Question 1

Who won a Nobel Prize in economics for his work in the development of game theory?

Accepted Answer

A)  John von Neuman 
B)  Oskar Morgenstern 
C)  John Nash 
D)  Howard Schultz 
A)  John von Neuman 
B)  Oskar Morgenstern 
C)  John Nash 
D)  Howard Schultz

Question 2

Producing a differentiated product occurs in which of the following industries?

Accepted Answer

A)  Oligopoly, monopolistic competition, and perfect competition 
B)  Monopolistic competition only 
C)  Oligopoly only 
D)  Monopolistic competition and oligopoly 
A)  Oligopoly, monopolistic competition, and perfect competition 
B)  Monopolistic competition only 
C)  Oligopoly only 
D)  Monopolistic competition and oligopoly

Question 3

What are the three characteristics of a game in game theory?

Accepted Answer

A)  Rules, strategies, and payoffs 
B)  Rules, regulations, and payoffs 
C)  Winners, losers, and rules 
D)  Risks, rewards, and penalties 
A)  Rules, strategies, and payoffs 
B)  Rules, regulations, and payoffs 
C)  Winners, losers, and rules 
D)  Risks, rewards, and penalties

Question 4

In a Nash equilibrium,all players select non-dominant strategies.

Accepted Answer

A) True 
 B)False

Question 5

How can firms increase their market power in an oligopoly?

Accepted Answer

A)  Selling to buyers who have market power 
B)  Pursuing dominant strategies 
C)  Colluding to set prices 
D)  Undertaking heavy advertising expenditure 
A)  Selling to buyers who have market power 
B)  Pursuing dominant strategies 
C)  Colluding to set prices 
D)  Undertaking heavy advertising expenditure

Question 6

In the long run,if price is less than average cost,________.

Accepted Answer

A)  there is an incentive for firms to exit the market 
B)  there is profit incentive for firms to enter the market 
C)  the market must be in long-run equilibrium 
D)  there is no incentive for the number of firms in the market to change 
A)  there is an incentive for firms to exit the market 
B)  there is profit incentive for firms to enter the market 
C)  the market must be in long-run equilibrium 
D)  there is no incentive for the number of firms in the market to change

Question 7

Figure 9.17  
-Refer to Figure 9.17.In the long run,why will the firm produce Qf units and not Qg units,which has a lower average cost of production?

Accepted Answer

A)  Although its average cost of production is lower when the firm produces Qg units, to be able to sell its output the firm will have to charge a price below average cost, resulting in a loss. 
B)  At Qg, average cost exceeds marginal cost so the firm will actually incur a loss. 
C)  At Qg, marginal revenue is less than average revenue, which will result in a loss for the firm. 
D)  The firm's goal is to charge a high price and make a small profit rather than charge a low price and make no profit. 
A)  Although its average cost of production is lower when the firm produces Qg units, to be able to sell its output the firm will have to charge a price below average cost, resulting in a loss. 
B)  At Qg, average cost exceeds marginal cost so the firm will actually incur a loss. 
C)  At Qg, marginal revenue is less than average revenue, which will result in a loss for the firm. 
D)  The firm's goal is to charge a high price and make a small profit rather than charge a low price and make no profit.

Question 8

Table 9.1
 $$\begin{array} { | c | c | c | } 
\hline \text { Quantity } & \text { Price } & \text { Total Revenue } \
&\text { (dollars) } & \text { (dollars) } \
\hline 1 & 7.50 & 7.50 \
\hline 2 & 7.00 & 14.00 \
\hline 3 & 6.50 & 19.50 \
\hline 4 & 6.00 & 24.00 \
\hline 5 & 5.50 & 27.50 \
\hline 6 & 5.00 & 30.00 \
\hline
\end{array}$$
-Refer to Table 9.1.What portion of the marginal revenue of the 4th unit is due to the output effect and what portion is due to the price effect?

