Question 1

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 noncooperative, 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 noncooperative, 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 2

The study of how people make decisions in situations where attaining their goals depends on their interactions with others is called

Accepted Answer

A)  Nash equilibrium. 
B)  the prisoner's dilemma. 
C)  game theory. 
D)  dominant strategy equilibrium. 
A)  Nash equilibrium. 
B)  the prisoner's dilemma. 
C)  game theory. 
D)  dominant strategy equilibrium.

Question 3

Consider a U-shaped long-run average cost curve that has a minimum efficient scale at 6,000 units of output.In this case,this industry would be

Accepted Answer

A)  perfectly competitive if the market quantity demanded is 20,000 units. 
B)  monopolistically competitive if the market quantity demanded is 12,000 units. 
C)  an oligopoly if the market quantity demanded is 18,000 units. 
D)  an oligopoly if the four-firm concentration ratio is more than 10 percent. 
A)  perfectly competitive if the market quantity demanded is 20,000 units. 
B)  monopolistically competitive if the market quantity demanded is 12,000 units. 
C)  an oligopoly if the market quantity demanded is 18,000 units. 
D)  an oligopoly if the four-firm concentration ratio is more than 10 percent.

Question 4

If firms are protected by substantial barriers to entry,short-run profits can turn into long-run profits.

Accepted Answer

A) True 
 B)False

Question 5

A cartel is

Accepted Answer

A)  a temporary storage facility for automobiles. 
B)  a group of firms that enter into an informal agreement to fix prices to maximize joint profits. 
C)  a group of firms that enter into a formal agreement to fix prices to maximize joint profits. 
D)  an example of a group of firms that collectively regulate a competitive industry. 
A)  a temporary storage facility for automobiles. 
B)  a group of firms that enter into an informal agreement to fix prices to maximize joint profits. 
C)  a group of firms that enter into a formal agreement to fix prices to maximize joint profits. 
D)  an example of a group of firms that collectively regulate a competitive industry.

Question 6

The "Discount Department Stores" industry is highly concentrated.What does this mean?

Accepted Answer

A)  There are many large stores such as Wal-Mart, Target, Kohl's, in this industry. 
B)  A few large stores account for a significant portion of industry sales. 
C)  There is cut-throat competition in this industry because there are no entry barriers. 
D)  The sales volume in this industry is consistently high. 
A)  There are many large stores such as Wal-Mart, Target, Kohl's, in this industry. 
B)  A few large stores account for a significant portion of industry sales. 
C)  There is cut-throat competition in this industry because there are no entry barriers. 
D)  The sales volume in this industry is consistently high.

Question 7

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 8

Price leadership is a form of explicit collusion where one firm in an oligopoly announces a price change and expects all other firms to follow suit.

Accepted Answer

A) True 
 B)False

Question 9

Most economists are concerned about entry barriers.Why is this so important to them?

Accepted Answer

Entry barriers enable a firm to earn lon

Question 10

Table 14-8   Two rival oligopolists in the athletic supplements industry, the Power Fuel Company and the Brawny Juice Company, have to decide on their pricing strategy. Each can choose either a high price or a low price. Table 14-8 shows the payoff matrix with the profits that each firm can expect to earn depending on the pricing strategy it adopts.
-Refer to Table 14-8.If the two firms collude,is there an incentive for either to cheat on the collusion agreement?

Accepted Answer

A)  No, neither firm can gain by cheating. 
B)  Yes, but only Brawny Juice is in a position to gain by cheating. 
C)  Yes, but only Power Fuel is in a position to gain by cheating. 
D)  Yes, either firm can gain if it alone cheats. 
A)  No, neither firm can gain by cheating. 
B)  Yes, but only Brawny Juice is in a position to gain by cheating. 
C)  Yes, but only Power Fuel is in a position to gain by cheating. 
D)  Yes, either firm can gain if it alone cheats.

