Question 1

What is the incentive for a firm to join a cartel?

Accepted Answer

A)  to be able to earn profits in the long run but not in the short run 
B)  to be able to earn larger profits than if it was not part of the cartel 
C)  to completely insulate itself from competition 
D)  to produce a larger amount of output than if it was not part of the cartel 
A)  to be able to earn profits in the long run but not in the short run 
B)  to be able to earn larger profits than if it was not part of the cartel 
C)  to completely insulate itself from competition 
D)  to produce a larger amount of output than if it was not part of the cartel

Question 2

-Refer to Table 11-3. What is the Nash equilibrium in this game?

Accepted Answer

A)  There is no Nash equilibrium. 
B)  Baine increases its advertising budget, but Alistair does not. 
C)  Alistair increases its advertising budget, but Baine does not. 
D)  Both Alistair and Baine increase their advertising budgets. 
A)  There is no Nash equilibrium. 
B)  Baine increases its advertising budget, but Alistair does not. 
C)  Alistair increases its advertising budget, but Baine does not. 
D)  Both Alistair and Baine increase their advertising budgets.

Question 3

The approach economists use to analyse competition among oligopolists is called

Accepted Answer

A)  marginal analysis. 
B)  game theory. 
C)  oligopoly theory. 
D)  competition among the few. 
A)  marginal analysis. 
B)  game theory. 
C)  oligopoly theory. 
D)  competition among the few.

Question 4

An equilibrium in a game in which players pursue their own self-interest is called

Accepted Answer

A)  a Nash equilibrium. 
B)  a cooperative equilibrium. 
C)  a noncooperative equilibrium. 
D)  a prisoner's dilemma. 
A)  a Nash equilibrium. 
B)  a cooperative equilibrium. 
C)  a noncooperative equilibrium. 
D)  a prisoner's dilemma.

Question 5

A set of actions that a firm takes to achieve a goal is the definition of a

Accepted Answer

A)  business plan. 
B)  business strategy. 
C)  business prospectus. 
D)  business goal. 
A)  business plan. 
B)  business strategy. 
C)  business prospectus. 
D)  business goal.

Question 6

Explain how collusion makes firms better off. Given the incentives to collude, briefly explain why every industry does not become a cartel.

Accepted Answer

Collusion makes firms better off because

Question 7

Monopolistic competition differs from oligopoly in that in monopolistic competition firms act independently while in oligopoly firms act interdependently.

Accepted Answer

A) True 
 B)False

Question 8

Why are decision trees useful to managers who plan business strategies?

Accepted Answer

A)  Decision trees explain the level of concentration in an industry. 
B)  Decision trees can be used to increase the amount of product differentiation; this enables managers to charge higher prices for their products. 
C)  Decision trees provide a systematic way of thinking through the implications of a strategy. 
D)  Using a decision tree always leads to a dominant strategy. 
A)  Decision trees explain the level of concentration in an industry. 
B)  Decision trees can be used to increase the amount of product differentiation; this enables managers to charge higher prices for their products. 
C)  Decision trees provide a systematic way of thinking through the implications of a strategy. 
D)  Using a decision tree always leads to a dominant strategy.

Question 9

Which of the following is not a reason why government officials are willing to impose entry barriers?

Accepted Answer

A)  to raise revenue 
B)  to encourage innovation which may improve the standard of living in the long run 
C)  to increase economic efficiency 
D)  to promote an equitable distribution of income 
A)  to raise revenue 
B)  to encourage innovation which may improve the standard of living in the long run 
C)  to increase economic efficiency 
D)  to promote an equitable distribution of income

Question 10

An oligopolistic industry is characterised by a few large firms acting independently.

Accepted Answer

A) True 
 B)False

Question 11

Interdependence of firms is most common in

Accepted Answer

A)  monopolistically competitive industries. 
B)  monopolistic industries. 
C)  monopolistically competitive and oligopolistic industries. 
D)  oligopolistic industries. 
A)  monopolistically competitive industries. 
B)  monopolistic industries. 
C)  monopolistically competitive and oligopolistic industries. 
D)  oligopolistic industries.

