Question 1

Which of the following is characteristic of oligopoly, but NOT of monopolistic competition?

Accepted Answer

A)  Firms are profit- maximisers. 
B)  There is more than one firm in the industry. 
C)  Each firm faces a downward- sloping demand curve. 
D)  The choices made by one firm have a significant effect on other firms. 
A)  Firms are profit- maximisers. 
B)  There is more than one firm in the industry. 
C)  Each firm faces a downward- sloping demand curve. 
D)  The choices made by one firm have a significant effect on other firms.

Question 2

A trigger strategy is one in which a player

Accepted Answer

A)  cooperates in the current period if the other player has always cooperated, but cheats forever if the other player ever cheats. 
B)  cheats in the current period if the other player has always cheated, but cooperates forever if the other player has ever cooperated. 
C)  cheats in the current period if the other player cooperated in the previous period, but cooperates in the current period if the other player cheated in the previous period. 
D)  cooperates in the current period if the other player cooperated in the previous period, but cheats in the current period only if the other player cheated in the previous period. 
A)  cooperates in the current period if the other player has always cooperated, but cheats forever if the other player ever cheats. 
B)  cheats in the current period if the other player has always cheated, but cooperates forever if the other player has ever cooperated. 
C)  cheats in the current period if the other player cooperated in the previous period, but cooperates in the current period if the other player cheated in the previous period. 
D)  cooperates in the current period if the other player cooperated in the previous period, but cheats in the current period only if the other player cheated in the previous period.

Question 3

Consider a market in which each firm must predict the price and quantity decisions of other firms, as well as how those price and quantity decisions will affect the first firm's revenue and profit. This market is BEST described as

Accepted Answer

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

Question 4

There are two firms that compete against each other and each needs to decide if it will undertake research and development to improve its product. The payoffs are as follows:
If Firm 1 does undertake R&D then Firm 2 will earn $25 million if they also do R&D or $50 million if not;
If Firm 1 does not undertake R&D then Firm 2 will earn $2 million if they do R&D or $0 million if not;
If Firm 2 does undertake R&D then Firm 1 will earn $10 million if they also do R&D or $20 million if not;
If Firm 2 does not undertake R&D then Firm 1 will earn $2 million if they do R&D or $0 million if not;
Regarding this game, which of the following is true?

Accepted Answer

A)  Both firms will not do R&D. 
B)  Only one firm will do R&D but we cannot say which one. 
C)  Both firms will do R&D. 
D)  Firm 1 will do R&D and Firm 2 will not. 
A)  Both firms will not do R&D. 
B)  Only one firm will do R&D but we cannot say which one. 
C)  Both firms will do R&D. 
D)  Firm 1 will do R&D and Firm 2 will not.

Question 5

A strategy called "limit pricing" sets the price

Accepted Answer

A)  at the monopoly level. 
B)  at the highest level that inflicts a loss on the entrant. 
C)  below the competitive level. 
D)  at the lowest level that inflicts a loss on the entrant. 
A)  at the monopoly level. 
B)  at the highest level that inflicts a loss on the entrant. 
C)  below the competitive level. 
D)  at the lowest level that inflicts a loss on the entrant.

Question 6

Firm 1
  
-Two software firms have developed an identical new software application. They are debating whether to give the new application away for free and then sell add- ons, or sell the application at
$30 a copy. The payoff matrix is above and the payoffs are profits in millions of dollars. What is Firm 1's best strategy?

Accepted Answer

A)  Sell the application at $30 a copy regardless of what Firm 2 does. 
B)  Give away the application only if Firm 2 sells the application. 
C)  Give away the application only if Firm 2 gives away the application. 
D)  Give away the application regardless of what Firm 2 does. 
A)  Sell the application at $30 a copy regardless of what Firm 2 does. 
B)  Give away the application only if Firm 2 sells the application. 
C)  Give away the application only if Firm 2 gives away the application. 
D)  Give away the application regardless of what Firm 2 does.

Question 7

In an oligopoly

Accepted Answer

A)  there is no product differentiation. 
B)  there are only a few firms. 
C)  firms' decisions are unrelated to each other. 
D)  there is free entry and exit. 
A)  there is no product differentiation. 
B)  there are only a few firms. 
C)  firms' decisions are unrelated to each other. 
D)  there is free entry and exit.

Question 8

In a prisoner's dilemma game, each person will pick

Accepted Answer

A)  their best outcome given what the other person will do. 
B)  their worst outcome. 
C)  their best outcome after consulting with the other person. 
D)  their best outcome. 
A)  their best outcome given what the other person will do. 
B)  their worst outcome. 
C)  their best outcome after consulting with the other person. 
D)  their best outcome.

