Question 1

A group of firms acting together to limit output,raise price,and increase economic profit is a called a

Accepted Answer

A) duopoly. 
B) monopolistic oligopoly. 
C) competitive oligopoly. 
D) cartel. 
E) multi-firm competitive monopoly. 
A) duopoly. 
B) monopolistic oligopoly. 
C) competitive oligopoly. 
D) cartel. 
E) multi-firm competitive monopoly.

Question 2

-Two competing firms in a duopoly must decide whether or not to offer consumers a coupon for their good.The payoff matrix above represents the daily profit available to the firms under the different coupon strategies.
a.What strategies and payoffs are represented by quadrant A?
b.What strategy will Firm 1 pursue if it believes that Firm 2 is offering a coupon?
c.What quadrant represents the equilibrium that will result if the firms act independently (compete)?
d.What quadrant represents the equilibrium that will result if the firms successfully collude?

Accepted Answer

a.In quadrant A,Firm 1 offers a coupon w

Question 3

When firms in monopolistic competition are making an economic profit,firms will

Accepted Answer

A) enter the industry,and demand will increase for the original firms. 
B) exit the industry,and demand will increase for the firms that remain. 
C) exit the industry,and demand will decrease for the firms that remain. 
D) enter the industry,and demand will decrease for the original firms. 
E) enter the industry and then will exit the industry. 
A) enter the industry,and demand will increase for the original firms. 
B) exit the industry,and demand will increase for the firms that remain. 
C) exit the industry,and demand will decrease for the firms that remain. 
D) enter the industry,and demand will decrease for the original firms. 
E) enter the industry and then will exit the industry.

Question 4

The Herfindahl-Hirschman Index is used as a guideline to determine if a market is competitive or concentrated.Calculate the index value for each market described below.
a.100 firms,each of which produces 1 per cent of market output
b.50 firms,each of which produces 2 per cent of market output
c.25 firms,each of which produces 4 per cent of market output
d.20 firms,each of which produces 5 per cent of market output
e.10 firms,each of which produces 10 per cent of market output
f.5 firms,each of which produces 20 per cent of market output
g.2 firms,each of which produces 50 per cent of market output

Accepted Answer

a.100 × 1 = 100
b.50 × 4 = 200

Question 5

In the example of the Nike running shoe,we see that

Accepted Answer

A) selling costs account for over half of a shoe's retail price. 
B) materials actually account for two-thirds of the retail price of the shoes. 
C) taxes account for one-quarter of the retail price of the shoes. 
D) production costs exceed selling costs by a wide margin. 
E) raw materials costs are by far the largest component of the total costs of producing the shoes. 
A) selling costs account for over half of a shoe's retail price. 
B) materials actually account for two-thirds of the retail price of the shoes. 
C) taxes account for one-quarter of the retail price of the shoes. 
D) production costs exceed selling costs by a wide margin. 
E) raw materials costs are by far the largest component of the total costs of producing the shoes.

Question 6

When a city licenses only 3 taxi firms to serve the market,the city has created a

Accepted Answer

A) cartel. 
B) legal monopoly. 
C) monopolistically competitive market. 
D) legal oligopoly. 
E) natural oligopoly. 
A) cartel. 
B) legal monopoly. 
C) monopolistically competitive market. 
D) legal oligopoly. 
E) natural oligopoly.

Question 7

-An industry has only four firms,who have market shares of 45 percent,25 percent,20 percent,and 10 percent.What is the Herfindahl-Hirschman Index?

Accepted Answer

The Herfin

Question 8

Suppose two companies,Sony and Magnavox,are competing in a duopoly.If both companies charge a high price,they each earn $700 million in economic profit.If both companies charge a low price,they each earn $500 million in economic profit.If one company charges a high price and the other a low price,the company charging the higher price earns $450 million in economic profit and the company charging the lower price earns $800 million in economic profit.
a.Complete the payoff matrix below for Sony and Magnavox.   
b.Find the Nash equilibrium.

Accepted Answer

@#IMG-DLM& a.The completed payoff matrix

Question 9

The primary reason why monopolistically competitive firms cannot earn an economic profit in the long run is because

Accepted Answer

A) there are barriers to entry. 
B) there is freedom of entry. 
C) the antitrust laws prevent profit from increasing. 
D) recessions occur. 
E) they collude to earn a normal profit. 
A) there are barriers to entry. 
B) there is freedom of entry. 
C) the antitrust laws prevent profit from increasing. 
D) recessions occur. 
E) they collude to earn a normal profit.

