Question 1

Gary's Gas and Frank's Fuel are the only two providers of gasoline in their town.Gary and Frank decide to form a cartel.Later, Gary summarizes his pricing strategy as, "I'll cheat on the cartel because regardless of what Frank does, cheating gives me the best payoff." This is an example of:

Accepted Answer

A)  a dominant strategy.
B)  a tit-for-tat strategy.
C)  an irrational strategy.
D)  product differentiation.E) A) and B)
F) B) and D)

Question 2

Antitrust policy refers to government:

Accepted Answer

A)  attempts to prevent the acquisition of monopoly power.
B)  attempts to encourage the exercise of monopoly power.
C)  encouragement of collusion in the marketplace.
D)  attempts to limit private enterprise.E) C) and D)
F) B) and C)

Question 3

Figure: Payoff Matrix for Gehrig and Gabriel   (Figure: Payoff Matrix for Gehrig and Gabriel)  The figure Payoff Matrix for Gehrig and Gabriel refers to two people who sell handmade Davy Crockett figurines in San Antonio.Both Gehrig and Gabriel have two strategies available to them: to produce 5,000 figurines each month or to produce 7,000 figurines each month.For Gehrig and Gabriel, the dominant strategy is to:

Accepted Answer

A)  produce 5,000 figurines.
B)  produce 7,000 figurines.
C)  produce between 5,000 and 7,000 figurines.
D)  collude and increase production to more than 14,000 figurines.E) None of the above
F) B) and C)

Question 4

Figure: Payoff Matrix for Ajinomoto and ADM
(Figure: Payoff Matrix for Ajinomoto and ADM)  Given the payoff matrix in the figure Payoff Matrix for Ajinomoto and ADM, the Nash equilibrium combination occurs when:

Accepted Answer

A)  each firm produces 30 million pounds.
B)  each firm produces 40 million pounds.
C)  ADM produces 30 million pounds and Ajinomoto produces 40 million pounds.
D)  ADM produces 40 million pounds and Ajinomoto produces 30 million pounds.E) A) and B)
F) A) and C)

Question 5

(Table: Demand for Crude Oil)  The table Demand for Crude Oil shows the demand schedule for crude oil.The marginal cost of producing crude oil equals zero.If the crude oil industry is a monopoly, the price of crude oil will be , the total quantity of crude oil produced by the
Monopoly will be ________ barrels, and the monopoly will earn revenue equal to _.

Accepted Answer

A)  $80; 80; $6,400
B)  $80; 80; $0
C)  $160; 0; $0
D)  $60; 100; $6,000E) A) and B)
F) B) and C)

Question 6

Figure: Pricing Strategy in Cable TV Market II   (Figure: Pricing Strategy in Cable TV Market II)  Look at the figure Pricing Strategy in Cable TV Market II.The dominant strategy for CableNorth:

Accepted Answer

A)  is to charge a high price.
B)  is to charge a low price.
C)  is to charge what CableSouth does.
D)  does not exist.E) B) and C)
F) None of the above

Question 7

(Table: Demand for Crude Oil)  The table Demand for Crude Oil shows the demand schedule for crude oil.Assume that the crude oil industry is a duopoly and the marginal cost of producing crude oil equals zero.If the two firms collude to share the market equally, the price of crude oil will be ________, firm 1 will produce ________ barrels, firm 2 will produce barrels,
And each firm will earn revenue equal to _.

Accepted Answer

A)  $80; 80; 80; $6,400
B)  $80; 40; 40; $3,200
C)  $60; 50; 50; $3,000
D)  $40; 60; 60; $2,400E) B) and D)
F) A) and B)

Question 8

Figure: Pricing Strategy in Cable TV Market I   (Figure: Pricing Strategy in Cable TV Market I)  Look at the figure Pricing Strategy in Cable TV Market I.If the two firms in the cable TV market collude, then:

Accepted Answer

A)  both firms advertise, and each earns $100,000 per month.
B)  neither firm advertises, and each earns $150,000 per month.
C)  CableNorth advertises and earns $130,000 per month, while CableSouth does not advertise and earns $70,000 per month.
D)  both firms advertise and each earns $130,000 per month.E) All of the above
F) None of the above

