Question 1

Focal-point strategies are typically used when there is

Accepted Answer

A)  no Nash equilibrium. 
B)  more than one Nash equilibrium. 
C)  one Nash equilibrium. 
D)  a prisoner's dilemma. 
A)  no Nash equilibrium. 
B)  more than one Nash equilibrium. 
C)  one Nash equilibrium. 
D)  a prisoner's dilemma.

Question 2

The success rate of cartels is low because

Accepted Answer

A)  participation is secretive. 
B)  the agreed price is too low. 
C)  cheating is likely to occur due to profit incentive. 
D)  all cartels are designed to fail. 
A)  participation is secretive. 
B)  the agreed price is too low. 
C)  cheating is likely to occur due to profit incentive. 
D)  all cartels are designed to fail.

Question 3

When a cartel member produces more than the agreed-upon quota, the net gain for that firm is calculated as the revenue earned from

Accepted Answer

A)  a higher market price plus the revenue earned from producing more output. 
B)  a higher market price minus the revenue lost from producing more output. 
C)  producing more output minus the revenue lost from a lower market price. 
D)  producing more output divided by the revenue lost from a lower market price. 
A)  a higher market price plus the revenue earned from producing more output. 
B)  a higher market price minus the revenue lost from producing more output. 
C)  producing more output minus the revenue lost from a lower market price. 
D)  producing more output divided by the revenue lost from a lower market price.

Question 4

In the grim trigger strategy, the actions of opponents are met with

Accepted Answer

A)  permanent retaliatory force. 
B)  exit from the industry. 
C)  negotiations. 
D)  indifference. 
A)  permanent retaliatory force. 
B)  exit from the industry. 
C)  negotiations. 
D)  indifference.

Question 5

In the long run, which statement is TRUE for a monopolistically competitive firm?

Accepted Answer

A)  Price equals average total cost, and MR > MC. 
B)  Price is greater than average total cost, and MR = MC. 
C)  Price equals average total cost, and MR = MC. 
D)  Price is less than average total cost, and MR = MC. 
A)  Price equals average total cost, and MR > MC. 
B)  Price is greater than average total cost, and MR = MC. 
C)  Price equals average total cost, and MR = MC. 
D)  Price is less than average total cost, and MR = MC.

Question 6

Interdependence is a key attribute of firms in monopolistic competition.

Accepted Answer

A) True 
 B)False

Question 7

Why are prices relatively stable in oligopoly industries? Support your response with a graph.

Accepted Answer

The relevant portion of the marginal rev

Question 8

Jessie and Sammy are playing a game in which each has two choices. Based on the following game table (where Jessie's payoffs are listed first in each outcome), the Nash equilibrium is

Accepted Answer

A)  Heads, Heads = 10, 6 
B)  Tails, Heads = 12, 3 
C)  Heads, Tails = 8, 11 
D)  Tails, Tails = 5, 9 
A)  Heads, Heads = 10, 6 
B)  Tails, Heads = 12, 3 
C)  Heads, Tails = 8, 11 
D)  Tails, Tails = 5, 9

Question 9

Assume that economic profits are earned by monopolistically competitive firms. What will happen in the long run?

Accepted Answer

A)  New firms enter, the market demand rises, and the price for each firm falls until normal profits occur. 
B)  New firms enter, the market supply rises, and the price for each firm falls until P = MC for each firm. 
C)  New firms enter and demand for each firm's product rises until economic profits are eliminated. 
D)  New firms enter and demand for each firm's product falls until economic profits are zero. 
A)  New firms enter, the market demand rises, and the price for each firm falls until normal profits occur. 
B)  New firms enter, the market supply rises, and the price for each firm falls until P = MC for each firm. 
C)  New firms enter and demand for each firm's product rises until economic profits are eliminated. 
D)  New firms enter and demand for each firm's product falls until economic profits are zero.

Question 10

A prisoner's dilemma describes a Nash equilibrium where

Accepted Answer

A)  the payoffs are the lowest for both players. 
B)  an outcome exists that is better for both players. 
C)  one player achieves the highest payoff, while the other achieves the lowest payoff. 
D)  there is no dominant strategy for either player. 
A)  the payoffs are the lowest for both players. 
B)  an outcome exists that is better for both players. 
C)  one player achieves the highest payoff, while the other achieves the lowest payoff. 
D)  there is no dominant strategy for either player.