Accepted Answer

A)  Output effect = $24.00; price effect = $19.50 
B)  Output effect = $6.50; price effect = $2.00 
C)  Output effect = -$0.50; price effect = $5.00 
D)  Output effect = $6.00; price effect = -$1.50 
A)  Output effect = $24.00; price effect = $19.50 
B)  Output effect = $6.50; price effect = $2.00 
C)  Output effect = -$0.50; price effect = $5.00 
D)  Output effect = $6.00; price effect = -$1.50

Question 9

Table 9.1   Godrickporter and Star Connections are the only two airport shuttle and limousine rental service companies in the mid-sized town of Godrick Hollow. Each firm must decide on whether to increase its advertising spending to compete for customers. Table 9.1 shows the payoff matrix for this advertising game.
-Refer to Table 9.1.Is there a dominant strategy for Godrickporter and,if so,what is it?

Accepted Answer

A)  No, its outcome depends on what Star Connections does. 
B)  Yes, Godrickporter should increase its advertising spending. 
C)  Yes, Godrickporter should reduce its advertising spending. 
D)  Yes, Godrickporter's dominant strategy is to collude with Star Connections. 
A)  No, its outcome depends on what Star Connections does. 
B)  Yes, Godrickporter should increase its advertising spending. 
C)  Yes, Godrickporter should reduce its advertising spending. 
D)  Yes, Godrickporter's dominant strategy is to collude with Star Connections.

Question 10

Figure 9.12  
-Refer to Figure 9.12.The productively efficient output for the firm represented in the diagram is ______.

Accepted Answer

A)  Q1 units 
B)  Q2 units 
C)  Q3 units 
D)  Q4 units 
A)  Q1 units 
B)  Q2 units 
C)  Q3 units 
D)  Q4 units

Question 11

Collusion _______.

Accepted Answer

A)  is rampant in perfect competition, as all firms charge the same price 
B)  reduces market concentration in an industry 
C)  among firms is difficult to maintain because it eliminates long-run economic profit 
D)  is more difficult when there are many firms producing differentiated products in an industry 
A)  is rampant in perfect competition, as all firms charge the same price 
B)  reduces market concentration in an industry 
C)  among firms is difficult to maintain because it eliminates long-run economic profit 
D)  is more difficult when there are many firms producing differentiated products in an industry

Question 12

Figure 9.4   Figure 9.4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches.
-Refer to Figure 9.4.The area that represents the total fixed cost of production is _____.

Accepted Answer

A)  0P1aQa 
B)  P0adP3 
C)  P1bdP3 
D)  That information cannot be determined from the graph. 
A)  0P1aQa 
B)  P0adP3 
C)  P1bdP3 
D)  That information cannot be determined from the graph.

Question 13

Table 9.3
 $$\begin{array} { | c | c | c | c | c | } 
\hline \text { Quantity } & \begin{array} { c } 
\text { Price } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Total Revenue } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Total Variable } \
\text { Cost } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Total Cost } \
\text { (dollars) }
\end{array} \
\hline 0 & 21 & 0 & 0 & 50 \
\hline 1 & 20 & 20 & 16 & 66 \
\hline 2 & 19 & 38 & 31 & 81 \
\hline 3 & 18 & 54 & 45 & 95 \
\hline 4 & 17 & 68 & 59 & 109 \
\hline 5 & 16 & 80 & 75 & 125 \
\hline 6 & 15 & 90 & 93 & 143 \
\hline 7 & 14 & 98 & 112 & 162 \
\hline 8 & 13 & 104 & 140 & 190 \
\hline 9 & 12 & 108 & 180 & 230 \
\hline 10 & 11 & 110 & 230 & 280 \
\hline
\end{array}$$ Table 9.3 shows the demand and cost schedules for a monopolistically competitive firm.
-Refer to Table 9.3.The profit-maximising/loss-minimising output level and price are ____.

Accepted Answer

A)  Q = 0 (firm should not produce) 
B)  Q = 3; P = $18 
C)  Q = 4; P = $17 
D)  Q = 5; P = $16 
A)  Q = 0 (firm should not produce) 
B)  Q = 3; P = $18 
C)  Q = 4; P = $17 
D)  Q = 5; P = $16

Question 14

The best example of an oligopolistic industry is ______.