Question 10

A Nash equilibrium is defined as

Accepted Answer

A) earning zero economic profit in the long run. 
B) forming a cartel with strong penalties for cheaters. 
C) relying on other game players to realize the benefit of cooperation. 
D) each player taking the best possible action given the action of the other player. 
E) each player taking the action that is best for all the players. 
A) earning zero economic profit in the long run. 
B) forming a cartel with strong penalties for cheaters. 
C) relying on other game players to realize the benefit of cooperation. 
D) each player taking the best possible action given the action of the other player. 
E) each player taking the action that is best for all the players.

Question 11

Firms attempt to create a consumer perception of product differentiation through
I.packaging.
Ii.marketing.
Iii.advertising.

Accepted Answer

A) i only 
B) ii only 
C) ii and iii 
D) i and iii 
E) i,ii,and iii 
A) i only 
B) ii only 
C) ii and iii 
D) i and iii 
E) i,ii,and iii

Question 12

In the Boeing/Airbus oligopoly example discussed in the text,why did Boeing and Airbus have an incentive to produce more planes than the monopoly outcome?

Accepted Answer

Both Boeing and Airbus wanted to produce

Question 13

In monopolistic competition,a firm can set the price for its product because of

Accepted Answer

A) easy entry and exit. 
B) economic profits. 
C) product differentiation. 
D) many competitors. 
E) the firm's upward sloping demand curve. 
A) easy entry and exit. 
B) economic profits. 
C) product differentiation. 
D) many competitors. 
E) the firm's upward sloping demand curve.

Question 14

If the four-firm concentration ratio of an industry is

Accepted Answer

A) near 100,the industry is considered very competitive. 
B) less than 40,the industry is considered an oligopoly. 
C) over 40,the industry is considered monopolistic competition. 
D) less than 40,the industry is considered monopolistic competition. 
E) close to 0,the industry is considered a monopoly. 
A) near 100,the industry is considered very competitive. 
B) less than 40,the industry is considered an oligopoly. 
C) over 40,the industry is considered monopolistic competition. 
D) less than 40,the industry is considered monopolistic competition. 
E) close to 0,the industry is considered a monopoly.

Question 15

The three largest firms in an industry have market shares of 40 percent,30 percent,and 2 percent.The remaining 47 firms in the industry each have a market share of 1 percent.The Herfindahl-Hirschman Index (HHI)for this industry is

Accepted Answer

A) 2,551. 
B) 5,184. 
C) 24,061. 
D) 10,000. 
E) 3,013. 
A) 2,551. 
B) 5,184. 
C) 24,061. 
D) 10,000. 
E) 3,013.

Question 16

If firms in an oligopolistic industry successfully collude and form a cartel,what price and output will result?

Accepted Answer

A) the monopoly price and output 
B) the competitive price and output 
C) the monopolistically competitive price and output 
D) a price higher than the monopoly price and,because there is more than one firm in the industry,more output than the monopoly amount 
E) a price lower than the competitive price and,because there are only a few firms in the industry,less output than the competitive amount 
A) the monopoly price and output 
B) the competitive price and output 
C) the monopolistically competitive price and output 
D) a price higher than the monopoly price and,because there is more than one firm in the industry,more output than the monopoly amount 
E) a price lower than the competitive price and,because there are only a few firms in the industry,less output than the competitive amount

Question 17

A market in which the Herfindahl-Hirschman Index exceeds 1,800 is considered to be

Accepted Answer

A) competitive. 
B) not competitive. 
C) moderately competitive. 
D) purely competitive. 
E) either a monopoly or monopolistic competition. 
A) competitive. 
B) not competitive. 
C) moderately competitive. 
D) purely competitive. 
E) either a monopoly or monopolistic competition.

Question 18

When oligopolies seek to operate as a single-price monopoly,the firms produce at the point where:

Accepted Answer

A) P = MC. 
B) MR = MC. 
C) P < ATC. 
D) P = MR. 
E) MC = ATC. 
A) P = MC. 
B) MR = MC. 
C) P < ATC. 
D) P = MR. 
E) MC = ATC.

Question 19

Crest Toothpaste offers new whitening toothpaste one year,a new gel swirl design the next year,and an improved cleaning formula the year after.Crest Toothpaste does this because it is

Accepted Answer

A) a monopoly trying to decrease its costs. 
B) a perfectly competitive firm trying to increase its price. 
C) a monopolistically competitive firm trying to maintain its economic profit. 
D) driving its competitors out of business. 
E) a perfectly competitive firm trying to increase its costs so it can increase its price. 
A) a monopoly trying to decrease its costs. 
B) a perfectly competitive firm trying to increase its price. 
C) a monopolistically competitive firm trying to maintain its economic profit. 
D) driving its competitors out of business. 
E) a perfectly competitive firm trying to increase its costs so it can increase its price.

