Question 1

Even though four firms can profitably sell hotdogs downtown,the government licenses only two firms.This market is a

Accepted Answer

A)  natural duopoly. 
B)  legal duopoly. 
C)  natural monopoly. 
D)  legal monopoly. 
E)  market-limited oligopoly. 
A)  natural duopoly. 
B)  legal duopoly. 
C)  natural monopoly. 
D)  legal monopoly. 
E)  market-limited oligopoly.

Question 2

A Nash equilibrium occurs when each player in a game takes the ________ given the action of the other player.

Accepted Answer

A)  worst possible action for himself or herself 
B)  best possible action for himself or herself 
C)  most unpredictable possible action 
D)  most mutually beneficial possible action 
E)  best possible action for the other player 
A)  worst possible action for himself or herself 
B)  best possible action for himself or herself 
C)  most unpredictable possible action 
D)  most mutually beneficial possible action 
E)  best possible action for the other player

Question 3

Why do oligopoly firms find it difficult to cooperate and not cheat on a cartel agreement?

Accepted Answer

Firms in an oligopoly have large market

Question 4

A group of firms in Sunnyvale have a complaint about one of their competitors.They charge that Big Box Building Supply charges such low prices that they can't stay in business.Which of the following is the most likely response from an economist?

Accepted Answer

A)  Big Box Building Supply isn't engaged in predatory pricing because new firms can always enter and compete away any monopoly profits. 
B)  Big Box Building Supply is engaged in price fixing and should be prosecuted for violating antitrust law. 
C)  The firms have a valid complaint against Big Box Building Supply because it is engaged in resale price maintenance. 
D)  The firms don't have a valid complaint against Big Box Building Supply because it is operating like a natural monopoly. 
E)  Big Box Building Supply is engaged in resale price maintenance but most likely is providing efficient service. 
A)  Big Box Building Supply isn't engaged in predatory pricing because new firms can always enter and compete away any monopoly profits. 
B)  Big Box Building Supply is engaged in price fixing and should be prosecuted for violating antitrust law. 
C)  The firms have a valid complaint against Big Box Building Supply because it is engaged in resale price maintenance. 
D)  The firms don't have a valid complaint against Big Box Building Supply because it is operating like a natural monopoly. 
E)  Big Box Building Supply is engaged in resale price maintenance but most likely is providing efficient service.

Question 5

Suppose there are 6 firms in an industry with the following market shares.If the two smallest firms want to merge,how will the Federal Trade Commission reply?
Firm 1:30
Firm 2:25
Firm 3:25
Firm 4:10
Firm 5: 7
Firm 6: 3

Accepted Answer

A)  The firms will be allowed to merge and compete with the larger firms. 
B)  The firms will be challenged because the merger will raise the HHI by more than 50 points. 
C)  The firms will not be allowed to merge. 
D)  The firms will be challenged because the merger will raise the HHI by more than 100 points. 
E)  The firms will be challenged because the merger will raise the HHI by more than 250 points. 
A)  The firms will be allowed to merge and compete with the larger firms. 
B)  The firms will be challenged because the merger will raise the HHI by more than 50 points. 
C)  The firms will not be allowed to merge. 
D)  The firms will be challenged because the merger will raise the HHI by more than 100 points. 
E)  The firms will be challenged because the merger will raise the HHI by more than 250 points.

Question 6

What are the actions that are prohibited according to the Clayton Act and its amendments? What conditions must be met for these actions to be prohibited?

Accepted Answer

The Clayton Act prohibits certain practi

Question 7

Which of the following is an example of exclusive dealing?

Accepted Answer

A)  preventing a buyer from reselling a product outside a specific area 
B)  forcing a buyer to buy other goods from a supplier 
C)  forcing the purchase of all necessities from a single firm 
D)  prohibiting a seller from selling a competing item 
E)  selling different units of a good to the same buyer at different prices 
A)  preventing a buyer from reselling a product outside a specific area 
B)  forcing a buyer to buy other goods from a supplier 
C)  forcing the purchase of all necessities from a single firm 
D)  prohibiting a seller from selling a competing item 
E)  selling different units of a good to the same buyer at different prices

Question 8

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 9

What is a cartel?

Accepted Answer

A cartel is a group of firms acting toge

Question 10

Sammy's Inc.competes with a few other firms because there are natural barriers to entry.Sammy's operates in

Accepted Answer

A)  a perfectly competitive market. 
B)  an oligopoly. 
C)  a monopolistically competitive market. 
D)  a monopoly. 
E)  a natural monopolistically competitive market. 
A)  a perfectly competitive market. 
B)  an oligopoly. 
C)  a monopolistically competitive market. 
D)  a monopoly. 
E)  a natural monopolistically competitive market.