Accepted Answer

A)  the beef market 
B)  the pharmaceutical industry 
C)  public education 
D)  the beauty products industry 
A)  the beef market 
B)  the pharmaceutical industry 
C)  public education 
D)  the beauty products industry

Question 15

Which of the following statements about the prisoner's dilemma is false?

Accepted Answer

A)  The prisoner's dilemma in a one-shot game leads to a non-cooperative, equilibrium outcome. 
B)  The prisoner's dilemma in repeated games could lead to cooperation, especially if there is some enforcement mechanism that punishes a player who does not cooperate. 
C)  Players caught in a prisoner's dilemma act in selfish ways that lead to an equilibrium that is sub-optimal. 
D)  The prisoner's dilemma game can never reach a Nash equilibrium as long as players do not cooperate. 
A)  The prisoner's dilemma in a one-shot game leads to a non-cooperative, equilibrium outcome. 
B)  The prisoner's dilemma in repeated games could lead to cooperation, especially if there is some enforcement mechanism that punishes a player who does not cooperate. 
C)  Players caught in a prisoner's dilemma act in selfish ways that lead to an equilibrium that is sub-optimal. 
D)  The prisoner's dilemma game can never reach a Nash equilibrium as long as players do not cooperate.

Question 16

The incentive for a firm to join a cartel is ________.

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 17

Which of the following is not a characteristic of game theory?

Accepted Answer

A)  Rules that determine what actions are allowable 
B)  Payoffs that are the results of the interaction among players' strategies 
C)  Strategies that players employ to attain their objectives 
D)  Independence among players 
A)  Rules that determine what actions are allowable 
B)  Payoffs that are the results of the interaction among players' strategies 
C)  Strategies that players employ to attain their objectives 
D)  Independence among players

Question 18

Figure 9.18  
-Refer to Figure 9.18.Which of the following statements is true?

Accepted Answer

A)  Da represents the long-run demand curve facing a monopolistic competitor in a constant-cost industry while Db depicts the demand curve in the short run. 
B)  Da represents the long-run demand curve facing a monopolistic competitor in a constant-cost industry while Db depicts the long-run demand curve in an increasing-cost industry. 
C)  Da represents the long-run demand curve facing a perfect competitor while Db depicts the long-run demand curve facing a monopolistic competitor. 
D)  Da represents the long-run supply curve in a perfectly competitive, constant-cost industry while Db depicts the long-run demand curve facing a monopolistic competitor in a decreasing-cost industry. 
A)  Da represents the long-run demand curve facing a monopolistic competitor in a constant-cost industry while Db depicts the demand curve in the short run. 
B)  Da represents the long-run demand curve facing a monopolistic competitor in a constant-cost industry while Db depicts the long-run demand curve in an increasing-cost industry. 
C)  Da represents the long-run demand curve facing a perfect competitor while Db depicts the long-run demand curve facing a monopolistic competitor. 
D)  Da represents the long-run supply curve in a perfectly competitive, constant-cost industry while Db depicts the long-run demand curve facing a monopolistic competitor in a decreasing-cost industry.

Question 19

For a downward-sloping demand curve,marginal revenue decreases as quantity sold increases.

Accepted Answer

A) True 
 B)False

Question 20

What is a key characteristic of a monopolistically competitive market structure?

Accepted Answer

A)  Few sellers 
B)  Sellers selling similar but differentiated products 
C)  High barriers to entry 
D)  Sellers acting to maximise revenue 
A)  Few sellers 
B)  Sellers selling similar but differentiated products 
C)  High barriers to entry 
D)  Sellers acting to maximise revenue

Who won a Nobel Prize in economics for his work in the development of game theory?

Producing a differentiated product occurs in which of the following industries?

What are the three characteristics of a game in game theory?

In a Nash equilibrium,all players select non-dominant strategies.

How can firms increase their market power in an oligopoly?