Question 9

Suppose that each of the only two firms in an industry has the independent choice of advertising its product or not advertising.If neither advertises, each gets $20 million in profit; if both advertise, their profits will be $10 million each; and if one advertises while the other does not, the advertiser gets $25 million profit while the other gets $4 million profit.According to game theory, the likely strategy by the firms is:

Accepted Answer

A)  both may or may not advertise.
B)  one will advertise and the other will not.
C)  both will advertise.
D)  neither will advertise.E) A) and C)
F) B) and C)

Question 10

A dominant strategy equilibrium exists in a game when:

Accepted Answer

A)  no player has a choice.
B)  every player has a clear best action that does not depend on the action of the other players.
C)  each player's choices are dependent on the actions of other players.
D)  no player is able to dictate or predict the actions of any other player.E) C) and D)
F) A) and D)

Question 11

A Nash equilibrium results when each player chooses the action that maximizes his or her payoff given the actions of other players.False

Accepted Answer

A) True 
 B)False

Question 12

Figure: Pricing Strategy in Cable TV Market I   (Figure: Pricing Strategy in Cable TV Market I)  Look at the figure Pricing Strategy in Cable TV Market I.If both CableNorth and CableSouth advertise, then without any collusion:

Accepted Answer

A)  CableNorth will stop advertising to maximize profits.
B)  CableSouth will stop advertising to maximize profits.
C)  there will be no tendency for either CableNorth or CableSouth to stop advertising.
D)  there is a tendency for both CableNorth and CableSouth to stop advertising.E) B) and C)
F) All of the above

Question 13

Scenario: Payoff Matrix for Firms X and Y The following payoff matrix depicts the profits for firms X and Y, which are trying to decide whether to choose a high or low price in their competitive strategy with each other.They are the only two firms in this oligopolistic industry.
(Scenario: Payoff Matrix for Firms X and Y)  In the scenario Payoff Matrix for Firms X and Y, if firm X were to choose its dominant strategy, it would:

Accepted Answer

A)  choose a low price.
B)  choose a high price.
C)  encounter a dilemma, since there are two dominant strategies.
D)  allow firm Y to dominate the industry.E) C) and D)
F) B) and D)

Question 14

Unwritten or unspoken understandings through which firms collude to restrict competition are called:

Accepted Answer

A)  cartelization.
B)  oligopolization.
C)  overt collusion.
D)  tacit collusion.E) None of the above
F) All of the above

Question 15

Which of the following characteristics make an industry more conducive to collusive behavior?

Accepted Answer

A)  Firms in the industry have very different marginal costs of production.
B)  Firms in the industry produce goods with significantly different product attributes.
C)  Firms in the industry are operating at a maximum productive capacity that cannot be easily altered in the short run.
D)  Firms in the industry serve customers that can easily switch between firms as they search for the best price.E) A) and B)
F) A) and C)

Question 16

If there are two gas stations in a very small town,, then the gas station business there is probably best characterized as:

Accepted Answer

A)  perfectly competitive.
B)  monopolistically competitive.
C)  monopolistic.
D)  oligopolistic.E) A) and D)
F) None of the above

Question 17

Figure: Monopoly Profits in Duopoly   (Figure: Monopoly Profits in Duopoly)  Given the duopoly industry illustrated in the figure Monopoly Profits in Duopoly, if each firm acted on the belief that it faced demand curve D2 and acted without consideration of the other, each firm would attempt to maximize economic profits by producing quantity ________ and setting price equal to _.

Accepted Answer

A)  Q4; P₁
B)  Q4; P₂
C)  Q₁; P₄
D)  Q₂; P₂E) B) and D)
F) A) and D)

Question 18

(Table: Demand for Crude Oil)  Look at the table Demand for Crude Oil.Assume that the crude oil industry is a duopoly and the marginal cost of producing crude oil equals zero.Suppose that the two firms are maximizing industry profit and splitting the profit evenly.If firm 1 decides to cheat and increase production by 10 more barrels, the price of crude oil will be:

Accepted Answer

A)  $0.
B)  $70.
C)  $80.
D)  $160.E) C) and D)
F) B) and C)

Question 19

Non-price competition is more prevalent in an oligopoly when there is (are) :

Accepted Answer

A)  a Nash equilibrium.
B)  complex products.
C)  tacit collusion.
D)  no product differentiations.E) A) and D)
F) A) and C)