Question 12

Firms in an oligopoly are said to be interdependent. What does this mean?

Accepted Answer

Interdependence among firms means that t

Question 13

Occupational licensing is an example of an entry barrier that improves a country's standard of living.

Accepted Answer

A) True 
 B)False

Question 14

Sequential games are used to analyse

Accepted Answer

A)  firms that are subject to the prisoner's dilemma. 
B)  cartels. 
C)  second-price auctions. 
D)  situations in which one firm acts and other firms respond. 
A)  firms that are subject to the prisoner's dilemma. 
B)  cartels. 
C)  second-price auctions. 
D)  situations in which one firm acts and other firms respond.

Question 15

In a decision tree, the difference between a decision node and a terminal node is that

Accepted Answer

A)  at a decision node, all participants are free to make individual decisions, but at a terminal node, they must agree on a collective decision. 
B)  at a decision node, all participants make the same decision, while at a terminal node, different players may make different decisions. 
C)  at a decision node, a decision must be made, while a terminal node shows the payoff. 
D)  at a decision node, a decision must be made, while at a terminal node, the final decision must be made. 
A)  at a decision node, all participants are free to make individual decisions, but at a terminal node, they must agree on a collective decision. 
B)  at a decision node, all participants make the same decision, while at a terminal node, different players may make different decisions. 
C)  at a decision node, a decision must be made, while a terminal node shows the payoff. 
D)  at a decision node, a decision must be made, while at a terminal node, the final decision must be made.

Question 16

An oligopolist's demand curve is

Accepted Answer

A)  identical to that of a perfectly competitive firm. 
B)  identical to that of a monopolistically competitive firm. 
C)  vertical on a price-quantity diagram. 
D)  unknown because a response of firms to price changes by rivals is uncertain. 
A)  identical to that of a perfectly competitive firm. 
B)  identical to that of a monopolistically competitive firm. 
C)  vertical on a price-quantity diagram. 
D)  unknown because a response of firms to price changes by rivals is uncertain.

Question 17

-Refer to Table 11-3. Does Baine have a dominant strategy and, if so, what is it?

Accepted Answer

A)  Yes, Baine should increase its advertising budget. 
B)  Yes, Baine should keep its advertising budget as is. 
C)  There are two dominant strategies: if Alistair increases its advertising budget, then Baine's best bet is to keep its budget the same, but if Alistair does not increase its spending, then Baine should raise its advertising budget. 
D)  No, there is no dominant strategy. 
A)  Yes, Baine should increase its advertising budget. 
B)  Yes, Baine should keep its advertising budget as is. 
C)  There are two dominant strategies: if Alistair increases its advertising budget, then Baine's best bet is to keep its budget the same, but if Alistair does not increase its spending, then Baine should raise its advertising budget. 
D)  No, there is no dominant strategy.

Question 18

Which of the following is not an example of a government-imposed entry barrier?

Accepted Answer

A)  patents 
B)  occupational licensing 
C)  barriers to international trade 
D)  antitrust legislation 
A)  patents 
B)  occupational licensing 
C)  barriers to international trade 
D)  antitrust legislation

Question 19

Why does a prisoner's dilemma lead to a noncooperative equilibrium?

Accepted Answer

A)  because each player had agreed before the game started to minimise the harm that he can inflict on the other players 
B)  because each player is uncertain how other players will play the game 
C)  because players must choose from a limited number of non-dominant strategies 
D)  because each rational player has a dominant strategy to play a certain way regardless of what other players do 
A)  because each player had agreed before the game started to minimise the harm that he can inflict on the other players 
B)  because each player is uncertain how other players will play the game 
C)  because players must choose from a limited number of non-dominant strategies 
D)  because each rational player has a dominant strategy to play a certain way regardless of what other players do

Question 20

-Refer to Figure 11-2. Now suppose that the government delays Xenophone's entry and Gigacom moves first. What is the likely outcome in the market?