In the long run,if price is less than average cost,________.

Figure 9.17 -Refer to Figure 9.17.In the long run,why will the firm produce Q_f units and not Q_gunits,which has a lower average cost of production?

Table 9.1 Quantity Price Total Revenue (dollars) (dollars) 1 7.50 7.50 2 7.00 14.00 3 6.50 19.50 4 6.00 24.00 5 5.50 27.50 6 5.00 30.00 -Refer to Table 9.1.What portion of the marginal revenue of the 4th unit is due to the output effect and what portion is due to the price effect?

Figure 9.12 -Refer to Figure 9.12.The productively efficient output for the firm represented in the diagram is ______.

Collusion _______.

Figure 9.4 Figure 9.4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches. -Refer to Figure 9.4.The area that represents the total fixed cost of production is _____.

The best example of an oligopolistic industry is ______.

Which of the following statements about the prisoner's dilemma is false?

The incentive for a firm to join a cartel is ________.

Which of the following is not a characteristic of game theory?

Figure 9.18 -Refer to Figure 9.18.Which of the following statements is true?

For a downward-sloping demand curve,marginal revenue decreases as quantity sold increases.

What is a key characteristic of a monopolistically competitive market structure?

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency,government Price Setting and Taxes

Technology,production and Costs

Firms in Perfectly Competitive Markets

Monopoly Markets

The Markets for Labour and Other Factors of Production

Government Intervention in the Market

Social Policy and Inequality

Gdp: Measuring Total Production, income and Economic Growth

Unemployment and Inflation

Aggregate Demand and Aggregate Supply Analysis

Money,banks and the Reserve Bank of Australia

Monetary Policy

Fiscal Policy

Comparative Advantage and the Gains From International Trade

Macroeconomics in an Open Economy

Filters

Exam 9: Monopolistic Competition and Oligopoly

Who won a Nobel Prize in economics for his work in the development of game theory?

Producing a differentiated product occurs in which of the following industries?

What are the three characteristics of a game in game theory?

In a Nash equilibrium,all players select non-dominant strategies.

How can firms increase their market power in an oligopoly?

In the long run,if price is less than average cost,________.

Figure 9.17 -Refer to Figure 9.17.In the long run,why will the firm produce Qf units and not Qg units,which has a lower average cost of production?

Table 9.1 Quantity Price Total Revenue (dollars) (dollars) 1 7.50 7.50 2 7.00 14.00 3 6.50 19.50 4 6.00 24.00 5 5.50 27.50 6 5.00 30.00 -Refer to Table 9.1.What portion of the marginal revenue of the 4th unit is due to the output effect and what portion is due to the price effect?

Figure 9.12 -Refer to Figure 9.12.The productively efficient output for the firm represented in the diagram is ______.

Collusion _______.

Figure 9.4 Figure 9.4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches. -Refer to Figure 9.4.The area that represents the total fixed cost of production is _____.

The best example of an oligopolistic industry is ______.

Which of the following statements about the prisoner's dilemma is false?

The incentive for a firm to join a cartel is ________.

Which of the following is not a characteristic of game theory?

Figure 9.18 -Refer to Figure 9.18.Which of the following statements is true?

For a downward-sloping demand curve,marginal revenue decreases as quantity sold increases.

What is a key characteristic of a monopolistically competitive market structure?

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency,government Price Setting and Taxes

Technology,production and Costs

Firms in Perfectly Competitive Markets

Monopoly Markets

The Markets for Labour and Other Factors of Production

Government Intervention in the Market

Social Policy and Inequality

Gdp: Measuring Total Production, income and Economic Growth

Unemployment and Inflation

Aggregate Demand and Aggregate Supply Analysis

Money,banks and the Reserve Bank of Australia

Monetary Policy

Fiscal Policy

Comparative Advantage and the Gains From International Trade

Macroeconomics in an Open Economy

Filters

Figure 9.17 -Refer to Figure 9.17.In the long run,why will the firm produce Q_f units and not Q_gunits,which has a lower average cost of production?