Question 11

If one firm in a duopoly increases its production by one unit beyond the monopoly output,that firm's profit ________,the other firm's profit ________,and the total profit of the duopoly ________.

Accepted Answer

A)  increases; increases; increases 
B)  does not change; does not change; does not change 
C)  increases; decreases; does not change 
D)  increases; does not change; increases 
E)  increases; decreases; decreases 
A)  increases; increases; increases 
B)  does not change; does not change; does not change 
C)  increases; decreases; does not change 
D)  increases; does not change; increases 
E)  increases; decreases; decreases

Question 12

A cartel is

Accepted Answer

A)  a group of firms selling identical products but at slightly different prices. 
B)  an agreement among firms to limit output, raise prices, and increase economic profit. 
C)  the automobile producing industry. 
D)  the only firm selling a particular product. 
E)  an illegal agreement among firms which most often arises in monopolistically competitive markets. 
A)  a group of firms selling identical products but at slightly different prices. 
B)  an agreement among firms to limit output, raise prices, and increase economic profit. 
C)  the automobile producing industry. 
D)  the only firm selling a particular product. 
E)  an illegal agreement among firms which most often arises in monopolistically competitive markets.

Question 13

The figure above shows the market for airplanes.
-Suppose the airplane market is an oligopoly.According to the figure above,if the firms act as a monopolist,the quantity produced will be ________ planes per week,and if the firms act as competitors,the quantity produced will be ________ planes per week.

Accepted Answer

A)  6; 12 
B)  12; 6 
C)  0; 6 
D)  12; 0 
E)  None of the above answers is correct. 
A)  6; 12 
B)  12; 6 
C)  0; 6 
D)  12; 0 
E)  None of the above answers is correct.

Question 14

Setting a price so low that competitors are driven out of a market and then boosting the price is called

Accepted Answer

A)  predatory pricing. 
B)  a tying arrangement. 
C)  resale price maintenance. 
D)  price fixing. 
E)  price discrimination. 
A)  predatory pricing. 
B)  a tying arrangement. 
C)  resale price maintenance. 
D)  price fixing. 
E)  price discrimination.

Question 15

"Because firms in an oligopoly are so large,they do not need to consider each other's actions." Is the previous statement correct or incorrect? Explain your answer.

Accepted Answer

The statement is most definitely incorre

Question 16

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 17

Federal Trade Commission guidelines state that it will examine mergers in markets for which the Herfindahl-Hirschman Index is

Accepted Answer

A)  a positive number. 
B)  below 1,000 points. 
C)  between 1,000 and 1,800, and the merger would reduce the index by 100 points. 
D)  between 1,000 and 1,800, and the merger would increase the index by 100 points. 
E)  more than 1,800. 
A)  a positive number. 
B)  below 1,000 points. 
C)  between 1,000 and 1,800, and the merger would reduce the index by 100 points. 
D)  between 1,000 and 1,800, and the merger would increase the index by 100 points. 
E)  more than 1,800.

Question 18

-The above figure shows the market demand curve for long-distance land-based telephone calls.Suppose the marginal cost of a long-distance telephone call is 2¢ a minute for a call no matter how many minutes of calls are made and there are 3 firms in the industry.If the firms in the industry operate as a monopoly,there are ________ minutes of calls made per hour.

Accepted Answer

A)  between 0 and 3 million 
B)  more than 3 million and less than or equal to 5 million 
C)  more than 5 million and less than or equal to 7 million 
D)  more than 7 million and less than or equal to 9 million 
E)  more than 9 million 
A)  between 0 and 3 million 
B)  more than 3 million and less than or equal to 5 million 
C)  more than 5 million and less than or equal to 7 million 
D)  more than 7 million and less than or equal to 9 million 
E)  more than 9 million

Question 19

Suppose that an industry has an HHI of 1,900.Two firms in the industry want to merge.Under which conditions will the Federal Trade Commission challenge the merger?

