Question 1

A cartel is an arrangement

Accepted Answer

A)  by the government to restrict imports. 
B)  to steal industrial processes from rival firms. 
C)  to flood the market and eliminate competition. 
D)  among firms to decrease output and raise price. 
A)  by the government to restrict imports. 
B)  to steal industrial processes from rival firms. 
C)  to flood the market and eliminate competition. 
D)  among firms to decrease output and raise price. D

Question 2

Australian
  
-There are two can companies, Australian and National, which have entered into a collusive agreement. The payoff matrix of economic profits is above. If both firms cheat on the collusive agreement, what amount of economic profit is made by Australian?

Accepted Answer

A)  - $2,000 
B)  $3,000 
C)  $4,000 
D)  $0 
A)  - $2,000 
B)  $3,000 
C)  $4,000 
D)  $0 D

Question 3

Player A
  
-The table above shows the payoff matrix for a prisoners' dilemma. In the Nash equilibrium,

Accepted Answer

A)  both prisoners get 10 years in jail. 
B)  both prisoners get 1 year in jail. 
C)  both prisoners get 3 years in jail. 
D)  both prisoners get 2 years in jail. 
A)  both prisoners get 10 years in jail. 
B)  both prisoners get 1 year in jail. 
C)  both prisoners get 3 years in jail. 
D)  both prisoners get 2 years in jail. C

Question 4

A strategy in which a player cooperates in the current period if the other player cooperated in the previous period, but the player cheats in the current period if the other player cheated in the previous period is called a

Accepted Answer

A)  duopoly strategy. 
B)  dominant firm strategy. 
C)  trigger strategy. 
D)  tit- for- tat strategy. 
A)  duopoly strategy. 
B)  dominant firm strategy. 
C)  trigger strategy. 
D)  tit- for- tat strategy.

Question 5

Which group of features is shared by all games?

Accepted Answer

A)  Rules, profit, payoffs, outcomes 
B)  Rules, strategies, payoffs, outcomes 
C)  Profit, strategies, payoffs, cheating 
D)  Rules, cheating, payoffs, outcomes 
A)  Rules, profit, payoffs, outcomes 
B)  Rules, strategies, payoffs, outcomes 
C)  Profit, strategies, payoffs, cheating 
D)  Rules, cheating, payoffs, outcomes

Question 6

In a cartel,

Accepted Answer

A)  each firm has an incentive to raise its price above the level set by the cartel. 
B)  each firm has an incentive to lower its price below the level set by the cartel. 
C)  each firm has an incentive to decrease its own production below the level set by the cartel. 
D)  the firms' marginal cost equals the price set by the cartel. 
A)  each firm has an incentive to raise its price above the level set by the cartel. 
B)  each firm has an incentive to lower its price below the level set by the cartel. 
C)  each firm has an incentive to decrease its own production below the level set by the cartel. 
D)  the firms' marginal cost equals the price set by the cartel.

Question 7

In what type of market is a cartel possible?

Accepted Answer

A)  A market in which there are many firms 
B)  A market in which there are only a few firms and barriers to entry exist 
C)  A market in which firms sell a differentiated good 
D)  A market in which firms sell an homogeneous good 
A)  A market in which there are many firms 
B)  A market in which there are only a few firms and barriers to entry exist 
C)  A market in which firms sell a differentiated good 
D)  A market in which firms sell an homogeneous good

Question 8

Cartels are typically subject to cheating by their members because

Accepted Answer

A)  the ACCC will punish any cartel agreement before the cartel has had a chance to operate. 
B)  barriers to entry do not exist so new entrants will join. 
C)  if the other firms stick to the agreement, a firm can increase its profits by cutting its price. 
D)  product differentiation allows the firms in the cartel to cheat. 
A)  the ACCC will punish any cartel agreement before the cartel has had a chance to operate. 
B)  barriers to entry do not exist so new entrants will join. 
C)  if the other firms stick to the agreement, a firm can increase its profits by cutting its price. 
D)  product differentiation allows the firms in the cartel to cheat.

Question 9

The ABC Nail Company has entered into a collusive agreement with the other firm in the industry, the DC Nail Company. What occurs in the nail industry if ABC decides to cheat on the agreement?

Accepted Answer

A)  The total profits in the nail industry will decrease. 
B)  The total industry output increases. 
C)  ABC lowers the price of its nails. 
D)  All of the above answers are correct. 
A)  The total profits in the nail industry will decrease. 
B)  The total industry output increases. 
C)  ABC lowers the price of its nails. 
D)  All of the above answers are correct.

