Question 1

Cheaters in cartels make ________ profit when the other cartel members ________ their promise.

Accepted Answer

A)  more; break 
B)  less; keep 
C)  zero; break 
D)  more; keep 
A)  more; break 
B)  less; keep 
C)  zero; break 
D)  more; keep

Question 2

Which of the following is TRUE?

Accepted Answer

A)  The more substitutes a resource has, the more likely a cartel controlling such a resource will succeed. 
B)  The more widespread a resource, the more likely a cartel controlling such a resource will succeed. 
C)  Oil and diamond cartels tend to be more successful than copper and plumbing cartels. 
D)  Oil and diamond cartels have never been successful. 
A)  The more substitutes a resource has, the more likely a cartel controlling such a resource will succeed. 
B)  The more widespread a resource, the more likely a cartel controlling such a resource will succeed. 
C)  Oil and diamond cartels tend to be more successful than copper and plumbing cartels. 
D)  Oil and diamond cartels have never been successful.

Question 3

OPEC nations cheat on their cartel agreement by producing more oil than they pledged to.

Accepted Answer

A) True 
 B)False

Question 4

In some cases cartels are successful because:

Accepted Answer

A)  the cartel produces a manufactured good with many substitutes. 
B)  the marginal costs of production are high. 
C)  the barriers to entry in the market are low. 
D)  the cartel controls access to a key input. 
A)  the cartel produces a manufactured good with many substitutes. 
B)  the marginal costs of production are high. 
C)  the barriers to entry in the market are low. 
D)  the cartel controls access to a key input.

Question 5

Which of the following is the best example of a firm operating in an oligopoly market?

Accepted Answer

A)  Walmart, a large retailer 
B)  ExxonMobil, one of the seven major refiners of oil 
C)  McDonald's, a fast-food restaurant chain 
D)  a corn farmer in Oklahoma 
A)  Walmart, a large retailer 
B)  ExxonMobil, one of the seven major refiners of oil 
C)  McDonald's, a fast-food restaurant chain 
D)  a corn farmer in Oklahoma

Question 6

A(n) ________ is a group of suppliers who try to act together to reduce supply.

Accepted Answer

A)  monopoly 
B)  retailer 
C)  oligopoly 
D)  cartel 
A)  monopoly 
B)  retailer 
C)  oligopoly 
D)  cartel

Question 7

Major league basketball, the NBA, is cartelized to:

Accepted Answer

A)  maintain high ticket price of the games. 
B)  keep down players' salaries. 
C)  reduce the competition of the teams. 
D)  prevent teams from exploiting players. 
A)  maintain high ticket price of the games. 
B)  keep down players' salaries. 
C)  reduce the competition of the teams. 
D)  prevent teams from exploiting players.

Question 8

Reference: Ref 15-9 (Figure: Monopolistic Competition) Refer to the figure. Suppose the figure represents a firm that operates in a monopolistic competitive market. In this market in the long run you would expect:

Accepted Answer

A)  both demand and price to stay the same. 
B)  both demand and price to increase as unprofitable firms leave the industry. 
C)  demand to decrease and price to fall to the point that P = AC. 
D)  demand to shift left and decrease price to the point that P = MC. 
A)  both demand and price to stay the same. 
B)  both demand and price to increase as unprofitable firms leave the industry. 
C)  demand to decrease and price to fall to the point that P = AC. 
D)  demand to shift left and decrease price to the point that P = MC.

Question 9

Which of the following is NOT a reason why cartels collapse?

Accepted Answer

A)  cheating by the cartel members 
B)  new entrants and demand response 
C)  government prosecution 
D)  increasing production costs 
A)  cheating by the cartel members 
B)  new entrants and demand response 
C)  government prosecution 
D)  increasing production costs

Question 10

Compared to a competitive market, firms operating in a cartel will charge a price that is:

Accepted Answer

A)  higher than the competitive price. 
B)  lower than the competitive price. 
C)  equal to their marginal cost of production. 
D)  equal to their average cost of production. 
A)  higher than the competitive price. 
B)  lower than the competitive price. 
C)  equal to their marginal cost of production. 
D)  equal to their average cost of production.

Question 11

Game theory can be used to study cartels and their behavior.

Accepted Answer

A) True 
 B)False

Question 12

A dominant strategy is a strategy that:

Accepted Answer

A)  all players must follow. 
B)  has a higher payoff than any other strategy no matter what the other player does. 
C)  leads to one player's interests dominating the interests of the other players. 
D)  a player follows regardless of the strategies followed by other players. 
A)  all players must follow. 
B)  has a higher payoff than any other strategy no matter what the other player does. 
C)  leads to one player's interests dominating the interests of the other players. 
D)  a player follows regardless of the strategies followed by other players.

