Question 1

A dominant strategy is a strategy that is best for a player in a game regardless of the strategies chosen by the other players.

Accepted Answer

A) True 
 B)False

Question 2

Figure 17-3. Hector and Bart are roommates. On a particular day, their apartment needs to be cleaned. Each person has to decide whether to take part in cleaning. At the end of the day, either the apartment will be completely clean (if one or both roommates take part in cleaning), or it will remain dirty (if neither roommate cleans). With happiness measured on a scale of 1 (very unhappy) to 10 (very happy), the possible outcomes are as follows:  
-Refer to Figure 17-3. The dominant strategy for Hector is to

Accepted Answer

A)  clean, and the dominant strategy for Bart is to clean. 
B)  clean, and the dominant strategy for Bart is to refrain from cleaning. 
C)  refrain from cleaning, and the dominant strategy for Bart is to clean. 
D)  refrain from cleaning, and the dominant strategy for Bart is to refrain from cleaning. 
A)  clean, and the dominant strategy for Bart is to clean. 
B)  clean, and the dominant strategy for Bart is to refrain from cleaning. 
C)  refrain from cleaning, and the dominant strategy for Bart is to clean. 
D)  refrain from cleaning, and the dominant strategy for Bart is to refrain from cleaning.

Question 3

Table 17-15
This table shows a game played between two players, A and B. The payoffs in the table are shown as (Payoff to A, Payoff to B).  
-Refer to Table 17-15. If player B chooses Right, player A should choose

Accepted Answer

A)  Up and earn a payoff of 1. 
B)  Middle and earn a payoff of 5. 
C)  Middle and earn a payoff of 7. 
D)  Down and earn a payoff of 4. 
A)  Up and earn a payoff of 1. 
B)  Middle and earn a payoff of 5. 
C)  Middle and earn a payoff of 7. 
D)  Down and earn a payoff of 4.

Question 4

As the number of firms in an oligopoly increases,

Accepted Answer

A)  each seller becomes more concerned about its impact on the market price. 
B)  the output effect decreases. 
C)  the total quantity of output produced by firms in the market gets closer to the socially efficient quantity. 
D)  the oligopoly has more market power and firms earn a greater profit. 
A)  each seller becomes more concerned about its impact on the market price. 
B)  the output effect decreases. 
C)  the total quantity of output produced by firms in the market gets closer to the socially efficient quantity. 
D)  the oligopoly has more market power and firms earn a greater profit.

Question 5

Table 17-12
The table shows the town of Driveaway's demand schedule for gasoline. Assume the town's gasoline seller(s) incurs a cost of $2 for each gallon sold, with no fixed cost.  
-Refer to Table 17-12. Suppose we observe that the price of a gallon of gasoline in Driveaway is $5; we observe as well that a particular seller's profit is $150. Given this observation, which of the following scenarios is most likely?

Accepted Answer

A)  The market for gasoline in Driveaway is a monopoly. 
B)  There are two identical sellers of gasoline in Driveaway, and the sellers collude. 
C)  There are two identical sellers of gasoline in Driveaway, and the sellers do not collude. 
D)  There are three identical sellers of gasoline in Driveaway, and the sellers collude. 
A)  The market for gasoline in Driveaway is a monopoly. 
B)  There are two identical sellers of gasoline in Driveaway, and the sellers collude. 
C)  There are two identical sellers of gasoline in Driveaway, and the sellers do not collude. 
D)  There are three identical sellers of gasoline in Driveaway, and the sellers collude.

Question 6

Predatory pricing refers to

Accepted Answer

A)  a firm selling certain products together rather than separately. 
B)  a monopoly firm reducing its price in an attempt to maintain its monopoly. 
C)  firms colluding to set prices. 
D)  All of the above are examples of predatory pricing. 
A)  a firm selling certain products together rather than separately. 
B)  a monopoly firm reducing its price in an attempt to maintain its monopoly. 
C)  firms colluding to set prices. 
D)  All of the above are examples of predatory pricing.

Question 7

Table 17-14
This table shows a game played between two players, A and B. The payoffs in the table are shown as (Payoff to A, Payoff to B).  
-Refer to Table 17-14. If player A chooses his/her best strategy, player B should

Accepted Answer

A)  choose left and earn a payoff of 4. 
B)  choose left and earn a payoff of 6. 
C)  choose right and earn a payoff of 2. 
D)  choose right and earn a payoff of 0. 
A)  choose left and earn a payoff of 4. 
B)  choose left and earn a payoff of 6. 
C)  choose right and earn a payoff of 2. 
D)  choose right and earn a payoff of 0.

Question 8

In a two-person repeated game, a tit-for-tat strategy starts with

Accepted Answer

A)  cooperation and then each player mimics the other player's last move. 
B)  cooperation and then each player is unresponsive to the strategic moves of the other player. 
C)  noncooperation and then each player pursues his or her own self-interest. 
D)  noncooperation and then each player cooperates when the other player demonstrates a desire for the cooperative solution. 
A)  cooperation and then each player mimics the other player's last move. 
B)  cooperation and then each player is unresponsive to the strategic moves of the other player. 
C)  noncooperation and then each player pursues his or her own self-interest. 
D)  noncooperation and then each player cooperates when the other player demonstrates a desire for the cooperative solution.

Question 9

If a market is a duopoly and additional firms enter and do not cooperate, then

Accepted Answer

A)  price and quantity fall. 
B)  price and quantity rise. 
C)  price falls and quantity rises. 
D)  price rises and quantity falls. 
A)  price and quantity fall. 
B)  price and quantity rise. 
C)  price falls and quantity rises. 
D)  price rises and quantity falls.

