Question 1

If an oligopolistic firm decreases its price

Accepted Answer

A)  total revenue will decrease. 
B)  it faces an elastic demand curve. 
C)  competitors will not match the reduced price. 
D)  total revenue will increase. 
A)  total revenue will decrease. 
B)  it faces an elastic demand curve. 
C)  competitors will not match the reduced price. 
D)  total revenue will increase.

Question 2

The kinked demand curve model-jointly developed by economists Sweezy, Hall, and Hitch-was an attempt to demonstrate the _____ run for oligopolies.

Accepted Answer

A)  stability of prices over the long 
B)  instability of prices over the long 
C)  instability of prices over the short 
D)  stability of prices over the short 
A)  stability of prices over the long 
B)  instability of prices over the long 
C)  instability of prices over the short 
D)  stability of prices over the short

Question 3

Which of these is an example of a trigger strategy?

Accepted Answer

A)  noncooperative 
B)  tit-for-tat 
C)  one-off 
D)  static 
A)  noncooperative 
B)  tit-for-tat 
C)  one-off 
D)  static

Question 4

Monopolistically competitive markets and perfectly competitive markets do NOT share which characteristic?

Accepted Answer

A)  zero economic profits in the long run 
B)  many firms in the market 
C)  differentiated products 
D)  ease of entry into the market 
A)  zero economic profits in the long run 
B)  many firms in the market 
C)  differentiated products 
D)  ease of entry into the market

Question 5

Which action can help increase the stability of a cartel?

Accepted Answer

A)  decrease barriers to entry into the industry 
B)  increase product differentiation 
C)  increase government protection 
D)  increase the cartel's market share 
A)  decrease barriers to entry into the industry 
B)  increase product differentiation 
C)  increase government protection 
D)  increase the cartel's market share

Question 6

The payoff table shows the results of different decisions made by the players of a game.

Accepted Answer

A) True 
 B)False

Question 7

Assume that a monopolistically competitive firm faces the following situation: P = $20; output = 13,000 units, MC = $16, ATC = $28, AVC = $22, and MR = $16. Which statement BEST describes the firm's situation?

Accepted Answer

A)  The firm is minimizing its losses. 
B)  The firm would minimize its losses by shutting down in the short run. 
C)  The firm would minimize its losses by increasing its output. 
D)  The firm would maximize its profit by decreasing its output. 
A)  The firm is minimizing its losses. 
B)  The firm would minimize its losses by shutting down in the short run. 
C)  The firm would minimize its losses by increasing its output. 
D)  The firm would maximize its profit by decreasing its output.

Question 8

If an individual's primary objective is to maximize his or her salary, then which action would NOT be considered a rational decision?

Accepted Answer

A)  accepting a boring job that pays $60,000 per year over a fun job that pays $40,000 per year 
B)  accepting a fun job that pays $70,000 per year over a boring job that pays $60,000 per year 
C)  accepting a boring job that pays $95,000 per year over a fun job that pays $90,000 per year 
D)  accepting a fun job that pays $40,000 per year over a boring job that pays $60,000 per year 
A)  accepting a boring job that pays $60,000 per year over a fun job that pays $40,000 per year 
B)  accepting a fun job that pays $70,000 per year over a boring job that pays $60,000 per year 
C)  accepting a boring job that pays $95,000 per year over a fun job that pays $90,000 per year 
D)  accepting a fun job that pays $40,000 per year over a boring job that pays $60,000 per year

Question 9

The reason monopolistically competitive firms have difficulty maintaining a profit in the long run is that

Accepted Answer

A)  buyers refuse to pay higher prices over time. 
B)  costs tend to increase as production rises. 
C)  ease of entry into the market encourages new firms to enter and force down the price. 
D)  income taxes paid by the firms rise as their profits rise. 
A)  buyers refuse to pay higher prices over time. 
B)  costs tend to increase as production rises. 
C)  ease of entry into the market encourages new firms to enter and force down the price. 
D)  income taxes paid by the firms rise as their profits rise.

