Question 1

In the prisoner's dilemma:

Accepted Answer

A)  the outcome obtained when both confess is worse for each than the outcome they would have obtained had they both remained silent. 
B)  whatever the other does, each is better off confessing than remaining silent. 
C)  we see a conflict between group and individual rationality. 
D)  all of the above 
A)  the outcome obtained when both confess is worse for each than the outcome they would have obtained had they both remained silent. 
B)  whatever the other does, each is better off confessing than remaining silent. 
C)  we see a conflict between group and individual rationality. 
D)  all of the above

Question 2

If firms meet together to decide on prices and outputs,it is called:

Accepted Answer

A)  collusion. 
B)  oligopolistic competition. 
C)  price leadership. 
D)  a pricing conglomerate. 
A)  collusion. 
B)  oligopolistic competition. 
C)  price leadership. 
D)  a pricing conglomerate.

Question 3

If mutual interdependence among firms is present,then each profit-maximizing firm in the market:

Accepted Answer

A)  produces a product that is similar but not identical to the products of its rivals. 
B)  must consider the reactions of its rivals when it determines its pricing policy. 
C)  faces a perfectly elastic demand curve for its product. 
D)  faces a perfectly inelastic demand curve for its product. 
A)  produces a product that is similar but not identical to the products of its rivals. 
B)  must consider the reactions of its rivals when it determines its pricing policy. 
C)  faces a perfectly elastic demand curve for its product. 
D)  faces a perfectly inelastic demand curve for its product.

Question 4

In oligopolistic markets:

Accepted Answer

A)  there are a large number of sellers. 
B)  firms are large relative to the size of the market. 
C)  there are insignificant barriers to entry. 
D)  firms have no perceptible influence over the market price. 
A)  there are a large number of sellers. 
B)  firms are large relative to the size of the market. 
C)  there are insignificant barriers to entry. 
D)  firms have no perceptible influence over the market price.

Question 5

For a time,either R.J.Reynolds or Phillip Morris raised prices of cigarettes twice a year by about 50 cents per carton.The other firms in the industry raised their prices by the same amount.Economists call this:

Accepted Answer

A)  predatory pricing. 
B)  a price war. 
C)  price leadership. 
D)  producer sovereignty. 
A)  predatory pricing. 
B)  a price war. 
C)  price leadership. 
D)  producer sovereignty.

Question 6

Which of the following would have the lowest switching costs?

Accepted Answer

A)  a customer ordering from Papa John's instead Pizza Hut 
B)  an individual getting rid of a PS3 game system and beginning to use a Wii game system 
C)  a company changing from a QWERTY keyboard to a keyboard with a different format 
D)  a customer moving a bank account from one bank to another 
A)  a customer ordering from Papa John's instead Pizza Hut 
B)  an individual getting rid of a PS3 game system and beginning to use a Wii game system 
C)  a company changing from a QWERTY keyboard to a keyboard with a different format 
D)  a customer moving a bank account from one bank to another

Question 7

What impact would easy entry have on the profitability of oligopolies?

Accepted Answer

When market entry is easy,newcomers will

Question 8

In the "Prisoners' Dilemma" game:

Accepted Answer

A)  When the prisoners follow their dominant strategy and confess, both will be worse off than if each had remained silent. 
B)  a player would be better off if he did not confess and the other player confessed. 
C)  a player would be better off if both he and the other player confessed. 
D)  a player would be better off if neither he nor the other player confessed. 
A)  When the prisoners follow their dominant strategy and confess, both will be worse off than if each had remained silent. 
B)  a player would be better off if he did not confess and the other player confessed. 
C)  a player would be better off if both he and the other player confessed. 
D)  a player would be better off if neither he nor the other player confessed.

Question 9

If the firms in an industry represented 35%,25%,20%,15%,and 5% of the market's total revenues,respectively,what would be the measure of the Herfindahl-Hirschman Index for this industry?

Accepted Answer

A)  2,500 
B)  3,525 
C)  7,725 
D)  10,000 
A)  2,500 
B)  3,525 
C)  7,725 
D)  10,000

Question 10

Exhibit 15-5   Refer to Exhibit 15-5.The payoffs to General Mills and Kellogg's in the Nash equilibrium are:

Accepted Answer

A)  $50 million and $60 million, respectively. 
B)  $10 million and $110 million, respectively. 
C)  $100 million and $20 million, respectively. 
D)  $25 million and $30 million, respectively. 
A)  $50 million and $60 million, respectively. 
B)  $10 million and $110 million, respectively. 
C)  $100 million and $20 million, respectively. 
D)  $25 million and $30 million, respectively.

Question 11

A cartel is:

Accepted Answer

A)  a group of oligopolists who try to behave like a single monopolist and split the benefits among themselves. 
B)  a government-approved organization for the exchange of technical information among firms. 
C)  an industry trade group formed to lobby political leaders. 
D)  a regulated industry manufacturers association that is officially permitted to set the price of its product above long-run average total cost. 
A)  a group of oligopolists who try to behave like a single monopolist and split the benefits among themselves. 
B)  a government-approved organization for the exchange of technical information among firms. 
C)  an industry trade group formed to lobby political leaders. 
D)  a regulated industry manufacturers association that is officially permitted to set the price of its product above long-run average total cost.

