Question 1

Suppose that George and Laura are duopolists.George is producing 300 units of output,and Laura is producing 400 units of output.When Laura produces 400 units,George maximizes profit by producing 300 units.When George produces 300 units of output,Laura maximizes profit by producing 400 units.George and Laura are

Accepted Answer

A)   in a competitive market.
B)   at a Nash equilibrium.
C)   pricing at the minimum of average total cost.
D)   engaging in mark-up pricing.E) A) and D)
F) B) and C)

Question 2

The practice of tying is illegal on the grounds that

Accepted Answer

A)   it allows firms to expand their market power.
B)   it allows firms to form collusive arrangements.
C)   it prevents firms from forming collusive agreements.
D)   the Sherman Act explicitly prohibited such agreements.E) B) and C)
F) A) and B)

Question 3

Table 17-22
Brian and Matt own the only two bicycle repair shops in town.Each must choose between a low price for repair work and a high price.The annual economic profit from each strategy is indicated in the table.The profits are shown as (Matt,Brian) in each cell.
 
-Refer to Table 17-22.Which of the following statements is correct if Brian and Matt will play this game only once?

Accepted Answer

A)   The Nash equilibrium is the high price.
B)   A Nash equilibrium cannot be established unless Brian and Matt collude.
C)   A Nash equilibrium cannot be established without the players repeating the game.
D)   The Nash equilibrium price is the low price.E) A) and B)
F) A) and C)

Question 4

Table 17-2.The table shows the town of Pittsville's demand schedule for gasoline.For simplicity,assume the town's gasoline seller(s) incur no costs in selling gasoline.
 
-Refer to Table 17-2.If there are exactly two sellers of gasoline in Pittsville and if they collude,then which of the following outcomes is most likely?

Accepted Answer

A)   Each seller will sell 500 gallons and charge a price of $5.
B)   Each seller will sell 250 gallons and charge a price of $2.50.
C)   Each seller will sell 350 gallons and charge a price of $3.
D)   Each seller will sell 250 gallons and charge a price of $5.E) None of the above
F) A) and B)

Question 5

In a duopoly if the firms have agreed to jointly maximize profits,then each firm can increase its current profits by producing more.

Accepted Answer

A) True 
 B)False

Question 6

In which of the following markets are strategic interactions among firms most likely to occur?

Accepted Answer

A)   markets to which patent and copyright laws apply
B)   the market for piano lessons
C)   the market for tennis balls
D)   the market for cornE) A) and B)
F) A) and C)

Question 7

Predatory pricing occurs when

Accepted Answer

A)   firms collude to set prices.Economists are certain this practice is profitable.
B)   firms collude to set prices.Economists are skeptical that this practice is profitable.
C)   A monopolist decreases its prices to maintain its monopoly.Economists are certain this practice is profitable.
D)   A monopolist decreases its prices to maintain its monopoly.Economists are skeptical that this practice is profitable.E) A) and C)
F) All of the above

Question 8

The Sherman Act made cooperative agreements

Accepted Answer

A)   unenforceable outside of established judicial review processes.
B)   enforceable with proper judicial review.
C)   a criminal conspiracy.
D)   a crime,but did not give direction on possible penalties.E) A) and D)
F) B) and C)

Question 9

Figure 17-1.Two companies,ABC and XYZ,each decide whether to produce a high level of output or a low level of output.In the figure,the dollar amounts are payoffs and they represent annual profits for the two companies. 
-Refer to Figure 17-1.The dominant strategy for ABC is to

Accepted Answer

A)   produce high output,and the dominant strategy for XYZ is to produce high output.
B)   produce high output,and the dominant strategy for XYZ is to produce low output.
C)   produce low output,and the dominant strategy for XYZ is to produce high output.
D)   produce low output,and the dominant strategy for XYZ is to produce low output.E) B) and D)
F) B) and C)

