Question 1

As several eastern states began to legalize casino gambling,the revenues of casinos in Atlantic City began to ________ and their profits ________.

Accepted Answer

A) rise;increased 
B) rise;decreased 
C) fall;decreased 
D) fall;increased 
A) rise;increased 
B) rise;decreased 
C) fall;decreased 
D) fall;increased

Question 2

Each member of OPEC can increase its income by selling more oil than its output quota because

Accepted Answer

A) by selling more at OPEC's cartel price,a member will automatically earn more income. 
B) each member's demand is more elastic than the total demand for oil. 
C) the demand for oil is inelastic so total revenue increases. 
D) the demand for oil is perfectly elastic. 
A) by selling more at OPEC's cartel price,a member will automatically earn more income. 
B) each member's demand is more elastic than the total demand for oil. 
C) the demand for oil is inelastic so total revenue increases. 
D) the demand for oil is perfectly elastic.

Question 3

Which of the following best explains why airlines often cut their ticket prices at the last-minute in order to fill the remaining empty seats on their flights?

Accepted Answer

A) Fixed costs in the airline industry are very large,but the marginal cost of flying one more passenger is very low. 
B) Airlines receive a subsidy from the government for each flight that is fully booked and departs on time. 
C) The Federal Aviation Administration ranks each airline based on the percentage of flights that are fully booked.These rankings affect the decisions of firms to use a particular airline to fly their employees to business meetings. 
D) Cutting prices makes the airlines more popular with their customers,who may fly with the same airline in the future as the result of buying low-price tickets. 
A) Fixed costs in the airline industry are very large,but the marginal cost of flying one more passenger is very low. 
B) Airlines receive a subsidy from the government for each flight that is fully booked and departs on time. 
C) The Federal Aviation Administration ranks each airline based on the percentage of flights that are fully booked.These rankings affect the decisions of firms to use a particular airline to fly their employees to business meetings. 
D) Cutting prices makes the airlines more popular with their customers,who may fly with the same airline in the future as the result of buying low-price tickets.

Question 4

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 5

The most important barrier to entry is economies of scale.

Accepted Answer

A) True 
 B)False

Question 6

Decision trees are commonly used to illustrate how firms make business decisions that depend on the actions of rival firms.A decision tree has boxes that contain points that represent when firms must make the decisions contained in the boxes.What are these points called?

Accepted Answer

A) option points 
B) decision nodes 
C) either-or terminals 
D) decision options 
A) option points 
B) decision nodes 
C) either-or terminals 
D) decision options

Question 7

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 8

Which of the following statements is generally true?

Accepted Answer

A) Rivalry is less the larger the number of firms in an industry. 
B) The smaller the number of firms in an industry,the greater the rivalry. 
C) The larger the number of firms in an industry,the greater the rivalry. 
D) The degree of rivalry in an industry is largely independent of the number of firms. 
A) Rivalry is less the larger the number of firms in an industry. 
B) The smaller the number of firms in an industry,the greater the rivalry. 
C) The larger the number of firms in an industry,the greater the rivalry. 
D) The degree of rivalry in an industry is largely independent of the number of firms.

Question 9

Rainbow Writer (RW)is a small online company selling a highly rated software package for engraving words onto objects produced by 3D printers.The firm currently earns a profit of $2 million per year selling its package exclusively on its Website.Odeon,the producer of the most popular 3D printers has expressed interest in bundling Rainbow Writer's product with its printers.Odeon expects that bundling would further boost its sales and allow it to sell its printers at a higher price,thus raising its profits beyond its current profit of $12 million.Figure 14.4 shows the decision tree for the Rainbow Writer-Odeon bargaining game.
-Refer to Figure 14-4.In a real world situation involving Rainbow Writer and Odeon,what scenario below might permit Rainbow Writer to rationally refuse an offer from Odeon of $40 per copy of the software package?

Accepted Answer

A) Odeon is also negotiating with FastWrite,Rainbow Writer's chief rival. 
B) Odeon's competitors are also interested in bundling Rainbow Writer's software. 
C) Odeon hires a software developer to begin developing its own proprietary engraving software. 
D) Odeon is considering new distribution outlets for its products. 
A) Odeon is also negotiating with FastWrite,Rainbow Writer's chief rival. 
B) Odeon's competitors are also interested in bundling Rainbow Writer's software. 
C) Odeon hires a software developer to begin developing its own proprietary engraving software. 
D) Odeon is considering new distribution outlets for its products.

Question 10

In the 1930s and 1940s,the Technicolor company was able to leverage its bargaining power over the movie industry because Technicolor was the sole producer of cameras and films needed to produce color films.

Accepted Answer

A) True 
 B)False

Question 11

Firms are more likely to find themselves in a prisoner's dilemma in sequential games as opposed to simultaneous games.

Accepted Answer

A) True 
 B)False

Question 12

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 13

The DeBeers Company of South Africa was able to block competition through

Accepted Answer

A) economies of scale. 
B) ownership of an essential input. 
C) government-imposed barriers. 
D) differentiating its product. 
A) economies of scale. 
B) ownership of an essential input. 
C) government-imposed barriers. 
D) differentiating its product.

