Question 1

Which of the following statements about oligopolies is not correct?

Accepted Answer

A)  An oligopolistic market has only a few sellers.
B)  The actions of any one seller can have a large impact on the profits of all other sellers.
C)  Oligopolistic firms are interdependent in a way that competitive firms are not.
D)  Unlike monopolies and monopolistically competitive markets, oligopolies prices do not exceed their marginal revenues.E) None of the above
F) A) and B)

Question 2

As the number of firms in an oligopoly becomes very large, the price effect disappears.

Accepted Answer

A) True 
 B)False

Question 3

A manufacturer of light bulbs sells its products to retail stores and requires the stores to sell the bulbs to customers for $2 per bulb. This practice is known as tying.

Accepted Answer

A) True 
 B)False

Question 4

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) B) and D)

Question 5

Scenario 17-2.
​
Imagine that two oil companies, BQ and Exxoff, own adjacent oil fields. Under the fields is a common pool of oil worth $144 million. Drilling a well to recover oil costs $5 million per well. If each company drills one well, each will get half of the oil and earn a $67 million profit ($72 million in revenue - $5 million in costs) . Assume that having X percent of the total wells means that a company will collect X percent of the total revenue.
-Refer to Scenario 17-2. If BQ and Exxoff are able to successfully cooperate to maximize their joint profits, BQ will earn

Accepted Answer

A)  $43 million and Exxoff will earn $86 million.
B)  $62 million and Exxoff will earn $62 million.
C)  $67 million and Exxoff will earn $67 million.
D)  $86 million and Exxoff will earn $43 million.E) B) and D)
F) B) and C)

Question 6

To function as a monopoly, OPEC and other cartels rely on __________ among members.

Accepted Answer

The answer of To function as a monopoly, OPEC and...

Question 7

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. If Maddie chooses not to clean, then Nadia will

Accepted Answer

A)  clean, and Nadia's payoff will be 50.
B)  not clean, and Nadia's payoff will be 10.
C)  clean, and Nadia's payoff will be 7.
D)  not clean, and Nadia's payoff will be 30.E) A) and B)
F) B) and D)

Question 8

Which of the following questions about predatory pricing remains unresolved?

Accepted Answer

A)  Are the courts capable of determining which price cuts are competitive and which are predatory?
B)  Are the courts capable of determining which price cuts are good for consumers?
C)  Is predatory pricing ever a profitable business strategy?
D)  All of the above questions about predatory pricing are unresolved.E) A) and B)
F) A) and C)

Question 9

The prisoners' dilemma game

Accepted Answer

A)  provides insight into why cooperation is individually rational.
B)  provides insight into why cooperation is difficult.
C)  is a game in which neither player has a dominant strategy.
D)  is a game in which exactly one of the two players has a dominant strategy.E) B) and D)
F) B) and C)

Question 10

To increase their individual profits, members of a cartel have an incentive to

Accepted Answer

A)  charge a higher price than the other members of the cartel.
B)  increase production above the level agreed upon.
C)  ignore the choices made by the other firms and act as a monopolist.
D)  charge the same price a monopolist would charge.E) None of the above
F) B) and D)

Question 11

To move the allocation of resources closer to the social optimum, policymakers should typically try to induce firms in an oligopoly to

Accepted Answer

A)  collude with each other.
B)  form various degrees of cartels.
C)  compete rather than cooperate with each other.
D)  cooperate rather than compete with each other.E) A) and B)
F) A) and C)

Question 12

Table 17-28
Suppose that two firms determine that each could lower its costs and increase its profits if both reduced their advertising budgets. But in order for the plan to work, each firm must agree to refrain from advertising. Each firm believes that advertising works by increasing the demand for the firm's product, but each firm also believes that if neither firm advertises, the cost savings will outweigh the lost sales. The table below lists each firm's individual profits:
Firm A
Breaks agreement Maintains agreement
and advertises and does not advertise 
-Refer to Table 17-28. Does either Firm A or Firm B have a dominant strategy?

Accepted Answer

A)  Firm A has a dominant strategy, but Firm B does not.
B)  Firm A does not have a dominant strategy, but Firm B does.
C)  Neither Firm A nor Firm B has a dominant strategy.
D)  Both Firm A and Firm B have a dominant strategy.E) C) and D)
F) A) and B)

Question 13

Scenario 17-3.
​
Consider two countries, Kinglandia and Rovinastan, that are engaged in an arms race. Each country must decide whether to build new weapons or to disarm existing weapons. Each country prefers to have more arms than the other because a large arsenal gives it more influence in world affairs. But each country also prefers to live in a world safe from the other country's weapons. The following table shows the possible outcomes for each decision combination. The numbers in each cell represent the country's ranking of the outcome (10 = best outcome, 1 = worst outcome) . 
-Refer to Scenario 17-3. If Rovinastan chooses to disarm its existing weapons, then Kinglandia will

Accepted Answer

A)  disarm to increase its influence in world affairs.
B)  disarm to promote world peace.
C)  build new weapons to promote world peace.
D)  build new weapons to increase its influence in world affairs.E) A) and B)
F) A) and C)

Question 14

Figure 17-5. Two companies, ABC and QRS, 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 17-5. If this game is played only once, then the most likely outcome is that

Accepted Answer

A)  both firms charge a low price.
B)  ABC charges a low price and QRS charges a high price.
C)  ABC charges a high price and QRS charges a low price.
D)  both firms charge a high price.E) A) and C)
F) A) and B)

Question 15

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. Which of the following statements regarding this game is true?