Question 10

The practice of tying is used to

Accepted Answer

A)   enhance the enforcement of antitrust laws.
B)   encourage the enforcement of collusive agreements.
C)   control the retail price of a collection of related products.
D)   package products to sell at a combined price closer to a buyer's total willingness to pay.E) A) and B)
F) B) and C)

Question 11

The primary purpose of antitrust legislation is to

Accepted Answer

A)   protect small businesses.
B)   protect the competitiveness of U.S.markets.
C)   protect the prices of American-made products.
D)   ensure firms earn only a fair profit.E) None of the above
F) A) and B)

Question 12

How did the Clayton Act of 1914 differ from the Sherman Antitrust Act of 1890?

Accepted Answer

The Clayton Act strengthened t...

Question 13

The story of the prisoners' dilemma shows why

Accepted Answer

A)   predatory pricing is clearly not in society's best interest.
B)   economists are unanimous in condemning resale price maintenance,since it inevitably reduces competition.
C)   oligopolies can fail to act independently,even when independent decision-making is in their best interest.
D)   oligopolies can fail to cooperate,even when cooperation is in their best interest.E) B) and D)
F) A) and D)

Question 14

Figure 17-4.Two companies,Acme and Bilco,are sellers in the same market.Each company decides whether to charge a high price or a low price.In the figure,the dollar amounts are payoffs and they represent annual profits for the two companies. 
-Refer to Figure 17-4.Suppose we observe that the outcome of the game is one in which each company earns a profit of $5 million.This outcome

Accepted Answer

A)   is the result of each company pursuing its dominant strategy.
B)   is the result of cooperation between the two companies,and we know that a cooperative outcome is easy in a game such as this one.
C)   is the result of cooperation between the two companies,and we know that a cooperative outcome is difficult in a game such as this one.
D)   is the most likely outcome of the game,regardless of whether the two companies cooperate.E) B) and D)
F) B) and C)

Question 15

Table 17-20
Nadia and Maddie are two college roommates who both prefer a clean common space in their dorm room,but neither enjoys cleaning.The roommates must each make a decision to either clean or not clean the dorm room's common space.The payoff table for this situation is provided below,where the higher a player's payoff number,the better off that player is.The payoffs in each cell are shown as (payoff for Nadia,payoff for Maddie) .
 
-Refer to Table 17-20.What is Maddie's dominant strategy?

Accepted Answer

A)   Maddie has no dominant strategy.
B)   Maddie should always choose Clean.
C)   Maddie should always choose Don't Clean.
D)   Maddie has two dominant strategies,Clean and Don't Clean,depending on the choice Nadia makes.E) A) and D)
F) B) and C)

Question 16

Oligopolies can end up looking like competitive markets if the number of firms is

Accepted Answer

A)   large and they all cooperate.
B)   large and they do not cooperate.
C)   small and they all cooperate.
D)   small and they do not cooperate.E) A) and D)
F) A) and C)

Question 17

Table 17-4
Suppose that two oil companies - BP and Exxon - own adjacent natural gas fields.The profits that each firm earns depends on both the number of wells it drills and the number of wells drilled by the other firm.The table below lists each firm's individual profits:
Exxon
Drill one well Drill two wells
 
-Refer to Table 17-4.Does BP have a dominant strategy? If so,describe it.

Accepted Answer

Yes,regardless of Exxon's stra...

Question 18

Table 17-18
This table shows a game played between two firms,Firm A and Firm B.In this game each firm must decide how much output (Q) to produce: 10 units or 12 units.The profit for each firm is given in the table as (Profit for Firm A,Profit for Firm B) .
 