Question 10

(Figure: Kinked Demand Curves and Oligopolies) Based on the graph, an oligopolistic firm facing a kinked demand curve will NOT increase its price when its marginal cost fluctuates between which two points?

Accepted Answer

A)  a and b 
B)  a and c 
C)  b and c 
D)  a and d 
A)  a and b 
B)  a and c 
C)  b and c 
D)  a and d

Question 11

In the prisoner's dilemma, if the prisoners could collude

Accepted Answer

A)  both prisoners would be better off confessing. 
B)  the best outcome for both prisoners occurs if one confesses and the other does not. 
C)  both prisoners would be better off not confessing. 
D)  their prison sentences would be maximized. 
A)  both prisoners would be better off confessing. 
B)  the best outcome for both prisoners occurs if one confesses and the other does not. 
C)  both prisoners would be better off not confessing. 
D)  their prison sentences would be maximized.

Question 12

(Table) HH Gregg and Best Buy are competing for sales for their newest high-capacity mobile device battery packs. Each firm has a pricing strategy of either a high price or a low price. Profits for each store are listed in the payoff boxes, with Best Buy's payoff listed first. Based on the table, the Nash equilibrium for this game is
$\begin{array}{c}
\quad \quad \quad \quad \quad \quad \quad \quad \text { HH Gregg }\
\begin{array}{ccc} 
\text { Best Buy }\
&& \text { High } & \text { Low } \
&\text { High } & 100,100 & 30,120 \
&\text { Low } & 120,30 & 50,50
\end{array}\end{array}$

Accepted Answer

A)  High, High = (100, 100). 
B)  High, Low = (30, 120). 
C)  Low, High = (120, 30). 
D)  Low, Low = (50, 50). 
A)  High, High = (100, 100). 
B)  High, Low = (30, 120). 
C)  Low, High = (120, 30). 
D)  Low, Low = (50, 50).

Question 13

With a kinked demand curve model, the discontinuity of the marginal revenue curve suggests that

Accepted Answer

A)  prices will be stable. 
B)  prices will be unstable. 
C)  demand will be stable. 
D)  marginal cost will be stable. 
A)  prices will be stable. 
B)  prices will be unstable. 
C)  demand will be stable. 
D)  marginal cost will be stable.

Question 14

(Table) The game theory table for Barbara and Helen (with Barbara's profits in regular text and Helen's profits in italics) indicates that
$\begin{array}{c}
\text { Barbara's Barbershop }\
\begin{array}{|l|l|ll|ll|}
\hline && {\text { Low Price }} && {\text { High Price }} \
\hline  \text {  } &\text { Low Price } & \$ 2,000 & \$ 2,500 & \$ 3,500 & \$ 1,000 \
\hline& \text { High Price } & \$ 600 & \$ 3,900 & \$ 2,500 & \$ 2,700\
\hline 
\end{array}\end{array}$

Accepted Answer

A)  Barbara has a dominant strategy to earn profits, but Helen does not. 
B)  Helen has a dominant strategy to earn profits, but Barbara does not. 
C)  both Barbara and Helen have dominant strategies to earn profits. 
D)  neither Barbara nor Helen has dominant strategies to earn profits. 
A)  Barbara has a dominant strategy to earn profits, but Helen does not. 
B)  Helen has a dominant strategy to earn profits, but Barbara does not. 
C)  both Barbara and Helen have dominant strategies to earn profits. 
D)  neither Barbara nor Helen has dominant strategies to earn profits.

Question 15

If the demand curve for air travel to London is kinked and one firm reduces its price, then

Accepted Answer

A)  rival firms will raise their prices. 
B)  rival firms will reduce their prices. 
C)  quantity demanded will decrease. 
D)  rival firms will not react. 
A)  rival firms will raise their prices. 
B)  rival firms will reduce their prices. 
C)  quantity demanded will decrease. 
D)  rival firms will not react.

Question 16

Playing a round of golf and negotiating the price of a car are examples of

Accepted Answer

A)  sequential-move games. 
B)  simultaneous-move games. 
C)  a Nash equilibrium. 
D)  dominant strategies. 
A)  sequential-move games. 
B)  simultaneous-move games. 
C)  a Nash equilibrium. 
D)  dominant strategies.

