Question 1

One way a cartel gets its power is by controlling a natural resource that is found in large quantities in a few places.

Accepted Answer

A) True 
 B)False

Question 2

With an oligopoly if a group of firms is not able to coordinate or collude, prices will not be higher than in a competitive market.

Accepted Answer

A) True 
 B)False

Question 3

A cartel is characterized by firms that act together in order to:
I. increase competition.
II. raise prices.
III. raise profit.

Accepted Answer

A)  I only 
B)  I and II only 
C)  III only 
D)  II and III only 
A)  I only 
B)  I and II only 
C)  III only 
D)  II and III only

Question 4

The milk cartel in the United States:

Accepted Answer

A)  ended when the government prosecuted the owners of four major milk producers who conspired to raise prices. 
B)  is made legal and enforced by the government, and any firm that breaks the cartel is fined. 
C)  frequently breaks down because of firm cheating. 
D)  was put out of business because of new entrants. 
A)  ended when the government prosecuted the owners of four major milk producers who conspired to raise prices. 
B)  is made legal and enforced by the government, and any firm that breaks the cartel is fined. 
C)  frequently breaks down because of firm cheating. 
D)  was put out of business because of new entrants.

Question 5

The more successful a cartel is in raising the profits of the firms in the cartel, the:

Accepted Answer

A)  less likely there will be cheating. 
B)  more likely there will be cheating. 
C)  more competitive the cartel. 
D)  more likely there will be a price war. 
A)  less likely there will be cheating. 
B)  more likely there will be cheating. 
C)  more competitive the cartel. 
D)  more likely there will be a price war.

Question 6

Overfishing in oceans is a prisoner's ______ outcome.

Accepted Answer

A)  release 
B)  call 
C)  cooperation 
D)  dilemma 
A)  release 
B)  call 
C)  cooperation 
D)  dilemma

Question 7

Cartels will tend to be more successful when there are ______ for the cartelized good.

Accepted Answer

A)  more substitutes 
B)  fewer substitutes 
C)  more producers 
D)  fewer consumers 
A)  more substitutes 
B)  fewer substitutes 
C)  more producers 
D)  fewer consumers

Question 8

Game theory can be used to study cartels and their behavior.

Accepted Answer

A) True 
 B)False

Question 9

Cartels are ______ by new market entrants.

Accepted Answer

A)  reinforced 
B)  ignored 
C)  challenged 
D)  discovered 
A)  reinforced 
B)  ignored 
C)  challenged 
D)  discovered

Question 10

Which of the following is NOT a result of the network effect?

Accepted Answer

A)  Facebook is more valuable to a person the more friends use it. 
B)  eBay is more valuable to a buyer the more sellers there are. 
C)  eBay is more valuable to a seller the more buyers there are. 
D)  "Network effects" tend to limit the size of the firm. 
A)  Facebook is more valuable to a person the more friends use it. 
B)  eBay is more valuable to a buyer the more sellers there are. 
C)  eBay is more valuable to a seller the more buyers there are. 
D)  "Network effects" tend to limit the size of the firm.

Question 11

A dominant strategy is a strategy that:

Accepted Answer

A)  all players must follow. 
B)  has a higher payoff than any other strategy no matter what the other player does. 
C)  leads to one player's interests dominating the interests of the other players. 
D)  a player follows regardless of the strategies followed by other players. 
A)  all players must follow. 
B)  has a higher payoff than any other strategy no matter what the other player does. 
C)  leads to one player's interests dominating the interests of the other players. 
D)  a player follows regardless of the strategies followed by other players.

Question 12

There are no government supported cartels in the United States.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following factors is NOT significant in leading to the collapse of a cartel?

Accepted Answer

A)  cheating by cartel members 
B)  new entrants and demand response 
C)  transparency of action among members 
D)  government prosecution and regulation 
A)  cheating by cartel members 
B)  new entrants and demand response 
C)  transparency of action among members 
D)  government prosecution and regulation

Question 14

Loyalty programs, such as frequent flyer plans, tend to:

Accepted Answer

A)  increase prices. 
B)  decrease prices. 
C)  decrease monopoly power of the firm. 
D)  make demand more elastic. 
A)  increase prices. 
B)  decrease prices. 
C)  decrease monopoly power of the firm. 
D)  make demand more elastic.