Question 14

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 15

Table 14-2 shows the payoff matrix for Wal-Mart and Target from every combination of pricing strategies for the popular PlayStation 4.At the start of the game each firm charges a low price and each earns a profit of $7,000.
-Refer to Table 14-2.Suppose pricing PlayStations is a repeated game in which Wal-Mart and Target will be selling the game system in competition over a long period of time.In this case,what is the most likely outcome?

Accepted Answer

A) a noncooperative equilibrium in which each firm charges the high price 
B) a cooperative equilibrium in which each firm charges the high price 
C) a noncooperative equilibrium in which each firm charges the low price 
D) a cooperative equilibrium in which each firm charges the low price 
A) a noncooperative equilibrium in which each firm charges the high price 
B) a cooperative equilibrium in which each firm charges the high price 
C) a noncooperative equilibrium in which each firm charges the low price 
D) a cooperative equilibrium in which each firm charges the low price

Question 16

Consider two oligopolistic industries selling the same product in different locations.In the first industry,firms always match price changes by any other firm in the industry.In the second industry,firms always ignore price changes by any other firm.Which of the following statements is true about these two industries,holding everything else constant?

Accepted Answer

A) Market prices are likely to be higher in the first industry in which firms always match price changes by rival firms than in the second where firms ignore their rivals' price changes. 
B) Market prices are likely to be lower in the first industry where firms always match price changes by rival firms than in the second where firms ignore their rivals' price changes. 
C) Market prices are likely to be the same in both markets because they are both oligopolistic markets. 
D) No conclusions can be drawn about the pricing behavior under these very different firm behaviors. 
A) Market prices are likely to be higher in the first industry in which firms always match price changes by rival firms than in the second where firms ignore their rivals' price changes. 
B) Market prices are likely to be lower in the first industry where firms always match price changes by rival firms than in the second where firms ignore their rivals' price changes. 
C) Market prices are likely to be the same in both markets because they are both oligopolistic markets. 
D) No conclusions can be drawn about the pricing behavior under these very different firm behaviors.

Question 17

The De Beers Company blocked competition

Accepted Answer

A) in the diamond market by controlling the output of most of the world's diamond mines. 
B) by controlling the supply of most of the world's high-quality bauxite,the mineral used to produce aluminum. 
C) in the market for fresh and frozen cranberries because it controls about 80 percent of the cranberry crop. 
D) because it has lower production costs than other department stores due to economies of scale. 
A) in the diamond market by controlling the output of most of the world's diamond mines. 
B) by controlling the supply of most of the world's high-quality bauxite,the mineral used to produce aluminum. 
C) in the market for fresh and frozen cranberries because it controls about 80 percent of the cranberry crop. 
D) because it has lower production costs than other department stores due to economies of scale.

Question 18

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 19

The music streaming industry,where a firm's profitability depends on its interactions with other firms,is an example of

Accepted Answer

A) perfect competition. 
B) monopolistic competition. 
C) oligopoly. 
D) monopoly. 
A) perfect competition. 
B) monopolistic competition. 
C) oligopoly. 
D) monopoly.

Question 20

What do Spotify and Apple have in common?

Accepted Answer

A) Each achieved a dominant position in its industry because it owned a key input in the production of its product. 
B) The industry in which each firm competes is an oligopoly because of government-imposed barriers to entry. 
C) Each company was founded in the same state. 
D) The profitability of each firm depends on its interactions with other firms. 
A) Each achieved a dominant position in its industry because it owned a key input in the production of its product. 
B) The industry in which each firm competes is an oligopoly because of government-imposed barriers to entry. 
C) Each company was founded in the same state. 
D) The profitability of each firm depends on its interactions with other firms.

Exam 14: Oligopoly: Firms in Less Competitive Markets

As several eastern states began to legalize casino gambling,the revenues of casinos in Atlantic City began to ________ and their profits ________.

Each member of OPEC can increase its income by selling more oil than its output quota because

Which of the following best explains why airlines often cut their ticket prices at the last-minute in order to fill the remaining empty seats on their flights?

Collusion

The most important barrier to entry is economies of scale.

Decision trees are commonly used to illustrate how firms make business decisions that depend on the actions of rival firms.A decision tree has boxes that contain points that represent when firms must make the decisions contained in the boxes.What are these points called?

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

Which of the following statements is generally true?

In the 1930s and 1940s,the Technicolor company was able to leverage its bargaining power over the movie industry because Technicolor was the sole producer of cameras and films needed to produce color films.

Firms are more likely to find themselves in a prisoner's dilemma in sequential games as opposed to simultaneous games.

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

The DeBeers Company of South Africa was able to block competition through

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

The De Beers Company blocked competition

The music streaming industry,where a firm's profitability depends on its interactions with other firms,is an example of

What do Spotify and Apple have in common?

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

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money,banks,and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

As several eastern states began to legalize casino gambling,the revenues of casinos in Atlantic City began to and their profits .