Question 1

Which of the following is a distinguishing characteristic of oligopoly?

Accepted Answer

A)   A large number of firms compete.
B)   No one firm's actions directly affect the actions of the other firms.
C)   Firms are free to enter and exit the industry.
D)   Natural or legal barriers prevent the entry of new firms.E) A) and C)
F) None of the above

Question 2

Sears 
-Refer to the payoffs in the table above. Sears and Wal-Mart must decide whether to lower their prices based on the profits shown in the table. This game has

Accepted Answer

A)   no Nash equilibrium.
B)   a Nash equilibrium: Sears keeps its prices high and Wal-Mart lowers its prices.
C)   a Nash equilibrium: both Sears and Wal-Mart keep prices high.
D)   a Nash equilibrium: both Sears and Wal-Mart lower prices.E) C) and D)
F) A) and B)

Question 3

A duopoly occurs when ________.

Accepted Answer

A)   there are only two producers of a particular good competing in the same market
B)   there are two producers of two goods competing in an oligopoly market
C)   there are numerous producers of two goods competing in a competitive market
D)   the one producer of two goods sells the goods in a monopoly marketE) A) and C)
F) A) and D)

Question 4

The small town of Narberth has two pizza stores. Which of the following statements are correct? I. The profits of each store depend on the price of the pizza at the other store.
II)  Both stores would increase their profit if they cooperated in setting their prices.

Accepted Answer

A)   I only
B)   II only
C)   Both I and II
D)   Neither I nor IIE) B) and D)
F) A) and C)

Question 5

In the figure, D is the demand curve for taxi rides in a town, and ATC is the average total cost curve of a taxi company.
-In the scenario above, the market is:

Accepted Answer

A)   A natural duopoly.
B)   A natural oligopoly with three firms.
C)   A natural monopoly.
D)   Monopolistically competitive.E) None of the above
F) B) and C)

Question 6

In a market with a Herfindahl-Hirschman Index of 2,000, according to their guidelines will the Department of Justice challenge a merger that would increase the index by 100?

Accepted Answer

Yes, according to their guidel...

Question 7

Price wars can be the result of

Accepted Answer

A)   a cooperative equilibrium.
B)   a firm playing a tit-for-tat strategy in which last period the competitors complied with a collusive agreement.
C)   new firms entering the industry and immediately agreeing to abide by a collusive agreement.
D)   new firms entering an industry and all firms then finding themselves in a prisoners' dilemma.E) All of the above
F) B) and C)

Question 8

A cooperative equilibrium is most likely to arise in a

Accepted Answer

A)   single-play game with a large number of players.
B)   single-play game without communication.
C)   repeated game with a large number of players.
D)   repeated game with a small number of players.E) A) and B)
F) A) and C)

Question 9

What market structures other than oligopoly have the characteristic of one firm's actions affecting the actions of its competitors? Explain your answer.

Accepted Answer

No other market structure has the charac...

Question 10

Which of the following is true regarding a collusive agreement? I. It is illegal in the United States.
II)  Two or more producers agree to restrict output or raise prices.
III)  Firms' profits are never maximized under this sort of agreement.

Accepted Answer

A)   I and II
B)   I and III
C)   II and III
D)   I, II and IIIE) A) and C)
F) None of the above

Question 11

In a contestable market,

Accepted Answer

A)   the HHI is usually quite low.
B)   the firm in the market usually earns a large economic profit.
C)   the firm in the market may play an entry-deterrence game.
D)   there are high barriers to entry.E) A) and D)
F) B) and D)

Question 12

If two duopolists can collude successfully, then both will

Accepted Answer

A)   earn greater profits than if they did not collude.
B)   price at marginal cost.
C)   price below average total cost.
D)   lower their economic profits.E) A) and C)
F) B) and C)

Question 13

The outcome of a prisoners' dilemma game with a Nash equilibrium is that ________.

Accepted Answer

A)   both players deny
B)   one player denies and one player confesses
C)   both players confess
D)   there is no equilibriumE) None of the above
F) C) and D)

Question 14

Iran called on OPEC in November 2008 to cut production by a further 1 million to 1.5 million barrels per day when it meets in Cairo later this month. Why would OPEC, a cartel, restrict production?