Question 20

The players in a game theory situation often do not act in their joint interest because of which of the following?

Accepted Answer

A) They do not realize the benefit of cooperation. 
B) Players strive to minimize their opponents' profits. 
C) Players do not understand the game and its payoffs. 
D) It is not in each player's self-interest to cooperate. 
E) Players understand the game but they do not know which action(s)will benefit their joint interest. 
A) They do not realize the benefit of cooperation. 
B) Players strive to minimize their opponents' profits. 
C) Players do not understand the game and its payoffs. 
D) It is not in each player's self-interest to cooperate. 
E) Players understand the game but they do not know which action(s)will benefit their joint interest.

A group of firms acting together to limit output,raise price,and increase economic profit is a called a

When firms in monopolistic competition are making an economic profit,firms will

In the example of the Nike running shoe,we see that

When a city licenses only 3 taxi firms to serve the market,the city has created a

-An industry has only four firms,who have market shares of 45 percent,25 percent,20 percent,and 10 percent.What is the Herfindahl-Hirschman Index?

The primary reason why monopolistically competitive firms cannot earn an economic profit in the long run is because

A Nash equilibrium is defined as

Firms attempt to create a consumer perception of product differentiation through I.packaging. Ii.marketing. Iii.advertising.

In the Boeing/Airbus oligopoly example discussed in the text,why did Boeing and Airbus have an incentive to produce more planes than the monopoly outcome?

In monopolistic competition,a firm can set the price for its product because of

If the four-firm concentration ratio of an industry is

The three largest firms in an industry have market shares of 40 percent,30 percent,and 2 percent.The remaining 47 firms in the industry each have a market share of 1 percent.The Herfindahl-Hirschman Index (HHI)for this industry is

If firms in an oligopolistic industry successfully collude and form a cartel,what price and output will result?

A market in which the Herfindahl-Hirschman Index exceeds 1,800 is considered to be

When oligopolies seek to operate as a single-price monopoly,the firms produce at the point where:

Crest Toothpaste offers new whitening toothpaste one year,a new gel swirl design the next year,and an improved cleaning formula the year after.Crest Toothpaste does this because it is

The players in a game theory situation often do not act in their joint interest because of which of the following?

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Global Markets in Action

Externalities: Pollution, education, and Health Care

Production and Cost

Perfect Competition

Monopoly

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and Economic Growth

Money and the Monetary System

Aggregate Supply and Aggregate Demand

Fiscal Policy and Monetary Policy

Filters

Exam 13: Monopolistic Competition and Oligopoly

A group of firms acting together to limit output,raise price,and increase economic profit is a called a

When firms in monopolistic competition are making an economic profit,firms will

In the example of the Nike running shoe,we see that

When a city licenses only 3 taxi firms to serve the market,the city has created a

-An industry has only four firms,who have market shares of 45 percent,25 percent,20 percent,and 10 percent.What is the Herfindahl-Hirschman Index?

The primary reason why monopolistically competitive firms cannot earn an economic profit in the long run is because

A Nash equilibrium is defined as

Firms attempt to create a consumer perception of product differentiation through I.packaging. Ii.marketing. Iii.advertising.

In the Boeing/Airbus oligopoly example discussed in the text,why did Boeing and Airbus have an incentive to produce more planes than the monopoly outcome?

In monopolistic competition,a firm can set the price for its product because of

If the four-firm concentration ratio of an industry is

The three largest firms in an industry have market shares of 40 percent,30 percent,and 2 percent.The remaining 47 firms in the industry each have a market share of 1 percent.The Herfindahl-Hirschman Index (HHI)for this industry is

If firms in an oligopolistic industry successfully collude and form a cartel,what price and output will result?

A market in which the Herfindahl-Hirschman Index exceeds 1,800 is considered to be

When oligopolies seek to operate as a single-price monopoly,the firms produce at the point where:

Crest Toothpaste offers new whitening toothpaste one year,a new gel swirl design the next year,and an improved cleaning formula the year after.Crest Toothpaste does this because it is

The players in a game theory situation often do not act in their joint interest because of which of the following?

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Global Markets in Action

Externalities: Pollution, education, and Health Care

Production and Cost

Perfect Competition

Monopoly

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and Economic Growth

Money and the Monetary System

Aggregate Supply and Aggregate Demand

Fiscal Policy and Monetary Policy

Filters