Question 15

In the 1990s, the FBI and Department of Justice sued:

Accepted Answer

A)  Avomeen. 
B)  Archer Daniels Midland. 
C)  Bunge Limited. 
D)  the Andersons Inc. 
A)  Avomeen. 
B)  Archer Daniels Midland. 
C)  Bunge Limited. 
D)  the Andersons Inc.

Question 16

Cartels have lots of market power and rarely ever collapse because cartel members have no incentive to expand output beyond the limits set by the carte.l

Accepted Answer

A) True 
 B)False

Question 17

Table: Firms A, B
 
Refer to the table. What is the equilibrium outcome if Firms A and B form a cartel and do not cheat? What is the equilibrium outcome if at least one firm decides to cheat?

Accepted Answer

The cartel outcome is for both

Question 18

Which of the following statements is TRUE?

Accepted Answer

A)  Cartels are an important source of economic growth in developing countries. 
B)  Economists are not opposed to government-created cartels since they usually provide high-quality products and service. 
C)  One cost of government-sponsored cartels is that people spend resources trying to obtain or maintain a cartel rather than produce better products. 
D)  Government supported cartels usually mean more innovation. 
A)  Cartels are an important source of economic growth in developing countries. 
B)  Economists are not opposed to government-created cartels since they usually provide high-quality products and service. 
C)  One cost of government-sponsored cartels is that people spend resources trying to obtain or maintain a cartel rather than produce better products. 
D)  Government supported cartels usually mean more innovation.

Question 19

OPEC is a ________ that has been able to maintain high oil prices for ________ periods of time.

Accepted Answer

A)  cartel; long 
B)  monopoly; long 
C)  cartel; not very long 
D)  monopoly; not very long 
A)  cartel; long 
B)  monopoly; long 
C)  cartel; not very long 
D)  monopoly; not very long

Question 20

In the prisoner's dilemma, both players have an incentive to cheat, even though they would both be better off if they both cooperated.

Accepted Answer

A) True 
 B)False

Exam 15: Oligopoly and Game Theory

One way a cartel gets its power is by controlling a natural resource that is found in large quantities in a few places.

With an oligopoly if a group of firms is not able to coordinate or collude, prices will not be higher than in a competitive market.

A cartel is characterized by firms that act together in order to: I. increase competition. II. raise prices. III. raise profit.

The milk cartel in the United States:

The more successful a cartel is in raising the profits of the firms in the cartel, the:

Overfishing in oceans is a prisoner's ______ outcome.

Cartels will tend to be more successful when there are ______ for the cartelized good.

Game theory can be used to study cartels and their behavior.

Cartels are ______ by new market entrants.

Which of the following is NOT a result of the network effect?

A dominant strategy is a strategy that:

There are no government supported cartels in the United States.

Which of the following factors is NOT significant in leading to the collapse of a cartel?

Loyalty programs, such as frequent flyer plans, tend to:

In the 1990s, the FBI and Department of Justice sued:

Cartels have lots of market power and rarely ever collapse because cartel members have no incentive to expand output beyond the limits set by the carte.l

Table: Firms A, B Refer to the table. What is the equilibrium outcome if Firms A and B form a cartel and do not cheat? What is the equilibrium outcome if at least one firm decides to cheat?

Which of the following statements is TRUE?

OPEC is a ________ that has been able to maintain high oil prices for ________ periods of time.

In the prisoner's dilemma, both players have an incentive to cheat, even though they would both be better off if they both cooperated.

The Big Ideas

The Power of Trade and Comparative

Supply and Demand

Equilibrium

Elasticity and Its Applications

Taxes and Subsidies

The Price System

Price Ceilings and Floors

International Trade

Externalities- When the Price Is Not Right

Costs and Profit Maximization Under Competition

Competition and the Invisible Hand

Monopoly

Price Discrimination

Competing for Monopoly

Monopolistic Competition and Advertising

Labor Markets

Public Goods and the Tragedy of the Commons

Political Economy and Public Choice

Economics, Ethics, and Public Policy

Managing Incentives

Stock Markets and Personal Finance

Price Discrimination

Consumer Choice

Filters

OPEC is a that has been able to maintain high oil prices for periods of time.