Accepted Answer

A)   to decrease demand
B)   to increase supply
C)   to decrease quantity supplied
D)   to increase profitsE) A) and B)
F) All of the above

Question 15

-Suppose the industry for washing machines has only four firms. The market shares are: Firm A, 40 percent; Firm B, 20 percent; Firm C 20, percent; and Firm D, 20 percent.
a) What is the Herfindahl-Hirschman Index (HHI)?
b) If Firms C and D were to announce a merger, would the Department of Justice oppose the merger?

Accepted Answer

a) The HHI is 2,800.
b) Yes, the Departm...

Question 16

A market structure in which a small number of producers compete against each other is

Accepted Answer

A)   monopolistic competition.
B)   oligopoly.
C)   monopoly.
D)   perfect competition.E) All of the above
F) A) and B)

Question 17

The Clayton Act of 1914 prohibits ________ if it substantially lessens competition or creates a monopoly.

Accepted Answer

A)   people from serving on the board of directors of competing firms
B)   contracts that force other goods to be bought from the same firm
C)   both of the above
D)   neither of the aboveE) A) and D)
F) C) and D)

Question 18

In 2008, a former Intel engineer has been charged with stealing trade secrets worth $1 billion. Intel owns 80 percent of the worldwide market for microprocessors, AMD has the rest. Conducting R&D is very expensive so suppose that each of these firms can either steal R&D or develop their own R&D. If both firms develop their own R&D, economic profit will be $50 million each. If one company steals R&D, that firm earns $100 million in economic profit while the other firm earns $10 million. If both firms steal R&D, each firm breaks even. What is the outcome of this game?

Accepted Answer

A)   Both firms will conduct R&D.
B)   Both firms will steal R&D.
C)   The outcome will be a dominant strategy equilibrium.
D)   Only one firm will conduct R&D, but we cannot predict which firm will conduct R&D.E) A) and B)
F) C) and D)

Question 19

Suppose two firms are trying to decide how much to budget for research and development. Once a new discovery is made, each firm benefits regardless of which firm developed the innovation. In this R&D game of chicken, the Nash equilibrium will be that

Accepted Answer

A)   either both firms conduct the R&D or neither firm conducts the R&D.
B)   only one firm conducts the R&D but which firm conducts the R&D cannot be determined.
C)   both firms conduct the R&D.
D)   neither firm conducts the R&D.E) All of the above
F) A) and B)

Question 20

Student 1 
-Two students are assigned a group project. Each has the option to work or not work to achieve a high grade. The payoffs are shown in the above table. Student 1 should

Accepted Answer

A)   work only if student 2 works.
B)   work regardless of the decision made by student 2.
C)   not work if student 2 works.
D)   not work regardless of what student 2 decides.E) B) and D)
F) C) and D)

Exam 15: Oligopoly

A cooperative equilibrium is most likely to arise in a

Correct Answer
verified

If two duopolists can collude successfully, then both will

Correct Answer
verified

Correct Answer
verified
a) The HHI is 2,800.
b) Yes, the Departm...
View Answer

In the figure, D is the demand curve for taxi rides in a town, and ATC is the average total cost curve of a taxi company. -In the scenario above, the market is:

Correct Answer
verified

Student 1 -Two students are assigned a group project. Each has the option to work or not work to achieve a high grade. The payoffs are shown in the above table. Student 1 should

Correct Answer
verified

A market structure in which a small number of producers compete against each other is

Correct Answer
verified

Which of the following is true regarding a collusive agreement? I. It is illegal in the United States. II) Two or more producers agree to restrict output or raise prices. III) Firms' profits are never maximized under this sort of agreement.

Correct Answer
verified

The Clayton Act of 1914 prohibits ________ if it substantially lessens competition or creates a monopoly.

Correct Answer
verified

Price wars can be the result of

Correct Answer
verified

The small town of Narberth has two pizza stores. Which of the following statements are correct? I. The profits of each store depend on the price of the pizza at the other store. II) Both stores would increase their profit if they cooperated in setting their prices.

Correct Answer
verified

Which of the following is a distinguishing characteristic of oligopoly?