Accepted Answer

A)  The market is considered competitive, so the merger will not be challenged. 
B)  The merger will be challenged if it raises the HHI by 100 or more points. 
C)  The merger will be challenged if it raises the HHI by 50 or more points. 
D)  The merger will be challenged if it raises the HHI by 200 or more points. 
E)  The merger will be challenged if it raises the HHI by 500 or more points. 
A)  The market is considered competitive, so the merger will not be challenged. 
B)  The merger will be challenged if it raises the HHI by 100 or more points. 
C)  The merger will be challenged if it raises the HHI by 50 or more points. 
D)  The merger will be challenged if it raises the HHI by 200 or more points. 
E)  The merger will be challenged if it raises the HHI by 500 or more points.

Question 20

Why are cartels among firms usually kept secret?

Accepted Answer

Cartels are typically kept secret becaus

Even though four firms can profitably sell hotdogs downtown,the government licenses only two firms.This market is a

A Nash equilibrium occurs when each player in a game takes the ________ given the action of the other player.

Why do oligopoly firms find it difficult to cooperate and not cheat on a cartel agreement?

A group of firms in Sunnyvale have a complaint about one of their competitors.They charge that Big Box Building Supply charges such low prices that they can't stay in business.Which of the following is the most likely response from an economist?

Suppose there are 6 firms in an industry with the following market shares.If the two smallest firms want to merge,how will the Federal Trade Commission reply? Firm 1:30 Firm 2:25 Firm 3:25 Firm 4:10 Firm 5: 7 Firm 6: 3

What are the actions that are prohibited according to the Clayton Act and its amendments? What conditions must be met for these actions to be prohibited?

Which of the following is an example of exclusive dealing?

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?

What is a cartel?

Sammy's Inc.competes with a few other firms because there are natural barriers to entry.Sammy's operates in

If one firm in a duopoly increases its production by one unit beyond the monopoly output,that firm's profit ,the other firm's profit ,and the total profit of the duopoly .

A cartel is

The figure above shows the market for airplanes. -Suppose the airplane market is an oligopoly.According to the figure above,if the firms act as a monopolist,the quantity produced will be planes per week,and if the firms act as competitors,the quantity produced will be planes per week.

Setting a price so low that competitors are driven out of a market and then boosting the price is called

"Because firms in an oligopoly are so large,they do not need to consider each other's actions." Is the previous statement correct or incorrect? Explain your answer.

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

Federal Trade Commission guidelines state that it will examine mergers in markets for which the Herfindahl-Hirschman Index is

Suppose that an industry has an HHI of 1,900.Two firms in the industry want to merge.Under which conditions will the Federal Trade Commission challenge the merger?

Why are cartels among firms usually kept secret?

Getting Started

The U.S.and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets with Private Information

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition

Markets for Factors of Production

Economic Inequality

Filters

Exam 18: Oligopoly

Even though four firms can profitably sell hotdogs downtown,the government licenses only two firms.This market is a

A Nash equilibrium occurs when each player in a game takes the ________ given the action of the other player.

Why do oligopoly firms find it difficult to cooperate and not cheat on a cartel agreement?

A group of firms in Sunnyvale have a complaint about one of their competitors.They charge that Big Box Building Supply charges such low prices that they can't stay in business.Which of the following is the most likely response from an economist?

Suppose there are 6 firms in an industry with the following market shares.If the two smallest firms want to merge,how will the Federal Trade Commission reply? Firm 1:30 Firm 2:25 Firm 3:25 Firm 4:10 Firm 5: 7 Firm 6: 3

What are the actions that are prohibited according to the Clayton Act and its amendments? What conditions must be met for these actions to be prohibited?

Which of the following is an example of exclusive dealing?

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?

What is a cartel?

Sammy's Inc.competes with a few other firms because there are natural barriers to entry.Sammy's operates in

If one firm in a duopoly increases its production by one unit beyond the monopoly output,that firm's profit ________,the other firm's profit ________,and the total profit of the duopoly ________.

A cartel is

Setting a price so low that competitors are driven out of a market and then boosting the price is called

"Because firms in an oligopoly are so large,they do not need to consider each other's actions." Is the previous statement correct or incorrect? Explain your answer.

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

Federal Trade Commission guidelines state that it will examine mergers in markets for which the Herfindahl-Hirschman Index is

Suppose that an industry has an HHI of 1,900.Two firms in the industry want to merge.Under which conditions will the Federal Trade Commission challenge the merger?

Why are cartels among firms usually kept secret?

Getting Started

The U.S.and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets with Private Information

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition

Markets for Factors of Production

Economic Inequality

Filters

If one firm in a duopoly increases its production by one unit beyond the monopoly output,that firm's profit ,the other firm's profit ,and the total profit of the duopoly .