Question 1

Antitrust laws:

Accepted Answer

A)  give the government the power to tax the trust funds of the children of rich families. 
B)  ensure that everyone keeps his or her promises. 
C)  give the government the power to prohibit or regulate anticompetitive business practices. 
D)  offer subsidies for cartels. 
A)  give the government the power to tax the trust funds of the children of rich families. 
B)  ensure that everyone keeps his or her promises. 
C)  give the government the power to prohibit or regulate anticompetitive business practices. 
D)  offer subsidies for cartels.

Question 2

The more firms there are in an oligopolistic market, the closer prices will be to monopoly levels.

Accepted Answer

A) True 
 B)False

Question 3

The milk industry in the United States:

Accepted Answer

A)  consists of government-controlled cartels that raise the price of milk and punish any seller who violates the cartel. 
B)  is currently in violation of antitrust laws, according to the President's legal staff. 
C)  shows how competition from new rivals can reduce the power of cartels. 
D)  was exposed by the FBI for conspiring to raise prices. 
A)  consists of government-controlled cartels that raise the price of milk and punish any seller who violates the cartel. 
B)  is currently in violation of antitrust laws, according to the President's legal staff. 
C)  shows how competition from new rivals can reduce the power of cartels. 
D)  was exposed by the FBI for conspiring to raise prices.

Question 4

Which of the following describes how cartel members cheat?

Accepted Answer

A)  They use inferior inputs in production to save money. 
B)  They steal production technologies from other firms. 
C)  They produce more output than they promised. 
D)  They fail to declare profits earned in foreign countries to avoid paying taxes. 
A)  They use inferior inputs in production to save money. 
B)  They steal production technologies from other firms. 
C)  They produce more output than they promised. 
D)  They fail to declare profits earned in foreign countries to avoid paying taxes.

Question 5

Tactic collusion occurs even without explicit agreement or communication.

Accepted Answer

A) True 
 B)False

Question 6

If two professional athletes take steroids, they each earn a lifetime income (net of health costs) of $3 million. If the two athletes abstain from steroids, they each earn a lifetime income of $4 million. If one athlete takes steroids, but the other does not, the steroid user gains a competitive advantage and earns a lifetime income of $6 million and the nonsteroid user earns $1 million.
a. Construct the payoff table for the two professional athletes.
b. What is the dominant strategy for both athletes?

Accepted Answer

a. @#IMG-DLM& b. The dominant

Question 7

Oligopolies are:

Accepted Answer

A)  too small to affect industry output. 
B)  large enough to change industry output and affect market prices. 
C)  not able to influence the market price, but they can increase or decrease industry output. 
D)  able to earn higher profits than monopolies. 
A)  too small to affect industry output. 
B)  large enough to change industry output and affect market prices. 
C)  not able to influence the market price, but they can increase or decrease industry output. 
D)  able to earn higher profits than monopolies.

Question 8

Tactic collusion occurs when firms:

Accepted Answer

A)  meet and decide on their collusion tactics. 
B)  limit competition with one another but they do so without explicit agreement or communication. 
C)  meet and play the prisoner's dilemma just once. 
D)  cheat rather than cooperate. 
A)  meet and decide on their collusion tactics. 
B)  limit competition with one another but they do so without explicit agreement or communication. 
C)  meet and play the prisoner's dilemma just once. 
D)  cheat rather than cooperate.

Question 9

Cartels are typically easy to maintain since each firm in the cartel is earning above normal profits.

Accepted Answer

A) True 
 B)False

Question 10

Frequent flyer programs are a form of price discrimination.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following statements is TRUE?

Accepted Answer

A)  When a cartel cheater increases quantity beyond the profit-maximizing quantity of a monopoly, the cheater benefits other cartel members. 
B)  When a cartel cheater increases quantity beyond the profit-maximizing quantity of a monopoly, the cheater benefits itself and other cartel members. 
C)  When a cartel cheater increases quantity beyond the profit-maximizing quantity of a monopoly, the cheater hurts itself. 
D)  When a cartel cheater increases quantity beyond the profit-maximizing quantity of a monopoly, the cheater hurts other cartel members. 
A)  When a cartel cheater increases quantity beyond the profit-maximizing quantity of a monopoly, the cheater benefits other cartel members. 
B)  When a cartel cheater increases quantity beyond the profit-maximizing quantity of a monopoly, the cheater benefits itself and other cartel members. 
C)  When a cartel cheater increases quantity beyond the profit-maximizing quantity of a monopoly, the cheater hurts itself. 
D)  When a cartel cheater increases quantity beyond the profit-maximizing quantity of a monopoly, the cheater hurts other cartel members.

Question 12

Copper is a natural resource. Why is the copper cartel not successful?

Accepted Answer

Because copper is available in

Question 13

Most radio stations broadcast their programming at no cost to the listener. How can they do this? What role does advertising play? Would radio stations be more profitable if they could instead charge listeners a subscription fee for listening to their station?