Question 11

(Table) In the payoff matrix, two possible pricing strategies for one 12-pack of Coke and one of Pepsi are shown. The profit payoffs to each firm are also shown, where the top value in each outcome is the profit for Coke. What is the Nash equilibrium?
$\begin{array}{c}
\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { Pepsi's Pricing Strategy per 12-pack} \
\begin{array}{cc}
&&\mathbf{\$ 4} & \mathbf{\$ 5} \
\text { Coke's Pricing Strategy per 12-pack} &\$ 4&\$ 2 \text { milion } & \$ 4 \text { million } \
&&\text { \$2 million } & \$ 1 \text { million } \
&\$ 5&\$ 1 \text { million } & \$ 3 \text { million } \
&&\$ 4 \text { million } & \$ 3 \text { million }
\end{array}\end{array}$

Accepted Answer

A)  Both firms charge $5 per 12-pack. 
B)  Pepsi charges $4 and Coke charges $5 per 12-pack. 
C)  Both firms charge $4 per 12-pack. 
D)  Pepsi charges $5 and Coke charges $4 per 12-pack. 
A)  Both firms charge $5 per 12-pack. 
B)  Pepsi charges $4 and Coke charges $5 per 12-pack. 
C)  Both firms charge $4 per 12-pack. 
D)  Pepsi charges $5 and Coke charges $4 per 12-pack.

Question 12

A monopolistically competitive firm will produce output as long as the marginal revenue is

Accepted Answer

A)  less than price. 
B)  less than marginal costs. 
C)  above price. 
D)  above marginal costs. 
A)  less than price. 
B)  less than marginal costs. 
C)  above price. 
D)  above marginal costs.

Question 13

How does the entry of new firms impact existing firms in an oligopoly?

Accepted Answer

A)  The cost curves of the existing firms shift upward. 
B)  The cost curves of the existing firms shift downward. 
C)  The demand curves of the existing firms shift rightward. 
D)  The demand curves of the existing firms shift leftward. 
A)  The cost curves of the existing firms shift upward. 
B)  The cost curves of the existing firms shift downward. 
C)  The demand curves of the existing firms shift rightward. 
D)  The demand curves of the existing firms shift leftward.

Question 14

A trigger strategy is a strategy that

Accepted Answer

A)  depends on an opponent's past decisions. 
B)  determines when to enter an industry. 
C)  tells a business to exit the industry because the price is below the AVC. 
D)  is only relevant for sequential games. 
A)  depends on an opponent's past decisions. 
B)  determines when to enter an industry. 
C)  tells a business to exit the industry because the price is below the AVC. 
D)  is only relevant for sequential games.

Question 15

In the long run, a monopolistically competitive firm charges a higher price than a perfectly competitive firm. The reason for this difference is that monopolistically competitive firms

Accepted Answer

A)  act like monopolies and restrict output. 
B)  have higher costs associated with advertising and product development. 
C)  need to earn economic profits in the long run to justify their expenditures on product development. 
D)  are able to price discriminate. 
A)  act like monopolies and restrict output. 
B)  have higher costs associated with advertising and product development. 
C)  need to earn economic profits in the long run to justify their expenditures on product development. 
D)  are able to price discriminate.

Question 16

(Figure: Monopolistic Competition) Based on the graph, under monopolistic competition in the short run, economic profit is represented by rectangle

Accepted Answer

A)  feab. 
B)  egca. 
C)  ehda. 
D)  fgcb. 
A)  feab. 
B)  egca. 
C)  ehda. 
D)  fgcb.

Question 17

Blocked market entry exists under monopolistic competition.

Accepted Answer

A) True 
 B)False

Question 18

Which trigger strategy does NOT allow for any forgiveness when one player deviates from the cooperative strategy?

