Question 1

If anything, a cartel is likely to ________ and ________ power over time.

Accepted Answer

A)  strengthen; gain 
B)  collapse; lose 
C)  go bankrupt; then reorganize under bankruptcy law and gain 
D)  operate in competitive markets; price discriminate to gain 
A)  strengthen; gain 
B)  collapse; lose 
C)  go bankrupt; then reorganize under bankruptcy law and gain 
D)  operate in competitive markets; price discriminate to gain

Question 2

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 the long run you would expect price in this market to:

Accepted Answer

A)  stay the same. 
B)  increase as unprofitable firms leave the industry. 
C)  decrease to the point that P = AC. 
D)  decrease to the point that P = MC. 
A)  stay the same. 
B)  increase as unprofitable firms leave the industry. 
C)  decrease to the point that P = AC. 
D)  decrease to the point that P = MC.

Question 3

Table: Market for Oil Suppose that oil is produced by 10 countries, each of which produces 10 million barrels of oil a day (MBD) for a total 100 MBD. The world price of oil at this quantity is $36 per barrel so each country earns $360 million a day.   Reference: Ref 15-2 (Table: Market for Oil) Refer to the table. Suppose that these countries form a cartel and they each cut back production to 8 MBD. Each country's revenue would:

Accepted Answer

A)  increase by $72 million a day. 
B)  increase by $40 million a day. 
C)  decrease by $72 million a day. 
D)  decrease by $40 million a day. 
A)  increase by $72 million a day. 
B)  increase by $40 million a day. 
C)  decrease by $72 million a day. 
D)  decrease by $40 million a day.

Question 4

Table: Market for Oil Suppose that oil is produced by 10 countries, each of which produces 10 million barrels of oil a day (MBD) for a total 100 MBD. The world price of oil at this quantity is $36 per barrel so each country earns $360 million a day.   Reference: Ref 15-2 (Table: Market for Oil) Refer to the table. Suppose that these countries form a cartel and each country produces 8 MBD. If one of the cartel members cheats by secretly pushing its production back to 10 MBD rather than 8, total revenue for the cheating country would:

Accepted Answer

A)  increase from $360 million to $500 million a day. 
B)  increase from $400 million to $475 million a day. 
C)  decrease from $380 million to $360 million a day. 
D)  remain unchanged at $400 million a day. 
A)  increase from $360 million to $500 million a day. 
B)  increase from $400 million to $475 million a day. 
C)  decrease from $380 million to $360 million a day. 
D)  remain unchanged at $400 million a day.

Question 5

Which federal law makes most cartels in the United States illegal?

Accepted Answer

A)  Interstate Commerce Act of 1901 
B)  Federal Reserve Act of 1914 
C)  Supreme Court case Johnson v. J. P. Morgan 
D)  Sherman Antitrust Act of 1890 
A)  Interstate Commerce Act of 1901 
B)  Federal Reserve Act of 1914 
C)  Supreme Court case Johnson v. J. P. Morgan 
D)  Sherman Antitrust Act of 1890

Question 6

In the long run, monopolistic competitive firms will end up producing at a price equal to that of competitive markets.

Accepted Answer

A) True 
 B)False

Question 7

Major league sports are illegal cartels.

Accepted Answer

A) True 
 B)False

Exam 15: Oligopoly and Game Theory

If anything, a cartel is likely to ________ and ________ power over time.

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 the long run you would expect price in this market to:

Which federal law makes most cartels in the United States illegal?

In the long run, monopolistic competitive firms will end up producing at a price equal to that of competitive markets.

Major league sports are illegal cartels.

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

If anything, a cartel is likely to and power over time.