Question 1

An oligopoly firm is similar to a monopolistically competitive firm in that

Accepted Answer

A)  both firms face the prisoner's dilemma. 
B)  both operate in a market in which there are entry barriers. 
C)  both firms have market power. 
D)  both firms are in industries characterised by an interdependent firm. 
A)  both firms face the prisoner's dilemma. 
B)  both operate in a market in which there are entry barriers. 
C)  both firms have market power. 
D)  both firms are in industries characterised by an interdependent firm.

Question 2

Because many business situations are repeated games, firms may be able to avoid the prisoner's dilemma and implicitly collude to keep prices high.

Accepted Answer

A) True 
 B)False

Question 3

What is the dominant strategy in the prisoner's dilemma?

Accepted Answer

A)  Each prisoner confesses because this is the rational action to pursue. 
B)  Do nothing in the hope that the other prisoner will also do nothing. 
C)  Do not confess because the other prisoner will most likely confess. 
D)  There is no dominant strategy. 
A)  Each prisoner confesses because this is the rational action to pursue. 
B)  Do nothing in the hope that the other prisoner will also do nothing. 
C)  Do not confess because the other prisoner will most likely confess. 
D)  There is no dominant strategy.

Question 4

eBay is an online auction site where more than 200 million items are auctioned annually. What type of auctions are run on eBay?

Accepted Answer

A)  noncooperative auctions 
B)  second-price auctions 
C)  cooperative auctions 
D)  double-blind auctions 
A)  noncooperative auctions 
B)  second-price auctions 
C)  cooperative auctions 
D)  double-blind auctions

Question 5

The larger the number of firms in an industry,

Accepted Answer

A)  the easier it is to implicitly collude to fix prices. 
B)  the more intense the rivalry among firms. 
C)  the greater the need for a price enforcement mechanism. 
D)  the larger the potential number of market segments. 
A)  the easier it is to implicitly collude to fix prices. 
B)  the more intense the rivalry among firms. 
C)  the greater the need for a price enforcement mechanism. 
D)  the larger the potential number of market segments.

Question 6

An agreement among firms to charge the same price or otherwise not to compete is called

Accepted Answer

A)  a payoff matrix. 
B)  a subgame-perfect equilibrium. 
C)  a Nash equilibrium. 
D)  collusion. 
A)  a payoff matrix. 
B)  a subgame-perfect equilibrium. 
C)  a Nash equilibrium. 
D)  collusion.

Question 7

Airlines often engage in last-minute price cutting to fill remaining empty seats on a flight because this practice will generally

Accepted Answer

A)  prevent rival airlines from competing in that market. 
B)  increase marginal revenue more than marginal cost. 
C)  maximise marginal revenue. 
D)  discourage rivals from matching price cuts. 
A)  prevent rival airlines from competing in that market. 
B)  increase marginal revenue more than marginal cost. 
C)  maximise marginal revenue. 
D)  discourage rivals from matching price cuts.

Question 8

An equilibrium in a game in which players pursue their own self-interests and do not cooperate is called a

Accepted Answer

A)  cartel equilibrium. 
B)  noncooperative equilibrium. 
C)  prisoner's dilemma equilibrium. 
D)  dominant strategy equilibrium. 
A)  cartel equilibrium. 
B)  noncooperative equilibrium. 
C)  prisoner's dilemma equilibrium. 
D)  dominant strategy equilibrium.

Question 9

A dominant strategy

Accepted Answer

A)  is one that is the best for a firm, no matter what strategies other firms use. 
B)  is one that a firm is forced into following by government policy. 
C)  involves colluding with rivals to maximise joint profits. 
D)  involves deciding what to do after all rivals have chosen their own strategies. 
A)  is one that is the best for a firm, no matter what strategies other firms use. 
B)  is one that a firm is forced into following by government policy. 
C)  involves colluding with rivals to maximise joint profits. 
D)  involves deciding what to do after all rivals have chosen their own strategies.

Question 10

For years economists believed that market structure explained the ability of some firms to earn economic profits. Today, economists and business strategists put greater emphasis on

Accepted Answer

A)  the number of years a firm has been in business and the average price of the products sold by the firm. 
B)  the number of countries in which a firm conducts business and the number of employees the firm has in each country. 
C)  the characteristics of individual firms and the strategies their managements use to continue to earn economic profits. 
D)  the size of a firm relative to the industry average and the number of firms in the domestic industry. 
A)  the number of years a firm has been in business and the average price of the products sold by the firm. 
B)  the number of countries in which a firm conducts business and the number of employees the firm has in each country. 
C)  the characteristics of individual firms and the strategies their managements use to continue to earn economic profits. 
D)  the size of a firm relative to the industry average and the number of firms in the domestic industry.

Question 11

A prisoner's dilemma leads to a noncooperative equilibrium.