Accepted Answer

A)  Both players have a dominant strategy.
B)  Player A has a dominant strategy, but player B does not have a dominant strategy.
C)  Player A does not have a dominant strategy, but player B does have a dominant strategy.
D)  Neither player has a dominant strategy.E) All of the above
F) A) and B)

Question 16

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. If the market for gasoline in Driveaway is perfectly competitive, then the equilibrium price of gasoline is

Accepted Answer

A)  $0 and the equilibrium quantity is 400 gallons.
B)  $1 and the equilibrium quantity is 350 gallons.
C)  $2 and the equilibrium quantity is 300 gallons.
D)  $4 and the equilibrium quantity is 200 gallons.E) All of the above
F) A) and D)

Question 17

Why are the actions of firms interdependent in an oligopoly market but not in a monopolistically competitive market?

Accepted Answer

Because there are only a few firms in an...

Question 18

In the prisoners' dilemma,

Accepted Answer

A)  the prisoners easily collude in order to achieve the best possible payoff for both.
B)  only one player has a dominant strategy.
C)  when each player chooses his dominant strategy the players achieve the best joint outcome.
D)  when each player chooses his dominant strategy the players reach a Nash equilibrium.E) A) and C)
F) B) and C)

Question 19

Juan Pablo and Zak are competitors in a local market. Each is trying to decide if it is better to advertise on TV, on radio, or not at all. If they both advertise on TV, each will earn a profit of $8,000. If they both advertise on radio, each will earn a profit of $14,000. If neither advertises at all, each will earn a profit of $20,000. If one advertises on TV and other advertises on radio, then the one advertising on TV will earn $12,000 and the other will earn $10,000. If one advertises on TV and the other does not advertise, then the one advertising on TV will earn $22,000 and the other will earn $4,000. If one advertises on radio and the other does not advertise, then the one advertising on radio will earn $24,000 and the other will earn $8,000. If both follow their dominant strategy, then Juan Pablo will

Accepted Answer

A)  advertise on TV and earn $8,000.
B)  advertise on radio and earn $14,000.
C)  advertise on TV and earn $22,000.
D)  not advertise and earn $20,000.E) None of the above
F) B) and C)

Question 20

Which of the following statements is false?

Accepted Answer

A)  The Clayton Act allows triple damages in civil lawsuits in order to encourage lawsuits against conspiring oligopolists.
B)  Many economists defend the practice of resale price maintenance on the grounds that it may help solve a free-rider problem.
C)  Most economists agree that predatory pricing is a profitable business strategy that usually preserves market power.
D)  The U.S. Supreme Court's view that the practice of tying usually allows a firm to extend its market power is not generally supported by economic theory.E) A) and D)
F) C) and D)

Exam 17: Oligopoly

Correct Answer
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To move the allocation of resources closer to the social optimum, policymakers should typically try to induce firms in an oligopoly to

Correct Answer
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The prisoners' dilemma game

Correct Answer
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Which of the following statements is false?

Correct Answer
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In the prisoners' dilemma,

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To increase their individual profits, members of a cartel have an incentive to

Correct Answer
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To function as a monopoly, OPEC and other cartels rely on __________ among members.

Correct Answer
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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. Which of the following statements regarding this game is true?

Correct Answer
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Correct Answer
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A manufacturer of light bulbs sells its products to retail stores and requires the stores to sell the bulbs to customers for $2 per bulb. This practice is known as tying.

Correct Answer
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As the number of firms in an oligopoly becomes very large, the price effect disappears.

Correct Answer
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Correct Answer
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Which of the following statements about oligopolies is not correct?

Correct Answer
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Correct Answer
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Which of the following questions about predatory pricing remains unresolved?

Correct Answer
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Why are the actions of firms interdependent in an oligopoly market but not in a monopolistically competitive market?

Correct Answer
verified
Because there are only a few firms in an...
View Answer

Exam 17: Oligopoly

Correct AnswerverifiedShow Answer

To move the allocation of resources closer to the social optimum, policymakers should typically try to induce firms in an oligopoly to

Correct AnswerverifiedShow Answer

The prisoners' dilemma game

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Which of the following statements is false?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In the prisoners' dilemma,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

To increase their individual profits, members of a cartel have an incentive to

Correct AnswerverifiedShow Answer

To function as a monopoly, OPEC and other cartels rely on __________ among members.

Correct AnswerverifiedShow Answer

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. Which of the following statements regarding this game is true?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A manufacturer of light bulbs sells its products to retail stores and requires the stores to sell the bulbs to customers for $2 per bulb. This practice is known as tying.

Correct AnswerverifiedShow Answer

As the number of firms in an oligopoly becomes very large, the price effect disappears.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following statements about oligopolies is not correct?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following questions about predatory pricing remains unresolved?

Correct AnswerverifiedShow Answer

Why are the actions of firms interdependent in an oligopoly market but not in a monopolistically competitive market?

Correct AnswerverifiedBecause there are only a few firms in an...View AnswerShow Answer

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Correct Answer
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Because there are only a few firms in an...
View Answer