C)  bandwagon effect; standardization 
D)  snob effect; congestion 
A)  snob effect; standardization 
B)  bandwagon effect; congestion 
C)  bandwagon effect; standardization 
D)  snob effect; congestion

Question 14

Cartel agreements are more likely to succeed if:

Accepted Answer

A)  there are a large number of firms in the industry producing identical products. 
B)  there are few firms in the industry producing identical products. 
C)  there are a large number of firms in the industry producing differentiated products. 
D)  there are a few firms in the industry producing differentiated products. 
A)  there are a large number of firms in the industry producing identical products. 
B)  there are few firms in the industry producing identical products. 
C)  there are a large number of firms in the industry producing differentiated products. 
D)  there are a few firms in the industry producing differentiated products.

Question 15

At a Nash equilibrium:

Accepted Answer

A)  each firm is said to be doing as well as it can, regardless of the actions of its competitor. 
B)  each firm is said to be doing as well as it can, given the actions of its competitor. 
C)  firms always choose strategies in order to maximize the social welfare. 
D)  firms always choose strategies to avoid the worst possible outcome. 
A)  each firm is said to be doing as well as it can, regardless of the actions of its competitor. 
B)  each firm is said to be doing as well as it can, given the actions of its competitor. 
C)  firms always choose strategies in order to maximize the social welfare. 
D)  firms always choose strategies to avoid the worst possible outcome.

Question 16

One difference between oligopoly firms and firms that are monopolistic competitors is that:

Accepted Answer

A)  the average total cost curves of monopolistic competitors are generally u-shaped, but for oligopoly firms they are not. 
B)  monopolistic competitors choose a level of output such that marginal revenue equals marginal cost, but oligopoly firms generally do not. 
C)  monopolistic competitors face lower costs on average than do oligopoly firms. 
D)  the interdependence among firms is highly significant in oligopoly markets, but not in monopolistically competitive markets. 
A)  the average total cost curves of monopolistic competitors are generally u-shaped, but for oligopoly firms they are not. 
B)  monopolistic competitors choose a level of output such that marginal revenue equals marginal cost, but oligopoly firms generally do not. 
C)  monopolistic competitors face lower costs on average than do oligopoly firms. 
D)  the interdependence among firms is highly significant in oligopoly markets, but not in monopolistically competitive markets.

Question 17

Exhibit 15-1 The following payoff matrix shows the possible sentences that two suspects,who are arrested on suspicion of car theft,could receive.The suspects are interrogated separately and are unable to communicate with one another.
  Refer to Exhibit 15-1.When the prisoner's follow their dominant strategy,the sentences for Suspect 1 and Suspect 2 are:

Accepted Answer

A)  2 years and 2 years, respectively. 
B)  6 years and 6 years, respectively. 
C)  10 years and 1 year, respectively. 
D)  1 year and 10 years, respectively. 
A)  2 years and 2 years, respectively. 
B)  6 years and 6 years, respectively. 
C)  10 years and 1 year, respectively. 
D)  1 year and 10 years, respectively.

Question 18

Exhibit 15-3 Prior to the year 2000,the United States considered renewal of Most Favored Nation (MFN)trading status with China annually (Most Favored Nation trading status is now called Normal Trade Relations).Historically,legislators made threats of not renewing MFN status because of alleged human rights abuses in China.The nonrenewable of MFN trading status would likely have triggered retaliatory measures by China.The game below reflects the potential economic gains from trade in a scenario in which China chooses whether to impose trade sanctions against U.S.firms and the United States chooses whether to renew MFN status with China.
  Refer to Exhibit 15-3.If trade negotiators are able to communicate effectively about the consequences of various trade policies (i.e.,enter into and enforce an agreement about the policy that they should adopt),then we would expect the game outcome to be:

Accepted Answer

A)  United States $140; China $5. 
B)  United States $65; China $75. 
C)  United States $35; China $285. 
D)  United States $130; China $275. 
A)  United States $140; China $5. 
B)  United States $65; China $75. 
C)  United States $35; China $285. 
D)  United States $130; China $275.

Question 19

Under conditions of oligopoly,economies of large-scale production mean that:

Accepted Answer

A)  firms are able to sell all of the output they desire. 
B)  it is difficult for a firm to determine its profit-maximizing price and output. 
C)  large firms would find it more profitable to break up into smaller production units. 
D)  small firms are at a disadvantage in competing with relatively large firms. 
A)  firms are able to sell all of the output they desire. 
B)  it is difficult for a firm to determine its profit-maximizing price and output. 
C)  large firms would find it more profitable to break up into smaller production units. 
D)  small firms are at a disadvantage in competing with relatively large firms.

Question 20

How do economies of scale result in barriers to entry into oligopoly models?

Accepted Answer

It is difficult to predict how firms wil

Exam 15: Oligopoly and Strategic Behavior

In a collusive oligopoly,joint profits are maximized when a price leader establishes price based on:

Equilibrium price and quantity for a collusive oligopoly are determined according to the intersection of the ____ curve and the horizontal sum of the short-run ____ curves for the oligopolists.

An example of an oligopoly is:

Which of the following best reflects a network externality?

Three airlines account for most of the air traffic in and out of a local city.If the three airlines joined together in setting fares and air travel schedules,economists would say that they were acting as:

If the firms in an oligopoly collude,the results will approximate what other type of industry?

Why should consumers be concerned about collusive agreements? What legal remedies are available now?

Under which one of the following market structures are sellers most likely to consider the reaction of rival sellers when they set the price of their product?

The U.S.commercial airline industry is a good example of an oligopolistic market.

Which of the following industries most closely approximates the oligopoly model?

Which of the following could result in a negative network externality?

Cartel agreements are more likely to succeed if:

At a Nash equilibrium:

One difference between oligopoly firms and firms that are monopolistic competitors is that:

Under conditions of oligopoly,economies of large-scale production mean that:

How do economies of scale result in barriers to entry into oligopoly models?

The Role and Method of Economics

Economics: Eight Powerful Ideas

Scarcity, Trade-Offs, and Production Possibilities

Demand, Supply, and Market Equilibrium

Markets in Motion and Price Controls

Elasticities

Market Efficiency and Welfare

Market Failure

Public Finance and Public Choice

Consumer Choice Theory

The Firm: Production and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Product Differentiation

The Markets for Labor, Capital, and Land

Income, Poverty, and Health Care

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Measuring Economic Performance

Economic Growth in the Global Economy

Financial Markets, Saving, and Investment

Aggregate Demand and Aggregate Supply

The Aggregate Expenditure Model

Monetary Institutions

The Federal Reserve System and Monetary Policy

Issues in Macroeconomic Theory and Policy

International Trade

International Finance

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Equilibrium price and quantity for a collusive oligopoly are determined according to the intersection of the curve and the horizontal sum of the short-run curves for the oligopolists.