Question 1

When a cartel maximises its profit,

Accepted Answer

A)  total output is greater than it would be without collusion. 
B)  the industry level of output is efficient. 
C)  industry marginal revenue equals industry marginal cost at the level of total output. 
D)  each firm necessarily produces the same amount. 
A)  total output is greater than it would be without collusion. 
B)  the industry level of output is efficient. 
C)  industry marginal revenue equals industry marginal cost at the level of total output. 
D)  each firm necessarily produces the same amount.

Question 2

Consider the prisoner's dilemma model where two criminals have two options (confess or deny), and each criminal must make their decision without speaking to the other criminal first. If they both confess they each get 3 years, if only one confesses then he gets 1 and his partner gets 10, and if neither confesses then they each get 0. They are in fact both guilty. In this game, the Nash equilibrium is where

Accepted Answer

A)  only one will confess. 
B)  neither one confesses. 
C)  both confess. 
D)  It is impossible to say. 
A)  only one will confess. 
B)  neither one confesses. 
C)  both confess. 
D)  It is impossible to say.

Question 3

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

Question 4

An equilibrium in game theory in which the players make and share the monopoly profit is called

Accepted Answer

A)  the cooperative equilibrium. 
B)  limit pricing. 
C)  a contestable market equilibrium. 
D)  the Nash equilibrium. 
A)  the cooperative equilibrium. 
B)  limit pricing. 
C)  a contestable market equilibrium. 
D)  the Nash equilibrium.

Question 5

Natural oligopoly is a situation where

Accepted Answer

A)  there are legal barriers to entry. 
B)  there is only one firm. 
C)  there are only two firms. 
D)  the level of demand can support only a few firms. 
A)  there are legal barriers to entry. 
B)  there is only one firm. 
C)  there are only two firms. 
D)  the level of demand can support only a few firms.

Question 6

Dr. Smith
  
-Libertyville has two optometrists, Dr. Smith and Dr. Jones. Each optometrist can choose to advertise his service or not. The incomes of each optometrist, in thousands of dollars, are given in the payoff matrix above. Which of the following statements correctly summarises the Nash equilibrium for the game?

Accepted Answer

A)  The game has a Nash equilibrium in which Dr. Smith does not advertise and Dr. Jones does advertise. 
B)  The game has a Nash equilibrium in which both optometrists advertise. 
C)  The game has a Nash equilibrium in which Dr. Smith advertises and Dr. Jones does not advertise. 
D)  The game has a Nash equilibrium in which both optometrists do not advertise. 
A)  The game has a Nash equilibrium in which Dr. Smith does not advertise and Dr. Jones does advertise. 
B)  The game has a Nash equilibrium in which both optometrists advertise. 
C)  The game has a Nash equilibrium in which Dr. Smith advertises and Dr. Jones does not advertise. 
D)  The game has a Nash equilibrium in which both optometrists do not advertise.

Question 7

A contestable market is one in which

Accepted Answer

A)  one or a small number of firms operate, but they face competition from potential entrants. 
B)  if a firm cuts its price, all other firms will follow the price cut. 
C)  a group of firms enter into an agreement to restrict output and raise prices. 
D)  one dominant firm sets the market price, and all other firms are price takers. 
A)  one or a small number of firms operate, but they face competition from potential entrants. 
B)  if a firm cuts its price, all other firms will follow the price cut. 
C)  a group of firms enter into an agreement to restrict output and raise prices. 
D)  one dominant firm sets the market price, and all other firms are price takers.

Question 8

Of the following market structures, which has the fewest number of firms competing against each other?

Accepted Answer

A)  Monopolistic competition 
B)  Perfect competition 
C)  Oligopoly 
D)  Both answers A and C are correct. 
A)  Monopolistic competition 
B)  Perfect competition 
C)  Oligopoly 
D)  Both answers A and C are correct.

Question 9

In the prisoners' dilemma game, each player

Accepted Answer

A)  can choose from three strategies. 
B)  can choose from four strategies. 
C)  has only one possible strategy. 
D)  can choose from two strategies. 
A)  can choose from three strategies. 
B)  can choose from four strategies. 
C)  has only one possible strategy. 
D)  can choose from two strategies.

Question 10

Two duopoly firms that sell an identical good form a cartel. They decide to collude and fix the price of their good. In this prisoners' dilemma type situation, the likely outcome is

Accepted Answer

A)  only one will cheat. 
B)  neither one will cheat. 
C)  both will cheat. 
D)  It is impossible to say. 
A)  only one will cheat. 
B)  neither one will cheat. 
C)  both will cheat. 
D)  It is impossible to say.

Question 11

A cartel is a group of firms that

Accepted Answer

A)  produce products that are complements. 
B)  agree to boost output to boost their profits. 
C)  agree to restrict output to boost their profits. 
D)  produce differentiated products. 
A)  produce products that are complements. 
B)  agree to boost output to boost their profits. 
C)  agree to restrict output to boost their profits. 
D)  produce differentiated products.

Question 12

In game theory, strategies include _______.