Question 10

Table 17-5
The information in the table below shows the total demand for premium-channel digital cable TV subscriptions in a small urban market. Assume that each digital cable TV operator pays a fixed cost of $200,000 (per year) to provide premium digital channels in the market area and that the marginal cost of providing the premium channel service to a household is zero.  
-Refer to Table 17-5. Assume there are two profit-maximizing digital cable TV companies operating in this market. Further assume that they are not able to collude on the price and quantity of premium digital channel subscriptions to sell. What price will premium digital channel cable TV subscriptions be sold at when this market reaches a Nash equilibrium?

Accepted Answer

A)  $30 
B)  $60 
C)  $90 
D)  $120 
A)  $30 
B)  $60 
C)  $90 
D)  $120

Question 11

Briefly describe the business practice of tying.

Accepted Answer

Tying is the practice of bundl

Question 12

Table 17-21
The Chicken Game is named for a contest in which drivers test their courage by driving straight at each other. John and Paul have a common interest to avoid crashing into each other, but they also have a personal, competing interest to not turn first to demonstrate their courage to those observing the contest. The payoff table for this situation is provided below. The payoffs are shown as (John, Paul).  
-Refer to Table 17-21. If John chooses Drive Straight, what will Paul choose to do and what will Paul's payoff equal?

Accepted Answer

A)  Turn, 5 
B)  Drive Straight, 0 
C)  Turn, 10 
D)  Drive Straight, 200 
A)  Turn, 5 
B)  Drive Straight, 0 
C)  Turn, 10 
D)  Drive Straight, 200

Question 13

If duopolists individually pursue their own self-interest when deciding how much to produce, the profit-maximizing price they will charge for their product will be

Accepted Answer

A)  less than the monopoly price. 
B)  equal to the perfectly competitive market price. 
C)  greater than the monopoly price. 
D)  possibly less than or greater than the monopoly price. 
A)  less than the monopoly price. 
B)  equal to the perfectly competitive market price. 
C)  greater than the monopoly price. 
D)  possibly less than or greater than the monopoly price.

Question 14

Table 17-14
This table shows a game played between two players, A and B. The payoffs in the table are shown as (Payoff to A, Payoff to B).  
-Refer to Table 17-14. If both players choose their best strategies, player A will earn a payoff of

Accepted Answer

A)  0. 
B)  2. 
C)  4. 
D)  6. 
A)  0. 
B)  2. 
C)  4. 
D)  6.

Question 15

Table 17-9
The table shows the demand schedule for a particular product.  
-Refer to Table 17-9. Suppose the market for this product is served by two firms that have formed a cartel. What price will the cartel charge in this market if the marginal cost of production is $4?

Accepted Answer

A)  $6 
B)  $8 
C)  $10 
D)  $12 
A)  $6 
B)  $8 
C)  $10 
D)  $12

Question 16

When a group of firms acts in unison to maximize profits as if they were a monopoly, they form a
.

Accepted Answer

The answer of When a group of firms acts in...

Question 17

Table 17-5
The information in the table below shows the total demand for premium-channel digital cable TV subscriptions in a small urban market. Assume that each digital cable TV operator pays a fixed cost of $200,000 (per year) to provide premium digital channels in the market area and that the marginal cost of providing the premium channel service to a household is zero.  
-Refer to Table 17-5. If there is only one digital cable TV company in this market, what price would it charge for a premium digital channel subscription to maximize its profit?

Accepted Answer

A)  $30 
B)  $60 
C)  $90 
D)  $150 
A)  $30 
B)  $60 
C)  $90 
D)  $150

Question 18

Compare the equilibrium output in a duopoly to the monopoly output.

Accepted Answer

The duopoly output will be higher than t

Question 19

The Clayton Act

Accepted Answer

A)  preceded the Sherman Act. 
B)  replaced the Sherman Act. 
C)  strengthened the Sherman Act. 
D)  was specifically designed to reduce the ability of cartels to organize. 
A)  preceded the Sherman Act. 
B)  replaced the Sherman Act. 
C)  strengthened the Sherman Act. 
D)  was specifically designed to reduce the ability of cartels to organize.

Question 20

In the prisoners' dilemma game, confessing is a dominant strategy for each of the two prisoners.

Accepted Answer

A) True 
 B)False

Exam 17: Oligopoly

A dominant strategy is a strategy that is best for a player in a game regardless of the strategies chosen by the other players.

Table 17-15 This table shows a game played between two players, A and B. The payoffs in the table are shown as (Payoff to A, Payoff to B). -Refer to Table 17-15. If player B chooses Right, player A should choose

As the number of firms in an oligopoly increases,

Predatory pricing refers to

Table 17-14 This table shows a game played between two players, A and B. The payoffs in the table are shown as (Payoff to A, Payoff to B). -Refer to Table 17-14. If player A chooses his/her best strategy, player B should

In a two-person repeated game, a tit-for-tat strategy starts with

If a market is a duopoly and additional firms enter and do not cooperate, then

Briefly describe the business practice of tying.

If duopolists individually pursue their own self-interest when deciding how much to produce, the profit-maximizing price they will charge for their product will be

Table 17-14 This table shows a game played between two players, A and B. The payoffs in the table are shown as (Payoff to A, Payoff to B). -Refer to Table 17-14. If both players choose their best strategies, player A will earn a payoff of

Table 17-9 The table shows the demand schedule for a particular product. -Refer to Table 17-9. Suppose the market for this product is served by two firms that have formed a cartel. What price will the cartel charge in this market if the marginal cost of production is $4?

When a group of firms acts in unison to maximize profits as if they were a monopoly, they form a .

Compare the equilibrium output in a duopoly to the monopoly output.

The Clayton Act

In the prisoners' dilemma game, confessing is a dominant strategy for each of the two prisoners.

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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