Question 13

OPEC is a(n) ________ of oil exporting countries.

Accepted Answer

A)  cartel 
B)  group 
C)  monopoly 
D)  oligopoly 
A)  cartel 
B)  group 
C)  monopoly 
D)  oligopoly

Question 14

Firms in monopolistic competitive industries: I. sell their products at a higher price than if their industry were strictly competitive. II. sell their products at the same price as if they were in a monopoly market. III. have a high incentive to innovate with new products and better quality.

Accepted Answer

A)  I and II only 
B)  II and III only 
C)  I and III only 
D)  I, II, and III 
A)  I and II only 
B)  II and III only 
C)  I and III only 
D)  I, II, and III

Question 15

Which of the following is the best example of a monopolistic competitive market?

Accepted Answer

A)  diamonds 
B)  gas stations 
C)  restaurants 
D)  milk 
A)  diamonds 
B)  gas stations 
C)  restaurants 
D)  milk

Question 16

The prisoner's dilemma describes situations where the pursuit of individual interest leads to a group outcome that is in the interest of everyone.

Accepted Answer

A) True 
 B)False

Question 17

A government-supported cartel usually means:

Accepted Answer

A)  lower prices. 
B)  higher quality of service. 
C)  more innovation. 
D)  None of the answers is correct. 
A)  lower prices. 
B)  higher quality of service. 
C)  more innovation. 
D)  None of the answers is correct.

Question 18

A dominant strategy is a strategy that a player should take only if the other player cheats.

Accepted Answer

A) True 
 B)False

Question 19

Persuasive advertising is wasteful advertising and does nothing to impact overall demand for the product.

Accepted Answer

A) True 
 B)False

Question 20

The Sherman Antitrust Act of 1890:

Accepted Answer

A)  limits cartel-like behavior in the United States. 
B)  serves to limit anticompetitive behavior by foreign firms that the U.S. trades with. 
C)  has illegalized all cartels in the United States. 
D)  All of the answers are correct. 
A)  limits cartel-like behavior in the United States. 
B)  serves to limit anticompetitive behavior by foreign firms that the U.S. trades with. 
C)  has illegalized all cartels in the United States. 
D)  All of the answers are correct.

Exam 15: Oligopoly and Game Theory

Cheaters in cartels make ________ profit when the other cartel members ________ their promise.

Which of the following is TRUE?

OPEC nations cheat on their cartel agreement by producing more oil than they pledged to.

In some cases cartels are successful because:

Which of the following is the best example of a firm operating in an oligopoly market?

A(n) ________ is a group of suppliers who try to act together to reduce supply.

Major league basketball, the NBA, is cartelized to:

Reference: Ref 15-9 (Figure: Monopolistic Competition) Refer to the figure. Suppose the figure represents a firm that operates in a monopolistic competitive market. In this market in the long run you would expect:

Which of the following is NOT a reason why cartels collapse?

Compared to a competitive market, firms operating in a cartel will charge a price that is:

Game theory can be used to study cartels and their behavior.

A dominant strategy is a strategy that:

OPEC is a(n) ________ of oil exporting countries.

Firms in monopolistic competitive industries: I. sell their products at a higher price than if their industry were strictly competitive. II. sell their products at the same price as if they were in a monopoly market. III. have a high incentive to innovate with new products and better quality.

Which of the following is the best example of a monopolistic competitive market?

The prisoner's dilemma describes situations where the pursuit of individual interest leads to a group outcome that is in the interest of everyone.

A government-supported cartel usually means:

A dominant strategy is a strategy that a player should take only if the other player cheats.

Persuasive advertising is wasteful advertising and does nothing to impact overall demand for the product.

The Sherman Antitrust Act of 1890:

The Big Ideas in Economics

The Power of Trade and Comparative Advantage

Business Fluctuations: Aggregate Demand and Supply

Equilibrium: How Supply and Demand Determine Prices

Elasticity and Its Applications

Taxes and Subsidies

The Price System: Signals, Speculation, and Prediction

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 and Pricing Strategy

Competing for Monopoly: the Economics of Network Goods

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

Asymmetric Information: Moral Hazard and Adverse Selection

Consumer Choice

Gdp and the Measurement of Progress

The Wealth of Nations and Economic Growth

Growth, Capital Accumulation, and the Economics of Ideas: Catching up Vs the Cutting Edge

Saving, Investment, and the Financial System

Supply and Demand

Unemployment and Labor Force Participation

Inflation and the Quantity Theory of Money

Transmission and Amplification Mechanisms

The Federal Reserve System and Open Market Operations

Monetary Policy

The Federal Budget: Taxes and Spending

Filters

Cheaters in cartels make profit when the other cartel members their promise.