-Refer to Table 17-18.If these two firms agree to cooperate to maximize their joint profit,the outcome of the game will be

Accepted Answer

A)   10 units of output for Firm A and 10 units of output for Firm B.
B)   10 units of output for Firm A and 12 units of output for Firm B.
C)   12 units of output for Firm A and 10 units of output for Firm B.
D)   12 units of output for Firm A and 12 units of output for Firm B.E) B) and D)
F) C) and D)

Question 19

Table 17-10
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 17-10.Suppose there are exactly two sellers of gasoline in Driveaway: Amogo and Spilmerica.If Amogo sells 150 gallons and Spilmerica sells 100 gallons,then

Accepted Answer

A)   Amogo's profit is $150 and Spilmerica's profit is $100.
B)   Amogo's profit is $100 and Spilmerica's profit is $66.67.
C)   Amogo's profit is $75 and Spilmerica's profit is $50.
D)   there is an excess supply of gasoline in Driveaway.E) A) and B)
F) A) and C)

Question 20

Explain how the output effect and the price effect influence the production decision of the individual oligopolist.

Accepted Answer

Since the individual oligopolist faces a...

Exam 17: Oligopoly

Correct Answer
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Correct Answer
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The practice of tying is used to

Correct Answer
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The story of the prisoners' dilemma shows why

Correct Answer
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The practice of tying is illegal on the grounds that

Correct Answer
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Correct Answer
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Yes,regardless of Exxon's stra...
View Answer

Correct Answer
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Correct Answer
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Oligopolies can end up looking like competitive markets if the number of firms is

Correct Answer
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Predatory pricing occurs when

Correct Answer
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Correct Answer
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Figure 17-1.Two companies,ABC and XYZ,each decide whether to produce a high level of output or a low level of output.In the figure,the dollar amounts are payoffs and they represent annual profits for the two companies. -Refer to Figure 17-1.The dominant strategy for ABC is to

Correct Answer
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The primary purpose of antitrust legislation is to

Correct Answer
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The Sherman Act made cooperative agreements

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

In a duopoly if the firms have agreed to jointly maximize profits,then each firm can increase its current profits by producing more.

Correct Answer
verified

Explain how the output effect and the price effect influence the production decision of the individual oligopolist.

Correct Answer
verified
Since the individual oligopolist faces a...
View Answer

How did the Clayton Act of 1914 differ from the Sherman Antitrust Act of 1890?

Correct Answer
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The Clayton Act strengthened t...
View Answer

In which of the following markets are strategic interactions among firms most likely to occur?

Correct Answer
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Exam 17: Oligopoly

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The practice of tying is used to

Correct AnswerverifiedShow Answer

The story of the prisoners' dilemma shows why

Correct AnswerverifiedShow Answer

The practice of tying is illegal on the grounds that

Correct AnswerverifiedShow Answer

Correct AnswerverifiedYes,regardless of Exxon's stra...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Oligopolies can end up looking like competitive markets if the number of firms is

Correct AnswerverifiedShow Answer

Predatory pricing occurs when

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 17-1.Two companies,ABC and XYZ,each decide whether to produce a high level of output or a low level of output.In the figure,the dollar amounts are payoffs and they represent annual profits for the two companies. -Refer to Figure 17-1.The dominant strategy for ABC is to

Correct AnswerverifiedShow Answer

The primary purpose of antitrust legislation is to

Correct AnswerverifiedShow Answer

The Sherman Act made cooperative agreements

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In a duopoly if the firms have agreed to jointly maximize profits,then each firm can increase its current profits by producing more.

Correct AnswerverifiedShow Answer

Explain how the output effect and the price effect influence the production decision of the individual oligopolist.

Correct AnswerverifiedSince the individual oligopolist faces a...View AnswerShow Answer

How did the Clayton Act of 1914 differ from the Sherman Antitrust Act of 1890?

Correct AnswerverifiedThe Clayton Act strengthened t...View AnswerShow Answer

In which of the following markets are strategic interactions among firms most likely to occur?

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Yes,regardless of Exxon's stra...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Since the individual oligopolist faces a...
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Correct Answer
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The Clayton Act strengthened t...
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Correct Answer
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