Question 12

Explain why under oligopoly conditions firms might wish to choose pricing and output strategies together.What is this arrangement called?

Accepted Answer

If firms can agree together about pricin

Question 13

As in perfect and monopolistic competition,oligopoly firms cannot earn economic profits in the long run.

Accepted Answer

A) True 
 B)False

Question 14

Under conditions of oligopoly markets,firms generally don't like to compete based on price.Why?

Accepted Answer

A)  Because no producer has a cost advantage in doing so. 
B)  Because consumers rarely spend time making price comparisons between different brands. 
C)  Because competing on the basis of price can set off a price war among competitors and significantly reduce profits to the firm. 
D)  Because price competition is illegal in most states. 
A)  Because no producer has a cost advantage in doing so. 
B)  Because consumers rarely spend time making price comparisons between different brands. 
C)  Because competing on the basis of price can set off a price war among competitors and significantly reduce profits to the firm. 
D)  Because price competition is illegal in most states.

Question 15

Individual members of a cartel have an incentive to ____ the cartel agreement because pursuit of ____ will maximize individual profit.

Accepted Answer

A)  adhere to; self-interest 
B)  cheat on; collective interest 
C)  cheat on; self-interest 
D)  adhere to; collective interest 
A)  adhere to; self-interest 
B)  cheat on; collective interest 
C)  cheat on; self-interest 
D)  adhere to; collective interest

Question 16

Cartels usually succumb to divisive forces caused by:

Accepted Answer

A)  stringent enforcement of a cartel agreement. 
B)  the similarity of production costs across member firms. 
C)  members cheating by giving secret discounts. 
D)  insufficient profits compared to independent operations. 
A)  stringent enforcement of a cartel agreement. 
B)  the similarity of production costs across member firms. 
C)  members cheating by giving secret discounts. 
D)  insufficient profits compared to independent operations.

Question 17

____ facilitates joint profit maximization for the oligopoly.

Accepted Answer

A)  Entry barrier 
B)  Switching costs 
C)  Collusion 
D)  Externalities 
A)  Entry barrier 
B)  Switching costs 
C)  Collusion 
D)  Externalities

Question 18

Exhibit 15-5   Refer to Exhibit 15-5.In the game:

Accepted Answer

A)  the dominant strategy of General Mills is to set a high price. 
B)  the dominant strategy of Kellogg's is to set a low price. 
C)  the dominant strategy of Kellogg's is to set a high price. 
D)  neither firm has a dominant strategy. 
A)  the dominant strategy of General Mills is to set a high price. 
B)  the dominant strategy of Kellogg's is to set a low price. 
C)  the dominant strategy of Kellogg's is to set a high price. 
D)  neither firm has a dominant strategy.

Question 19

____ is used in repeated games such that one player follows the other player's move in the previous round,leading to ____ cooperation.

Accepted Answer

A)  Bandwagon effect; greater 
B)  Bandwagon effect; lesser 
C)  Tit-for-tat strategy; greater 
D)  Tit-for-tat strategy; lesser 
A)  Bandwagon effect; greater 
B)  Bandwagon effect; lesser 
C)  Tit-for-tat strategy; greater 
D)  Tit-for-tat strategy; lesser

Question 20

A market situation where a small number of sellers compose the entire industry is called:

Accepted Answer

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

Exam 15: Oligopoly and Strategic Behavior

In the prisoner's dilemma:

If firms meet together to decide on prices and outputs,it is called:

If mutual interdependence among firms is present,then each profit-maximizing firm in the market:

In oligopolistic markets:

For a time,either R.J.Reynolds or Phillip Morris raised prices of cigarettes twice a year by about 50 cents per carton.The other firms in the industry raised their prices by the same amount.Economists call this:

Which of the following would have the lowest switching costs?

What impact would easy entry have on the profitability of oligopolies?

In the "Prisoners' Dilemma" game:

If the firms in an industry represented 35%,25%,20%,15%,and 5% of the market's total revenues,respectively,what would be the measure of the Herfindahl-Hirschman Index for this industry?

Exhibit 15-5 Refer to Exhibit 15-5.The payoffs to General Mills and Kellogg's in the Nash equilibrium are:

A cartel is:

Explain why under oligopoly conditions firms might wish to choose pricing and output strategies together.What is this arrangement called?

As in perfect and monopolistic competition,oligopoly firms cannot earn economic profits in the long run.

Under conditions of oligopoly markets,firms generally don't like to compete based on price.Why?

Individual members of a cartel have an incentive to ____ the cartel agreement because pursuit of ____ will maximize individual profit.

Cartels usually succumb to divisive forces caused by:

____ facilitates joint profit maximization for the oligopoly.

Exhibit 15-5 Refer to Exhibit 15-5.In the game:

____ is used in repeated games such that one player follows the other player's move in the previous round,leading to ____ cooperation.

A market situation where a small number of sellers compose the entire industry is called:

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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Individual members of a cartel have an incentive to the cartel agreement because pursuit of will maximize individual profit.

is used in repeated games such that one player follows the other player's move in the previous round,leading to cooperation.