Question 11

The fraction of an industry's sales that are accounted for by the largest firms is called

Accepted Answer

A)  the four-firm competition ratio. 
B)  the four-firm concentration ratio. 
C)  the four-firm industry ratio. 
D)  the four-firm oligopoly ratio. 
A)  the four-firm competition ratio. 
B)  the four-firm concentration ratio. 
C)  the four-firm industry ratio. 
D)  the four-firm oligopoly ratio.

Question 12

What is meant by the term "government-imposed barrier to entry"? Why would a government be willing to impose barriers to entering an industry?

Accepted Answer

Government imposed barriers to entry are

Question 13

According to Porter's Five Competitive Forces Model,which kinds of products are most likely to limit the ability of firms in an industry to raise prices?

Accepted Answer

A)  differentiated products that target a small subsegment of the industry 
B)  substitutable products produced by firms in different industries 
C)  similar products produced by similar industries in low-cost countries 
D)  complementary products produced by different firms in the same industry 
A)  differentiated products that target a small subsegment of the industry 
B)  substitutable products produced by firms in different industries 
C)  similar products produced by similar industries in low-cost countries 
D)  complementary products produced by different firms in the same industry

Question 14

The study of how people make decisions in situations in which attaining their goals depends on their interactions with others is called

Accepted Answer

A)  game theory. 
B)  oligopoly. 
C)  competitive analysis. 
D)  strategic analysis. 
A)  game theory. 
B)  oligopoly. 
C)  competitive analysis. 
D)  strategic analysis.

Question 15

A Nash equilibrium is

Accepted Answer

A)  reached when an oligopoly's market demand and supply intersect. 
B)  reached when each player chooses the best strategy for himself and for the group. 
C)  reached when each player chooses the best strategy for himself, given the other strategies chosen by the other players in the group. 
D)  an equilibrium comprising non-dominant strategies only. 
A)  reached when an oligopoly's market demand and supply intersect. 
B)  reached when each player chooses the best strategy for himself and for the group. 
C)  reached when each player chooses the best strategy for himself, given the other strategies chosen by the other players in the group. 
D)  an equilibrium comprising non-dominant strategies only.

Question 16

A member of a cartel like OPEC has an incentive to

Accepted Answer

A)  argue for larger production quotas for each member of the cartel. 
B)  agree to a low cartel production level and then produce more than its quota. 
C)  abide by its individual production quota. 
D)  support equal production quotas for each member. 
A)  argue for larger production quotas for each member of the cartel. 
B)  agree to a low cartel production level and then produce more than its quota. 
C)  abide by its individual production quota. 
D)  support equal production quotas for each member.

Question 17

Which of the following is not among Porter's competitive forces?

Accepted Answer

A)  power of buyers 
B)  power of suppliers 
C)  threat of new entrants 
D)  changing consumer tastes 
A)  power of buyers 
B)  power of suppliers 
C)  threat of new entrants 
D)  changing consumer tastes

Question 18

Table 14-7
   The payoff matrix shown above assumes that Perfect Plants and Florabunda Florist must decide whether to offer same-day delivery for their products. The matrix shows how much profit each firm will earn if it does or does not offer same-day delivery. The amount of profit for one firm depends on whether the other firm offers same-day delivery.
-Refer to Table 14-7.Which of the following statements is true?

Accepted Answer

A)  Given that Florabunda offers same-day delivery, Perfect's best strategy is to not offer same-day delivery. 
B)  Given that Perfect offers same-day delivery, Florabunda's best strategy is to offer same-day delivery. 
C)  Perfect and Florabunda will agree to collude in order to maximize their profits. 
D)  Neither Perfect nor Florabunda will offer same-day delivery; this decision will decrease their costs and allow each firm to earn more than $1,800 million in profits. 
A)  Given that Florabunda offers same-day delivery, Perfect's best strategy is to not offer same-day delivery. 
B)  Given that Perfect offers same-day delivery, Florabunda's best strategy is to offer same-day delivery. 
C)  Perfect and Florabunda will agree to collude in order to maximize their profits. 
D)  Neither Perfect nor Florabunda will offer same-day delivery; this decision will decrease their costs and allow each firm to earn more than $1,800 million in profits.