Question 20

Suppose there are 10 identical firms in an industry and each produces 10% of the total market sales.The HHI for this industry would indicate that the industry is:

Accepted Answer

A)  competitive.
B)  monopolistic.
C)  oligopolistic.
D)  Cannot be determined from the information provided.E) B) and C)
F) All of the above

Exam 14: Oligopoly

A Nash equilibrium results when each player chooses the action that maximizes his or her payoff given the actions of other players.False

Correct Answer
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Correct Answer
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Figure: Payoff Matrix for Ajinomoto and ADM (Figure: Payoff Matrix for Ajinomoto and ADM) Given the payoff matrix in the figure Payoff Matrix for Ajinomoto and ADM, the Nash equilibrium combination occurs when:

Correct Answer
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A dominant strategy equilibrium exists in a game when:

Correct Answer
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Correct Answer
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Figure: Pricing Strategy in Cable TV Market I (Figure: Pricing Strategy in Cable TV Market I) Look at the figure Pricing Strategy in Cable TV Market I.If the two firms in the cable TV market collude, then:

Correct Answer
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Antitrust policy refers to government:

Correct Answer
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Figure: Pricing Strategy in Cable TV Market I (Figure: Pricing Strategy in Cable TV Market I) Look at the figure Pricing Strategy in Cable TV Market I.If both CableNorth and CableSouth advertise, then without any collusion:

Correct Answer
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Correct Answer
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Unwritten or unspoken understandings through which firms collude to restrict competition are called:

Correct Answer
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Figure: Pricing Strategy in Cable TV Market II (Figure: Pricing Strategy in Cable TV Market II) Look at the figure Pricing Strategy in Cable TV Market II.The dominant strategy for CableNorth:

Correct Answer
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Non-price competition is more prevalent in an oligopoly when there is (are) :

Correct Answer
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Gary's Gas and Frank's Fuel are the only two providers of gasoline in their town.Gary and Frank decide to form a cartel.Later, Gary summarizes his pricing strategy as, "I'll cheat on the cartel because regardless of what Frank does, cheating gives me the best payoff." This is an example of:

Correct Answer
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Correct Answer
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If there are two gas stations in a very small town,, then the gas station business there is probably best characterized as:

Correct Answer
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Correct Answer
verified

Suppose there are 10 identical firms in an industry and each produces 10% of the total market sales.The HHI for this industry would indicate that the industry is:

Correct Answer
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Correct Answer
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Which of the following characteristics make an industry more conducive to collusive behavior?

Correct Answer
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Exam 14: Oligopoly

A Nash equilibrium results when each player chooses the action that maximizes his or her payoff given the actions of other players.False

Correct AnswerverifiedShow Answer

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Figure: Payoff Matrix for Ajinomoto and ADM (Figure: Payoff Matrix for Ajinomoto and ADM) Given the payoff matrix in the figure Payoff Matrix for Ajinomoto and ADM, the Nash equilibrium combination occurs when:

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A dominant strategy equilibrium exists in a game when:

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Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure: Pricing Strategy in Cable TV Market I (Figure: Pricing Strategy in Cable TV Market I) Look at the figure Pricing Strategy in Cable TV Market I.If the two firms in the cable TV market collude, then:

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Antitrust policy refers to government:

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Figure: Pricing Strategy in Cable TV Market I (Figure: Pricing Strategy in Cable TV Market I) Look at the figure Pricing Strategy in Cable TV Market I.If both CableNorth and CableSouth advertise, then without any collusion:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Unwritten or unspoken understandings through which firms collude to restrict competition are called:

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Figure: Pricing Strategy in Cable TV Market II (Figure: Pricing Strategy in Cable TV Market II) Look at the figure Pricing Strategy in Cable TV Market II.The dominant strategy for CableNorth:

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Non-price competition is more prevalent in an oligopoly when there is (are) :

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Gary's Gas and Frank's Fuel are the only two providers of gasoline in their town.Gary and Frank decide to form a cartel.Later, Gary summarizes his pricing strategy as, "I'll cheat on the cartel because regardless of what Frank does, cheating gives me the best payoff." This is an example of:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If there are two gas stations in a very small town,, then the gas station business there is probably best characterized as:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose there are 10 identical firms in an industry and each produces 10% of the total market sales.The HHI for this industry would indicate that the industry is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following characteristics make an industry more conducive to collusive behavior?

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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