Question 9

In a small town the level of demand is capable of supporting only two petrol stations. This market is

Accepted Answer

A)  an example of monopolistic competition. 
B)  operating as if it was a monopoly. 
C)  perfectly competitive because a homogeneous good is being sold. 
D)  a natural duopoly. 
A)  an example of monopolistic competition. 
B)  operating as if it was a monopoly. 
C)  perfectly competitive because a homogeneous good is being sold. 
D)  a natural duopoly.

Question 10

A contestable market is one in which there are

Accepted Answer

A)  one or a few firms and entry into the market is not costly. 
B)  many firms and entry into the market is not costly. 
C)  one or a few firms and entry into the market is costly. 
D)  many firms and entry into the market is costly. 
A)  one or a few firms and entry into the market is not costly. 
B)  many firms and entry into the market is not costly. 
C)  one or a few firms and entry into the market is costly. 
D)  many firms and entry into the market is costly.

Question 11

If firms in an industry differentiated their products and made economic profits in the short- run, what other characteristic would be important to determine if this is an oligopoly or a monopolistically competitive market?

Accepted Answer

A)  If the good being sold is a normal or inferior good 
B)  The number of firms in the market 
C)  The number of buyers in the market 
D)  The number of close substitutes for the good being produced 
A)  If the good being sold is a normal or inferior good 
B)  The number of firms in the market 
C)  The number of buyers in the market 
D)  The number of close substitutes for the good being produced

Question 12

Asus
  
-Dell and Asus must decide whether to lower their prices, based on the potential economic profits shown in the payoff matrix above (in millions of dollars). In the Nash equilibrium, Dell's profit is _______ million and Asus's profit is _______ million.

Accepted Answer

A)  $15; $15 
B)  $10; $10 
C)  $5; $20 
D)  $20; $5 
A)  $15; $15 
B)  $10; $10 
C)  $5; $20 
D)  $20; $5

Question 13

A single firm in a contestable market is limited in the amount of economic profit it can earn because there

Accepted Answer

A)  are barriers to entry. 
B)  is collusion. 
C)  are no barriers to entry. 
D)  are government regulations limiting its profit. 
A)  are barriers to entry. 
B)  is collusion. 
C)  are no barriers to entry. 
D)  are government regulations limiting its profit.

Question 14

Firm A
  
-Firms A and B can conduct research and development (R&D) or not conduct it. R&D is costly but can increase the quality of the product and increase sales. The payoff matrix is the economic profits of the two firms and is given above, where the numbers are millions of dollars. The Nash equilibrium occurs when

Accepted Answer

A)  neither A nor B conduct R&D. 
B)  both A and B conduct R&D. 
C)  only A conducts R&D. 
D)  only B conducts R&D. 
A)  neither A nor B conduct R&D. 
B)  both A and B conduct R&D. 
C)  only A conducts R&D. 
D)  only B conducts R&D.

Question 15

Disney
  
-Disney and Fox must decide when to release their next films. The revenues received by each studio depend in part on when the other studio releases its film. Each studio can release its film at New Year or Christmas. The revenues received by each studio, in millions of dollars, are depicted in the payoff matrix above. Which of the following statements correctly describes Fox's strategy given what Disney's release choice may be?

Accepted Answer

A)  If Disney chooses a Christmas release, Fox should choose a New Year release. 
B)  If Disney chooses a New Year release, Fox should choose a Christmas release. 
C)  Fox should release on Christmas regardless of what Disney does. 
D)  Both answers A and B are correct. 
A)  If Disney chooses a Christmas release, Fox should choose a New Year release. 
B)  If Disney chooses a New Year release, Fox should choose a Christmas release. 
C)  Fox should release on Christmas regardless of what Disney does. 
D)  Both answers A and B are correct.

Question 16

In a prisoners' dilemma game, in the Nash equilibrium,

Accepted Answer

A)  one player has another outcome that does not occur and is more favourable. 
B)  neither player has another outcome that does not occur and is more favourable. 
C)  collusion would not alter the outcome. 
D)  both players have another outcome that does not occur but is more favourable. 
A)  one player has another outcome that does not occur and is more favourable. 
B)  neither player has another outcome that does not occur and is more favourable. 
C)  collusion would not alter the outcome. 
D)  both players have another outcome that does not occur but is more favourable.

Question 17

A merger is unlikely to be approved if _______.