Question 10

For a Nash equilibrium to be possible, all players must _______.

Accepted Answer

A)  have a way to communicate with the other players 
B)  be able to predict the outcomes associated with all possible actions of the other players 
C)  have a strategy which allows for collusion 
D)  Both answers A and B are correct. 
A)  have a way to communicate with the other players 
B)  be able to predict the outcomes associated with all possible actions of the other players 
C)  have a strategy which allows for collusion 
D)  Both answers A and B are correct.

Question 11

In a repeated game, punishments that result in heavy damages are an incentive for players to adopt the strategies that result in a _ equilibrium.

Accepted Answer

A)  strategic 
B)  cooperative 
C)  winner- share- all 
D)  contestable 
A)  strategic 
B)  cooperative 
C)  winner- share- all 
D)  contestable

Question 12

Price wars can be the result of

Accepted Answer

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

Question 13

If firms in an industry make output decisions that are partially based on the price and output decisions of their competitors, then these firms are in _______ market and have _______ with the other firms in the market.

Accepted Answer

A)  an oligopoly or monopolistically competitive; interdependence 
B)  a monopolistically competitive; no interdependence 
C)  an oligopoly; no interdependence 
D)  an oligopoly; interdependence 
A)  an oligopoly or monopolistically competitive; interdependence 
B)  a monopolistically competitive; no interdependence 
C)  an oligopoly; no interdependence 
D)  an oligopoly; interdependence

Question 14

A duopoly is a form of

Accepted Answer

A)  monopoly. 
B)  perfect competition. 
C)  oligopoly. 
D)  monopolistic competition. 
A)  monopoly. 
B)  perfect competition. 
C)  oligopoly. 
D)  monopolistic competition.

Question 15

The European regulator in November 2008 fined car glass producers Asahi, Pilkington,
Saint- Gobain and Soliver more than 1.3 billion euros ($1.66 billion) for price fixing, the largest sum ever levied by the EU on a cartel. What are the economic justifications for making price fixing illegal?

Accepted Answer

A)  Consumers suffer because of decreased consumer surplus and the outcome is inefficient because of deadweight loss. 
B)  The cartel increases quantity supplied in the market causing a surplus and therefore harming other producers. 
C)  The cartel increases quantity supplied in the market causing a shortage. 
D)  An oligopoly cartel can maximise profit and behave like a natural monopoly. 
A)  Consumers suffer because of decreased consumer surplus and the outcome is inefficient because of deadweight loss. 
B)  The cartel increases quantity supplied in the market causing a surplus and therefore harming other producers. 
C)  The cartel increases quantity supplied in the market causing a shortage. 
D)  An oligopoly cartel can maximise profit and behave like a natural monopoly.

Question 16

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)  neither firm conducts the R&D. 
B)  one firm conducts the R&D but which firm does the R&D cannot be determined. 
C)  both firms conduct the R&D. 
D)  either both firms conduct the R&D or neither firm conducts the R&D. 
A)  neither firm conducts the R&D. 
B)  one firm conducts the R&D but which firm does the R&D cannot be determined. 
C)  both firms conduct the R&D. 
D)  either both firms conduct the R&D or neither firm conducts the R&D.

Question 17

The key feature of an oligopoly is that there

Accepted Answer

A)  is one seller. 
B)  are only a few sellers. 
C)  are many buyers and sellers. 
D)  is product differentiation. 
A)  is one seller. 
B)  are only a few sellers. 
C)  are many buyers and sellers. 
D)  is product differentiation.

Question 18

Limit pricing refers to

Accepted Answer

A)  a situation in which a firm might lower its price to keep potential competitors from entering its market. 
B)  how the price is determined in a kinked demand curve model of oligopoly. 
C)  the fact that a monopoly firm always sets the highest price possible. 
D)  None of the above. 
A)  a situation in which a firm might lower its price to keep potential competitors from entering its market. 
B)  how the price is determined in a kinked demand curve model of oligopoly. 
C)  the fact that a monopoly firm always sets the highest price possible. 
D)  None of the above.

Question 19

When two firms collude to maximise profit the total quantity produced by both firms taken together is determined at the quantity where _______.