Accepted Answer

A)  grim trigger 
B)  ultimatum trigger 
C)  trembling hand trigger 
D)  tit-for-tat 
A)  grim trigger 
B)  ultimatum trigger 
C)  trembling hand trigger 
D)  tit-for-tat

Question 19

The National Football League (NFL) draft in the United States is structured such that each team is able to choose new players, with one team at a time choosing in an order that is assigned. This is closely related to a _____ game.

Accepted Answer

A)  simultaneous 
B)  negative-sum 
C)  sequential-move 
D)  positive-sum 
A)  simultaneous 
B)  negative-sum 
C)  sequential-move 
D)  positive-sum

Question 20

One of the major characteristics of a cartel is that it has a highly elastic demand curve.

Accepted Answer

A) True 
 B)False

Focal-point strategies are typically used when there is

The success rate of cartels is low because

When a cartel member produces more than the agreed-upon quota, the net gain for that firm is calculated as the revenue earned from

In the grim trigger strategy, the actions of opponents are met with

In the long run, which statement is TRUE for a monopolistically competitive firm?

Interdependence is a key attribute of firms in monopolistic competition.

Why are prices relatively stable in oligopoly industries? Support your response with a graph.

Jessie and Sammy are playing a game in which each has two choices. Based on the following game table (where Jessie's payoffs are listed first in each outcome), the Nash equilibrium is

Assume that economic profits are earned by monopolistically competitive firms. What will happen in the long run?

A prisoner's dilemma describes a Nash equilibrium where

A monopolistically competitive firm will produce output as long as the marginal revenue is

How does the entry of new firms impact existing firms in an oligopoly?

A trigger strategy is a strategy that

In the long run, a monopolistically competitive firm charges a higher price than a perfectly competitive firm. The reason for this difference is that monopolistically competitive firms

(Figure: Monopolistic Competition) Based on the graph, under monopolistic competition in the short run, economic profit is represented by rectangle

Blocked market entry exists under monopolistic competition.

Which trigger strategy does NOT allow for any forgiveness when one player deviates from the cooperative strategy?

The National Football League (NFL) draft in the United States is structured such that each team is able to choose new players, with one team at a time choosing in an order that is assigned. This is closely related to a _____ game.

One of the major characteristics of a cartel is that it has a highly elastic demand curve.

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Exam 10: Monopolistic Competition, Oligopoly, and Game Theory

Focal-point strategies are typically used when there is

The success rate of cartels is low because

When a cartel member produces more than the agreed-upon quota, the net gain for that firm is calculated as the revenue earned from

In the grim trigger strategy, the actions of opponents are met with

In the long run, which statement is TRUE for a monopolistically competitive firm?

Interdependence is a key attribute of firms in monopolistic competition.

Why are prices relatively stable in oligopoly industries? Support your response with a graph.

Jessie and Sammy are playing a game in which each has two choices. Based on the following game table (where Jessie's payoffs are listed first in each outcome), the Nash equilibrium is

Assume that economic profits are earned by monopolistically competitive firms. What will happen in the long run?

A prisoner's dilemma describes a Nash equilibrium where

A monopolistically competitive firm will produce output as long as the marginal revenue is

How does the entry of new firms impact existing firms in an oligopoly?

A trigger strategy is a strategy that

In the long run, a monopolistically competitive firm charges a higher price than a perfectly competitive firm. The reason for this difference is that monopolistically competitive firms

(Figure: Monopolistic Competition) Based on the graph, under monopolistic competition in the short run, economic profit is represented by rectangle

Blocked market entry exists under monopolistic competition.

Which trigger strategy does NOT allow for any forgiveness when one player deviates from the cooperative strategy?

The National Football League (NFL) draft in the United States is structured such that each team is able to choose new players, with one team at a time choosing in an order that is assigned. This is closely related to a _____ game.

One of the major characteristics of a cartel is that it has a highly elastic demand curve.

Exploring Economics

Production, Economic Growth, and Trade

Supply and Demand

Markets and Government

Elasticity

Consumer Choice and Demand

Production and Costs

Perfect Competition

Monopoly

The Labor Market

Land, Capital Markets, and Innovation

Externalities and Public Goods

Network Goods

Poverty and Income Distribution

International Trade

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