Question 19

If economies of scale are relatively important in an industry,the typical firm's

Accepted Answer

A)  marginal cost curve will decline continuously until it reaches minimum efficient scale. 
B)  long-run average cost curve will begin rising before it reaches minimum efficient scale. 
C)  long-run average cost curve will reach a minimum at a level of output that leaves room for a large number of firms to enter the industry. 
D)  long-run average cost curve will reach a minimum at a level of output that is a relatively large fraction of total industry sales. 
A)  marginal cost curve will decline continuously until it reaches minimum efficient scale. 
B)  long-run average cost curve will begin rising before it reaches minimum efficient scale. 
C)  long-run average cost curve will reach a minimum at a level of output that leaves room for a large number of firms to enter the industry. 
D)  long-run average cost curve will reach a minimum at a level of output that is a relatively large fraction of total industry sales.

Question 20

A table that shows the possible payoffs each firm earns from every combination of strategies by all firms is called

Accepted Answer

A)  an earnings table. 
B)  a payoff table. 
C)  a payoff matrix. 
D)  a strategic matrix. 
A)  an earnings table. 
B)  a payoff table. 
C)  a payoff matrix. 
D)  a strategic matrix.

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

The study of how people make decisions in situations where attaining their goals depends on their interactions with others is called

Consider a U-shaped long-run average cost curve that has a minimum efficient scale at 6,000 units of output.In this case,this industry would be

If firms are protected by substantial barriers to entry,short-run profits can turn into long-run profits.

A cartel is

The "Discount Department Stores" industry is highly concentrated.What does this mean?

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

Price leadership is a form of explicit collusion where one firm in an oligopoly announces a price change and expects all other firms to follow suit.

Most economists are concerned about entry barriers.Why is this so important to them?

The fraction of an industry's sales that are accounted for by the largest firms is called

What is meant by the term "government-imposed barrier to entry"? Why would a government be willing to impose barriers to entering an industry?

According to Porter's Five Competitive Forces Model,which kinds of products are most likely to limit the ability of firms in an industry to raise prices?

The study of how people make decisions in situations in which attaining their goals depends on their interactions with others is called

A Nash equilibrium is

A member of a cartel like OPEC has an incentive to

Which of the following is not among Porter's competitive forces?

If economies of scale are relatively important in an industry,the typical firm's

A table that shows the possible payoffs each firm earns from every combination of strategies by all firms is called

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

Externalities, environmental Policy, and Public Goods

Elasticity: The Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice,taxes,and the Distribution of Income

Filters

Exam 14: Oligopoly: Firms in Less Competitive Markets

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

The study of how people make decisions in situations where attaining their goals depends on their interactions with others is called

Consider a U-shaped long-run average cost curve that has a minimum efficient scale at 6,000 units of output.In this case,this industry would be

If firms are protected by substantial barriers to entry,short-run profits can turn into long-run profits.

A cartel is

The "Discount Department Stores" industry is highly concentrated.What does this mean?

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

Price leadership is a form of explicit collusion where one firm in an oligopoly announces a price change and expects all other firms to follow suit.

Most economists are concerned about entry barriers.Why is this so important to them?

The fraction of an industry's sales that are accounted for by the largest firms is called

What is meant by the term "government-imposed barrier to entry"? Why would a government be willing to impose barriers to entering an industry?

According to Porter's Five Competitive Forces Model,which kinds of products are most likely to limit the ability of firms in an industry to raise prices?

The study of how people make decisions in situations in which attaining their goals depends on their interactions with others is called

A Nash equilibrium is

A member of a cartel like OPEC has an incentive to

Which of the following is not among Porter's competitive forces?

If economies of scale are relatively important in an industry,the typical firm's

A table that shows the possible payoffs each firm earns from every combination of strategies by all firms is called

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

Externalities, environmental Policy, and Public Goods

Elasticity: The Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice,taxes,and the Distribution of Income

Filters