Accepted Answer

A)  it would or would be likely to substantially lessen competition 
B)  there are fewer than 6 firms in a market 
C)  the industry is government regulated 
D)  the good produced in the market has been deemed a necessity 
A)  it would or would be likely to substantially lessen competition 
B)  there are fewer than 6 firms in a market 
C)  the industry is government regulated 
D)  the good produced in the market has been deemed a necessity

Question 18

In a prisoner's dilemma, when the Nash equilibrium occurs,

Accepted Answer

A)  neither person ends up with their best outcome. 
B)  only one ends up with his best outcome. 
C)  the one who goes first ends up with his best outcome. 
D)  both end up with their best outcome. 
A)  neither person ends up with their best outcome. 
B)  only one ends up with his best outcome. 
C)  the one who goes first ends up with his best outcome. 
D)  both end up with their best outcome.

Question 19

A trigger strategy can be used in

Accepted Answer

A)  a single- play game but not a repeated game. 
B)  a single- play game or a repeated game. 
C)  a repeated game but not a single- play game. 
D)  neither a single- play game nor a repeated game. 
A)  a single- play game but not a repeated game. 
B)  a single- play game or a repeated game. 
C)  a repeated game but not a single- play game. 
D)  neither a single- play game nor a repeated game.

Question 20

Two firms, Alpha and Beta, produce identical computer hard drives. They have identical costs, and the hard drives they produce are identical. The industry is a natural duopoly. Alpha and Beta enter into a collusive agreement, according to which they split the market equally. If both firms cheat on the agreement so the market is the same as a competitive market,

Accepted Answer

A)  each firm will increase its economic profit. 
B)  they will operate in a way indistinguishable from a monopoly. 
C)  each firm will make zero economic profit. 
D)  the price of a hard drive will be above marginal cost. 
A)  each firm will increase its economic profit. 
B)  they will operate in a way indistinguishable from a monopoly. 
C)  each firm will make zero economic profit. 
D)  the price of a hard drive will be above marginal cost.

Which of the following is characteristic of oligopoly, but NOT of monopolistic competition?

A trigger strategy is one in which a player

Consider a market in which each firm must predict the price and quantity decisions of other firms, as well as how those price and quantity decisions will affect the first firm's revenue and profit. This market is BEST described as

A strategy called "limit pricing" sets the price

In an oligopoly

In a prisoner's dilemma game, each person will pick

In a small town the level of demand is capable of supporting only two petrol stations. This market is

A contestable market is one in which there are

If firms in an industry differentiated their products and made economic profits in the short- run, what other characteristic would be important to determine if this is an oligopoly or a monopolistically competitive market?

Asus -Dell and Asus must decide whether to lower their prices, based on the potential economic profits shown in the payoff matrix above (in millions of dollars). In the Nash equilibrium, Dell's profit is _ million and Asus's profit is _ million.

A single firm in a contestable market is limited in the amount of economic profit it can earn because there

In a prisoners' dilemma game, in the Nash equilibrium,

A merger is unlikely to be approved if _______.

In a prisoner's dilemma, when the Nash equilibrium occurs,

A trigger strategy can be used in

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

Which of the following is characteristic of oligopoly, but NOT of monopolistic competition?

A trigger strategy is one in which a player

Consider a market in which each firm must predict the price and quantity decisions of other firms, as well as how those price and quantity decisions will affect the first firm's revenue and profit. This market is BEST described as

A strategy called "limit pricing" sets the price

In an oligopoly

In a prisoner's dilemma game, each person will pick

In a small town the level of demand is capable of supporting only two petrol stations. This market is

A contestable market is one in which there are

If firms in an industry differentiated their products and made economic profits in the short- run, what other characteristic would be important to determine if this is an oligopoly or a monopolistically competitive market?

Asus -Dell and Asus must decide whether to lower their prices, based on the potential economic profits shown in the payoff matrix above (in millions of dollars). In the Nash equilibrium, Dell's profit is _______ million and Asus's profit is _______ million.

A single firm in a contestable market is limited in the amount of economic profit it can earn because there

In a prisoners' dilemma game, in the Nash equilibrium,

A merger is unlikely to be approved if _______.

In a prisoner's dilemma, when the Nash equilibrium occurs,

A trigger strategy can be used in

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

Asus -Dell and Asus must decide whether to lower their prices, based on the potential economic profits shown in the payoff matrix above (in millions of dollars). In the Nash equilibrium, Dell's profit is _ million and Asus's profit is _ million.