Accepted Answer

A)  all possible actions and payoffs of each player 
B)  the payoff matrix 
C)  only the winning action of each player 
D)  all possible actions of each player 
A)  all possible actions and payoffs of each player 
B)  the payoff matrix 
C)  only the winning action of each player 
D)  all possible actions of each player

Question 13

If two duopolists can collude successfully, then both will

Accepted Answer

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

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. Firm A's best strategy is to

Accepted Answer

A)  conduct R&D regardless of what B does. 
B)  not conduct R&D regardless of what B does. 
C)  conduct R&D only if B does not conduct R&D. 
D)  conduct R&D only if B conducts R&D. 
A)  conduct R&D regardless of what B does. 
B)  not conduct R&D regardless of what B does. 
C)  conduct R&D only if B does not conduct R&D. 
D)  conduct R&D only if B conducts R&D.

Question 15

-The above payoff matrix shows the economic profits (in millions of dollars) of two firms in a duopoly that have agreed to a cartel agreement to restrict their output and set their prices equal to the monopoly price. Assuming the game is played once, the equilibrium outcome is where

Accepted Answer

A)  both choose the competitive price. 
B)  firm B chooses the monopoly price and firm A chooses the competitive price. 
C)  both choose the monopoly price. 
D)  firm A chooses the monopoly price and firm B chooses the competitive price. 
A)  both choose the competitive price. 
B)  firm B chooses the monopoly price and firm A chooses the competitive price. 
C)  both choose the monopoly price. 
D)  firm A chooses the monopoly price and firm B chooses the competitive price.

Question 16

The table above shows the payoff matrix for a prisoners' dilemma game. The Nash equilibrium is that

Accepted Answer

A)  both prisoners confess. 
B)  both prisoners do not confess. 
C)  prisoner A confesses while prisoner B does not confess. 
D)  prisoner A does not confess while prisoner B confesses. 
A)  both prisoners confess. 
B)  both prisoners do not confess. 
C)  prisoner A confesses while prisoner B does not confess. 
D)  prisoner A does not confess while prisoner B confesses.

Question 17

-In the above 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 this scenario, the market is

Accepted Answer

A)  a natural monopoly. 
B)  a natural oligopoly with three firms. 
C)  a natural duopoly. 
D)  monopolistically competitive. 
A)  a natural monopoly. 
B)  a natural oligopoly with three firms. 
C)  a natural duopoly. 
D)  monopolistically competitive.

Question 18

Of the following, the BEST example of oligopoly is

Accepted Answer

A)  the restaurant industry. 
B)  the clothing industry. 
C)  wheat farming. 
D)  the cigarette industry. 
A)  the restaurant industry. 
B)  the clothing industry. 
C)  wheat farming. 
D)  the cigarette industry.

Question 19

A natural oligopoly can form

Accepted Answer

A)  only if firms sell an homogeneous good. 
B)  if there are economies of scale. 
C)  if there is only one firm in the industry. 
D)  only if firms sell a differentiated good. 
A)  only if firms sell an homogeneous good. 
B)  if there are economies of scale. 
C)  if there is only one firm in the industry. 
D)  only if firms sell a differentiated good.

Question 20

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 at 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 Disney's strategy given what Fox's release choice may be?

Accepted Answer

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

When a cartel maximises its profit,

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

An equilibrium in game theory in which the players make and share the monopoly profit is called

Natural oligopoly is a situation where

A contestable market is one in which

Of the following market structures, which has the fewest number of firms competing against each other?

In the prisoners' dilemma game, each player

Two duopoly firms that sell an identical good form a cartel. They decide to collude and fix the price of their good. In this prisoners' dilemma type situation, the likely outcome is

A cartel is a group of firms that

In game theory, strategies include _______.

If two duopolists can collude successfully, then both will

-The above payoff matrix shows the economic profits (in millions of dollars) of two firms in a duopoly that have agreed to a cartel agreement to restrict their output and set their prices equal to the monopoly price. Assuming the game is played once, the equilibrium outcome is where

The table above shows the payoff matrix for a prisoners' dilemma game. The Nash equilibrium is that

-In the above 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 this scenario, the market is

Of the following, the BEST example of oligopoly is

A natural oligopoly can form

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

When a cartel maximises its profit,

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

An equilibrium in game theory in which the players make and share the monopoly profit is called

Natural oligopoly is a situation where

A contestable market is one in which

Of the following market structures, which has the fewest number of firms competing against each other?

In the prisoners' dilemma game, each player

Two duopoly firms that sell an identical good form a cartel. They decide to collude and fix the price of their good. In this prisoners' dilemma type situation, the likely outcome is

A cartel is a group of firms that

In game theory, strategies include _______.

If two duopolists can collude successfully, then both will

-The above payoff matrix shows the economic profits (in millions of dollars) of two firms in a duopoly that have agreed to a cartel agreement to restrict their output and set their prices equal to the monopoly price. Assuming the game is played once, the equilibrium outcome is where

The table above shows the payoff matrix for a prisoners' dilemma game. The Nash equilibrium is that

-In the above 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 this scenario, the market is

Of the following, the BEST example of oligopoly is

A natural oligopoly can form

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