Correct Answer
verified

What market structures other than oligopoly have the characteristic of one firm's actions affecting the actions of its competitors? Explain your answer.

Correct Answer
verified
No other market structure has the charac...
View Answer

In a market with a Herfindahl-Hirschman Index of 2,000, according to their guidelines will the Department of Justice challenge a merger that would increase the index by 100?

Correct Answer
verified
Yes, according to their guidel...
View Answer

Correct Answer
verified

Sears -Refer to the payoffs in the table above. Sears and Wal-Mart must decide whether to lower their prices based on the profits shown in the table. This game has

Correct Answer
verified

Iran called on OPEC in November 2008 to cut production by a further 1 million to 1.5 million barrels per day when it meets in Cairo later this month. Why would OPEC, a cartel, restrict production?

Correct Answer
verified

Suppose two firms are trying to decide how much to budget for research and development. Once a new discovery is made, each firm benefits regardless of which firm developed the innovation. In this R&D game of chicken, the Nash equilibrium will be that

Correct Answer
verified

In a contestable market,

Correct Answer
verified

A duopoly occurs when ________.

Correct Answer
verified

The outcome of a prisoners' dilemma game with a Nash equilibrium is that ________.

Correct Answer
verified

Exam 15: Oligopoly

A cooperative equilibrium is most likely to arise in a

Correct AnswerverifiedShow Answer

If two duopolists can collude successfully, then both will

Correct AnswerverifiedShow Answer

Correct Answerverifieda) The HHI is 2,800.b) Yes, the Departm...View AnswerShow Answer

In the figure, D is the demand curve for taxi rides in a town, and ATC is the average total cost curve of a taxi company. -In the scenario above, the market is:

Correct AnswerverifiedShow Answer

Student 1 -Two students are assigned a group project. Each has the option to work or not work to achieve a high grade. The payoffs are shown in the above table. Student 1 should

Correct AnswerverifiedShow Answer

A market structure in which a small number of producers compete against each other is

Correct AnswerverifiedShow Answer

Which of the following is true regarding a collusive agreement? I. It is illegal in the United States. II) Two or more producers agree to restrict output or raise prices. III) Firms' profits are never maximized under this sort of agreement.

Correct AnswerverifiedShow Answer

The Clayton Act of 1914 prohibits ________ if it substantially lessens competition or creates a monopoly.

Correct AnswerverifiedShow Answer

Price wars can be the result of

Correct AnswerverifiedShow Answer

The small town of Narberth has two pizza stores. Which of the following statements are correct? I. The profits of each store depend on the price of the pizza at the other store. II) Both stores would increase their profit if they cooperated in setting their prices.

Correct AnswerverifiedShow Answer

Which of the following is a distinguishing characteristic of oligopoly?

Correct AnswerverifiedShow Answer

What market structures other than oligopoly have the characteristic of one firm's actions affecting the actions of its competitors? Explain your answer.

Correct AnswerverifiedNo other market structure has the charac...View AnswerShow Answer

In a market with a Herfindahl-Hirschman Index of 2,000, according to their guidelines will the Department of Justice challenge a merger that would increase the index by 100?

Correct AnswerverifiedYes, according to their guidel...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Sears -Refer to the payoffs in the table above. Sears and Wal-Mart must decide whether to lower their prices based on the profits shown in the table. This game has

Correct AnswerverifiedShow Answer

Iran called on OPEC in November 2008 to cut production by a further 1 million to 1.5 million barrels per day when it meets in Cairo later this month. Why would OPEC, a cartel, restrict production?

Correct AnswerverifiedShow Answer

Suppose two firms are trying to decide how much to budget for research and development. Once a new discovery is made, each firm benefits regardless of which firm developed the innovation. In this R&D game of chicken, the Nash equilibrium will be that

Correct AnswerverifiedShow Answer

In a contestable market,

Correct AnswerverifiedShow Answer

A duopoly occurs when ________.

Correct AnswerverifiedShow Answer

The outcome of a prisoners' dilemma game with a Nash equilibrium is that ________.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
a) The HHI is 2,800.
b) Yes, the Departm...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
No other market structure has the charac...
View Answer

Correct Answer
verified
Yes, according to their guidel...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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