Accepted Answer

Radio stations earn revenue from selling

Question 14

Within a cartel, cheating is often a(n) ______ strategy.

Accepted Answer

A)  dominated 
B)  dominant 
C)  unused 
D)  unavailable 
A)  dominated 
B)  dominant 
C)  unused 
D)  unavailable

Question 15

The copper cartel (the International Council of Copper Exporting Countries) has been very successful.

Accepted Answer

A) True 
 B)False

Question 16

Use the following to answer questions: Table: Oil Output $$\begin{array} { | l | l | c | c | } 
\hline & & \begin{array} { c } 
\text { Iran National Oil } \
\text { (profit in millions) }
\end{array} &  { } \
\hline & & \text { Restrict Oil Output } & \text { Expand Oil Output } \
\hline \text { Iraq National Oil } & \text { Restrict Oil Output } & \$ 78 , \$ 78 & \$ 60 , \$ 89 \
\hline \text { (profit in millions) } & \text { Expand Oil Output } & \$ 89 , \$ 60 & \$ 65 , \$ 65 \
\hline
\end{array}$$
-(Table: Oil Output) Refer to the table. The situation between Iraq and Iran is similar to a:

Accepted Answer

A)  calibration cramp. 
B)  prisoner's dilemma. 
C)  flippant switch. 
D)  cooperative equilibrium. 
A)  calibration cramp. 
B)  prisoner's dilemma. 
C)  flippant switch. 
D)  cooperative equilibrium.

Question 17

Diamonds have been able to keep prices high primarily through

Accepted Answer

A)  successful advertising. 
B)  successful cartel behavior. 
C)  misinformation. 
D)  new diamond discoveries. 
A)  successful advertising. 
B)  successful cartel behavior. 
C)  misinformation. 
D)  new diamond discoveries.

Question 18

Table: Dana, Marnee Payoff Table $$\begin{array} { | l | l | c | c } 
\hline & & \begin{array} { c } 
\text { Marnee Milk } \
\text { Producer }
\end{array} & { } \
\hline & & \text { Cooperate } & \text { Cheat } \
\hline \text { Dana Milk } & \text { Cooperate } & ( 60,60 ) & ( 20,80 ) \
\hline \text { Producer } & \text { Cheat } & ( 80,20 ) & ( 30,30 ) \
\hline
\end{array}$$ 
Refer to the table. Using the information in the table, answer the following questions.
a. What is Dana Milk Producer's dominant strategy?
b. What is Marnee Milk Producer's dominant strategy?

Accepted Answer

Both firms

Question 19

Which of the following industries would find it easier to establish a cartel?

Accepted Answer

A)  automobile manufacturing 
B)  retail clothing 
C)  agricultural products 
D)  book publishing 
A)  automobile manufacturing 
B)  retail clothing 
C)  agricultural products 
D)  book publishing

Question 20

The National Basketball Association is a:

Accepted Answer

A)  natural resource cartel. 
B)  fixed-cost cartel. 
C)  buyer's cartel. 
D)  player's cartel. 
A)  natural resource cartel. 
B)  fixed-cost cartel. 
C)  buyer's cartel. 
D)  player's cartel.

Exam 15: Oligopoly and Game Theory

Antitrust laws:

The more firms there are in an oligopolistic market, the closer prices will be to monopoly levels.

The milk industry in the United States:

Which of the following describes how cartel members cheat?

Tactic collusion occurs even without explicit agreement or communication.

Oligopolies are:

Tactic collusion occurs when firms:

Cartels are typically easy to maintain since each firm in the cartel is earning above normal profits.

Frequent flyer programs are a form of price discrimination.

Which of the following statements is TRUE?

Copper is a natural resource. Why is the copper cartel not successful?

Most radio stations broadcast their programming at no cost to the listener. How can they do this? What role does advertising play? Would radio stations be more profitable if they could instead charge listeners a subscription fee for listening to their station?

Within a cartel, cheating is often a(n) ______ strategy.

The copper cartel (the International Council of Copper Exporting Countries) has been very successful.

Diamonds have been able to keep prices high primarily through

Which of the following industries would find it easier to establish a cartel?

The National Basketball Association is a:

The Big Ideas

The Power of Trade and Comparative

Supply and Demand

Equilibrium

Elasticity and Its Applications

Taxes and Subsidies

The Price System

Price Ceilings and Floors

International Trade

Externalities- When the Price Is Not Right

Costs and Profit Maximization Under Competition

Competition and the Invisible Hand

Monopoly

Price Discrimination

Competing for Monopoly

Monopolistic Competition and Advertising

Labor Markets

Public Goods and the Tragedy of the Commons

Political Economy and Public Choice

Economics, Ethics, and Public Policy

Managing Incentives

Stock Markets and Personal Finance

Price Discrimination

Consumer Choice

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