Accepted Answer

A) True 
 B)False

Question 12

Oligopolies are difficult to analyse because

Accepted Answer

A)  the firms are so large. 
B)  demand and cost curves do not exist for these types of industries. 
C)  how firms respond to a price change by a rival is uncertain. 
D)  oligopolies are a recent development so economists have not had time to develop models. 
A)  the firms are so large. 
B)  demand and cost curves do not exist for these types of industries. 
C)  how firms respond to a price change by a rival is uncertain. 
D)  oligopolies are a recent development so economists have not had time to develop models.

Question 13

-Refer to Table 11-2. Is there a dominant strategy for Nigeria and, if so, what is it?

Accepted Answer

A)  Yes, it has a dominant strategy depending on what Saudi Arabia does. 
B)  No, there is no dominant strategy. 
C)  Yes, the dominant strategy is to produce a low output. 
D)  Yes, the dominant strategy is to produce a high output. 
A)  Yes, it has a dominant strategy depending on what Saudi Arabia does. 
B)  No, there is no dominant strategy. 
C)  Yes, the dominant strategy is to produce a low output. 
D)  Yes, the dominant strategy is to produce a high output.

Question 14

If economies of scale are relatively unimportant in an industry, the typical firm's long-run average total cost curve will reach a minimum at a level of output that is a ________ fraction of total industry sales. The industry will be ________.

Accepted Answer

A)  large; competitive 
B)  large; an oligopoly 
C)  small; competitive 
D)  small; an oligopoly 
A)  large; competitive 
B)  large; an oligopoly 
C)  small; competitive 
D)  small; an oligopoly

Question 15

In many business situations one firm will act first, and then other firms will respond. To help analyse these types of situations economists use

Accepted Answer

A)  retaliation games. 
B)  follow-the-leader-games. 
C)  sequential games. 
D)  bargaining games. 
A)  retaliation games. 
B)  follow-the-leader-games. 
C)  sequential games. 
D)  bargaining games.

Question 16

Explain why member firms of a cartel like OPEC have incentives to agree to a low cartel production level and then produce more than its quota.

Accepted Answer

A low cartel production level results in

Question 17

Prices of PlayStation 4 game systems are similar at almost every large retailer and little price competition occurs among these retailers. An explanation for this is

Accepted Answer

A)  retailers are all price takers. 
B)  retailers have lobbied state governments to allow them to collude legally to set the prices of certain products. 
C)  pricing PlayStation 4 game systems is a repeated game. Over a long period of time, a cooperative equilibrium has been reached where retailers charge high prices for these systems. 
D)  retailers are in a prisoner's dilemma which causes them to all charge the same price for PlayStation 4 game systems. 
A)  retailers are all price takers. 
B)  retailers have lobbied state governments to allow them to collude legally to set the prices of certain products. 
C)  pricing PlayStation 4 game systems is a repeated game. Over a long period of time, a cooperative equilibrium has been reached where retailers charge high prices for these systems. 
D)  retailers are in a prisoner's dilemma which causes them to all charge the same price for PlayStation 4 game systems.

Question 18

We can draw demand curves for firms in perfectly competitive and monopolistically competitive industries, but not for oligopoly firms. The reason for this is

Accepted Answer

A)  there are no barriers to entry in perfectly competitive and monopolistically competitive industries. There are high barriers to entry in oligopoly industries. 
B)  we can assume that the prices charged by perfectly competitive and monopolistically competitive firms have no impact on rival firms. For oligopoly this assumption is unrealistic. 
C)  that perfectly competitive and monopolistically competitive firms are price takers. Oligopoly firms are price makers. 
D)  perfectly competitive and monopolistically competitive firms sell standardised products. Oligopoly firms sell differentiated products. 
A)  there are no barriers to entry in perfectly competitive and monopolistically competitive industries. There are high barriers to entry in oligopoly industries. 
B)  we can assume that the prices charged by perfectly competitive and monopolistically competitive firms have no impact on rival firms. For oligopoly this assumption is unrealistic. 
C)  that perfectly competitive and monopolistically competitive firms are price takers. Oligopoly firms are price makers. 
D)  perfectly competitive and monopolistically competitive firms sell standardised products. Oligopoly firms sell differentiated products.

Question 19

Explain the difference between a cooperative equilibrium and a noncooperative equilibrium in game theory.

Accepted Answer

A cooperative equilibrium is one in whic

Question 20

In which of the following cartels is total cartel profit likely to be the highest?

Accepted Answer

A)  a cartel made up of equal sized firms each producing different quantities of a differentiated product 
B)  a cartel made up of firms of various sizes each producing different quantities of a homogeneous product 
C)  a cartel made up of firms of various sizes each producing the same quantity of a differentiated product 
D)  a cartel made up of identical firms each producing the same quantity of a homogeneous product 
A)  a cartel made up of equal sized firms each producing different quantities of a differentiated product 
B)  a cartel made up of firms of various sizes each producing different quantities of a homogeneous product 
C)  a cartel made up of firms of various sizes each producing the same quantity of a differentiated product 
D)  a cartel made up of identical firms each producing the same quantity of a homogeneous product

An oligopoly firm is similar to a monopolistically competitive firm in that

Because many business situations are repeated games, firms may be able to avoid the prisoner's dilemma and implicitly collude to keep prices high.