Accepted Answer

A)  Both offer Internet service via cable line; Xenophone earns a profit of $6 million and Gigacom earns a profit of $9 million. 
B)  Both offer DSL Internet service; Xenophone earns a profit of $8 million and Gigacom earns a profit of $7 million. 
C)  Xenophone offers DSL Internet service and earns a profit of $5 million, while Gigacom offers Internet service via cable line and earns a profit of $6.5 million. 
D)  Xenophone offers Internet service via cable line and earns a profit of $4 million, while Gigacom offers DSL Internet service and earns a profit of $4.5 million. 
A)  Both offer Internet service via cable line; Xenophone earns a profit of $6 million and Gigacom earns a profit of $9 million. 
B)  Both offer DSL Internet service; Xenophone earns a profit of $8 million and Gigacom earns a profit of $7 million. 
C)  Xenophone offers DSL Internet service and earns a profit of $5 million, while Gigacom offers Internet service via cable line and earns a profit of $6.5 million. 
D)  Xenophone offers Internet service via cable line and earns a profit of $4 million, while Gigacom offers DSL Internet service and earns a profit of $4.5 million.

What is the incentive for a firm to join a cartel?

-Refer to Table 11-3. What is the Nash equilibrium in this game?

The approach economists use to analyse competition among oligopolists is called

An equilibrium in a game in which players pursue their own self-interest is called

A set of actions that a firm takes to achieve a goal is the definition of a

Explain how collusion makes firms better off. Given the incentives to collude, briefly explain why every industry does not become a cartel.

Monopolistic competition differs from oligopoly in that in monopolistic competition firms act independently while in oligopoly firms act interdependently.

Why are decision trees useful to managers who plan business strategies?

Which of the following is not a reason why government officials are willing to impose entry barriers?

An oligopolistic industry is characterised by a few large firms acting independently.

Interdependence of firms is most common in

Firms in an oligopoly are said to be interdependent. What does this mean?

Occupational licensing is an example of an entry barrier that improves a country's standard of living.

Sequential games are used to analyse

In a decision tree, the difference between a decision node and a terminal node is that

An oligopolist's demand curve is

-Refer to Table 11-3. Does Baine have a dominant strategy and, if so, what is it?

Which of the following is not an example of a government-imposed entry barrier?

Why does a prisoner's dilemma lead to a noncooperative equilibrium?

-Refer to Figure 11-2. Now suppose that the government delays Xenophone's entry and Gigacom moves first. What is the likely outcome in the market?

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

What is the incentive for a firm to join a cartel?

-Refer to Table 11-3. What is the Nash equilibrium in this game?

The approach economists use to analyse competition among oligopolists is called

An equilibrium in a game in which players pursue their own self-interest is called

A set of actions that a firm takes to achieve a goal is the definition of a

Explain how collusion makes firms better off. Given the incentives to collude, briefly explain why every industry does not become a cartel.

Monopolistic competition differs from oligopoly in that in monopolistic competition firms act independently while in oligopoly firms act interdependently.

Why are decision trees useful to managers who plan business strategies?

Which of the following is not a reason why government officials are willing to impose entry barriers?

An oligopolistic industry is characterised by a few large firms acting independently.

Interdependence of firms is most common in

Firms in an oligopoly are said to be interdependent. What does this mean?

Occupational licensing is an example of an entry barrier that improves a country's standard of living.

Sequential games are used to analyse

In a decision tree, the difference between a decision node and a terminal node is that

An oligopolist's demand curve is

-Refer to Table 11-3. Does Baine have a dominant strategy and, if so, what is it?

Which of the following is not an example of a government-imposed entry barrier?

Why does a prisoner's dilemma lead to a noncooperative equilibrium?

-Refer to Figure 11-2. Now suppose that the government delays Xenophone's entry and Gigacom moves first. What is the likely outcome in the market?

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