Accepted Answer

A)  industry marginal cost equals industry marginal revenue 
B)  excess capacity is as large as possible 
C)  the price equals the industry's marginal cost 
D)  excess capacity is minimised 
A)  industry marginal cost equals industry marginal revenue 
B)  excess capacity is as large as possible 
C)  the price equals the industry's marginal cost 
D)  excess capacity is minimised

Question 20

Once a cartel determines the profit- maximising price,

Accepted Answer

A)  entry into the industry by rival firms will not affect the profit of the cartel. 
B)  changes in the output of any member firm will not affect the market price. 
C)  each firm faces the temptation to cheat by lowering its price. 
D)  each firm faces the temptation to cheat by raising its price. 
A)  entry into the industry by rival firms will not affect the profit of the cartel. 
B)  changes in the output of any member firm will not affect the market price. 
C)  each firm faces the temptation to cheat by lowering its price. 
D)  each firm faces the temptation to cheat by raising its price.

A cartel is an arrangement

Australian -There are two can companies, Australian and National, which have entered into a collusive agreement. The payoff matrix of economic profits is above. If both firms cheat on the collusive agreement, what amount of economic profit is made by Australian?

Player A -The table above shows the payoff matrix for a prisoners' dilemma. In the Nash equilibrium,

A strategy in which a player cooperates in the current period if the other player cooperated in the previous period, but the player cheats in the current period if the other player cheated in the previous period is called a

Which group of features is shared by all games?

In a cartel,

In what type of market is a cartel possible?

Cartels are typically subject to cheating by their members because

The ABC Nail Company has entered into a collusive agreement with the other firm in the industry, the DC Nail Company. What occurs in the nail industry if ABC decides to cheat on the agreement?

For a Nash equilibrium to be possible, all players must _______.

In a repeated game, punishments that result in heavy damages are an incentive for players to adopt the strategies that result in a _ equilibrium.

Price wars can be the result of

If firms in an industry make output decisions that are partially based on the price and output decisions of their competitors, then these firms are in _ market and have _ with the other firms in the market.

A duopoly is a form of

The European regulator in November 2008 fined car glass producers Asahi, Pilkington, Saint- Gobain and Soliver more than 1.3 billion euros ($1.66 billion) for price fixing, the largest sum ever levied by the EU on a cartel. What are the economic justifications for making price fixing illegal?

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

The key feature of an oligopoly is that there

Limit pricing refers to

When two firms collude to maximise profit the total quantity produced by both firms taken together is determined at the quantity where _______.

Once a cartel determines the profit- maximising price,

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Public Choices and Public Goods

Economics of the Environment

Monopoly and Its Regulation

Economic Inequality

Consumer Choices and Constraints

Producer Choices and Constraints

Perfect Competition

Monopolistic Competition

Decisions in Factor Markets

Filters

Exam 16: Oligopoly Games and Strategy

A cartel is an arrangement

Australian -There are two can companies, Australian and National, which have entered into a collusive agreement. The payoff matrix of economic profits is above. If both firms cheat on the collusive agreement, what amount of economic profit is made by Australian?

Player A -The table above shows the payoff matrix for a prisoners' dilemma. In the Nash equilibrium,

A strategy in which a player cooperates in the current period if the other player cooperated in the previous period, but the player cheats in the current period if the other player cheated in the previous period is called a

Which group of features is shared by all games?

In a cartel,

In what type of market is a cartel possible?

Cartels are typically subject to cheating by their members because

The ABC Nail Company has entered into a collusive agreement with the other firm in the industry, the DC Nail Company. What occurs in the nail industry if ABC decides to cheat on the agreement?

For a Nash equilibrium to be possible, all players must _______.

In a repeated game, punishments that result in heavy damages are an incentive for players to adopt the strategies that result in a _ equilibrium.

Price wars can be the result of

If firms in an industry make output decisions that are partially based on the price and output decisions of their competitors, then these firms are in _______ market and have _______ with the other firms in the market.

A duopoly is a form of

The European regulator in November 2008 fined car glass producers Asahi, Pilkington, Saint- Gobain and Soliver more than 1.3 billion euros ($1.66 billion) for price fixing, the largest sum ever levied by the EU on a cartel. What are the economic justifications for making price fixing illegal?

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

The key feature of an oligopoly is that there

Limit pricing refers to

When two firms collude to maximise profit the total quantity produced by both firms taken together is determined at the quantity where _______.

Once a cartel determines the profit- maximising price,

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Public Choices and Public Goods

Economics of the Environment

Monopoly and Its Regulation

Economic Inequality

Consumer Choices and Constraints

Producer Choices and Constraints

Perfect Competition

Monopolistic Competition

Decisions in Factor Markets

Filters

If firms in an industry make output decisions that are partially based on the price and output decisions of their competitors, then these firms are in _ market and have _ with the other firms in the market.