What is the dominant strategy in the prisoner's dilemma?

eBay is an online auction site where more than 200 million items are auctioned annually. What type of auctions are run on eBay?

The larger the number of firms in an industry,

An agreement among firms to charge the same price or otherwise not to compete is called

Airlines often engage in last-minute price cutting to fill remaining empty seats on a flight because this practice will generally

An equilibrium in a game in which players pursue their own self-interests and do not cooperate is called a

A dominant strategy

For years economists believed that market structure explained the ability of some firms to earn economic profits. Today, economists and business strategists put greater emphasis on

A prisoner's dilemma leads to a noncooperative equilibrium.

Oligopolies are difficult to analyse because

-Refer to Table 11-2. Is there a dominant strategy for Nigeria and, if so, what is it?

If economies of scale are relatively unimportant in an industry, the typical firm's long-run average total cost curve will reach a minimum at a level of output that is a fraction of total industry sales. The industry will be .

In many business situations one firm will act first, and then other firms will respond. To help analyse these types of situations economists use

Explain why member firms of a cartel like OPEC have incentives to agree to a low cartel production level and then produce more than its quota.

Prices of PlayStation 4 game systems are similar at almost every large retailer and little price competition occurs among these retailers. An explanation for this is

We can draw demand curves for firms in perfectly competitive and monopolistically competitive industries, but not for oligopoly firms. The reason for this is

Explain the difference between a cooperative equilibrium and a noncooperative equilibrium in game theory.

In which of the following cartels is total cartel profit likely to be the highest?

Economics Foundations and Models

Choices and Trade - Offs in the Market

Where Prices Come Frome : The Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency , Government Price Setting and Taxes

Concumer Choice and Behavioural Economics

Technology , Production and Costs

Firms in Perfectly Compitive Markets

Monopoly Markets

Monopolistic Competition : The Competitive Model in More Realistic Setting

The Market for Labour and Other Factors of Production

International Trade

Government Intervention in the Market

Externalities , Environmental Policy and Public Goods

The Distribution of Income and Social Policy

Filters

Exam 11: Oligopoly : Firms in Less Competitve Markets

An oligopoly firm is similar to a monopolistically competitive firm in that

Because many business situations are repeated games, firms may be able to avoid the prisoner's dilemma and implicitly collude to keep prices high.

What is the dominant strategy in the prisoner's dilemma?

eBay is an online auction site where more than 200 million items are auctioned annually. What type of auctions are run on eBay?

The larger the number of firms in an industry,

An agreement among firms to charge the same price or otherwise not to compete is called

Airlines often engage in last-minute price cutting to fill remaining empty seats on a flight because this practice will generally

An equilibrium in a game in which players pursue their own self-interests and do not cooperate is called a

A dominant strategy

For years economists believed that market structure explained the ability of some firms to earn economic profits. Today, economists and business strategists put greater emphasis on

A prisoner's dilemma leads to a noncooperative equilibrium.

Oligopolies are difficult to analyse because

-Refer to Table 11-2. Is there a dominant strategy for Nigeria and, if so, what is it?

If economies of scale are relatively unimportant in an industry, the typical firm's long-run average total cost curve will reach a minimum at a level of output that is a ________ fraction of total industry sales. The industry will be ________.

In many business situations one firm will act first, and then other firms will respond. To help analyse these types of situations economists use

Explain why member firms of a cartel like OPEC have incentives to agree to a low cartel production level and then produce more than its quota.

Prices of PlayStation 4 game systems are similar at almost every large retailer and little price competition occurs among these retailers. An explanation for this is

We can draw demand curves for firms in perfectly competitive and monopolistically competitive industries, but not for oligopoly firms. The reason for this is

Explain the difference between a cooperative equilibrium and a noncooperative equilibrium in game theory.

In which of the following cartels is total cartel profit likely to be the highest?

Economics Foundations and Models

Choices and Trade - Offs in the Market

Where Prices Come Frome : The Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency , Government Price Setting and Taxes

Concumer Choice and Behavioural Economics

Technology , Production and Costs

Firms in Perfectly Compitive Markets

Monopoly Markets

Monopolistic Competition : The Competitive Model in More Realistic Setting

The Market for Labour and Other Factors of Production

International Trade

Government Intervention in the Market

Externalities , Environmental Policy and Public Goods

The Distribution of Income and Social Policy

Filters

If economies of scale are relatively unimportant in an industry, the typical firm's long-run average total cost curve will reach a minimum at a level of output that is a fraction of total industry sales. The industry will be .