Question 17

If Dixie's Dry Cleaners competes in a monopolistically competitive market and if the firm is earning a normal profit, then

Accepted Answer

A)  P = MC. 
B)  P = MR. 
C)  P < MR. 
D)  P = ATC. 
A)  P = MC. 
B)  P = MR. 
C)  P < MR. 
D)  P = ATC.

Question 18

In which situation can a prisoner's dilemma outcome MOST likely be avoided?

Accepted Answer

A)  if the game is repeated over and over under the same conditions 
B)  if the players involved choose not to cooperate with one another 
C)  if each player plays its best-response strategy 
D)  if the game is played only once with no opportunity for retaliation 
A)  if the game is repeated over and over under the same conditions 
B)  if the players involved choose not to cooperate with one another 
C)  if each player plays its best-response strategy 
D)  if the game is played only once with no opportunity for retaliation

Question 19

The monopolistically competitive firm in the following figure is earning a profit of _____; in the long run, _____ will occur in this industry.

Accepted Answer

A)  $300; entry 
B)  $300; exit 
C)  $400; entry 
D)  $400; exit 
A)  $300; entry 
B)  $300; exit 
C)  $400; entry 
D)  $400; exit

Question 20

Regardless of what Penny (a criminal suspect) does, if Buck (an accomplice) can minimize his jail sentence by informing on Penny, informing would be considered a _____ strategy.

Accepted Answer

A)  zero-sum 
B)  tit-for-tat 
C)  dominant 
D)  trembling hand 
A)  zero-sum 
B)  tit-for-tat 
C)  dominant 
D)  trembling hand

If an oligopolistic firm decreases its price

The kinked demand curve model-jointly developed by economists Sweezy, Hall, and Hitch-was an attempt to demonstrate the _____ run for oligopolies.

Which of these is an example of a trigger strategy?

Monopolistically competitive markets and perfectly competitive markets do NOT share which characteristic?

Which action can help increase the stability of a cartel?

The payoff table shows the results of different decisions made by the players of a game.

Assume that a monopolistically competitive firm faces the following situation: P = $20; output = 13,000 units, MC = $16, ATC = $28, AVC = $22, and MR = $16. Which statement BEST describes the firm's situation?

If an individual's primary objective is to maximize his or her salary, then which action would NOT be considered a rational decision?

The reason monopolistically competitive firms have difficulty maintaining a profit in the long run is that

(Figure: Kinked Demand Curves and Oligopolies) Based on the graph, an oligopolistic firm facing a kinked demand curve will NOT increase its price when its marginal cost fluctuates between which two points?

In the prisoner's dilemma, if the prisoners could collude

With a kinked demand curve model, the discontinuity of the marginal revenue curve suggests that

(Table) The game theory table for Barbara and Helen (with Barbara's profits in regular text and Helen's profits in italics) indicates that Barbara's Barbershop Low Price High Price Low Price \ 2,000 \ 2,500 \ 3,500 \ 1,000 High Price \ 600 \ 3,900 \ 2,500 \ 2,700

If the demand curve for air travel to London is kinked and one firm reduces its price, then

Playing a round of golf and negotiating the price of a car are examples of

If Dixie's Dry Cleaners competes in a monopolistically competitive market and if the firm is earning a normal profit, then

In which situation can a prisoner's dilemma outcome MOST likely be avoided?

The monopolistically competitive firm in the following figure is earning a profit of _; in the long run, _ will occur in this industry.

Regardless of what Penny (a criminal suspect) does, if Buck (an accomplice) can minimize his jail sentence by informing on Penny, informing would be considered a _____ strategy.

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

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Exam 10: Monopolistic Competition, Oligopoly, and Game Theory

If an oligopolistic firm decreases its price

The kinked demand curve model-jointly developed by economists Sweezy, Hall, and Hitch-was an attempt to demonstrate the _____ run for oligopolies.

Which of these is an example of a trigger strategy?

Monopolistically competitive markets and perfectly competitive markets do NOT share which characteristic?

Which action can help increase the stability of a cartel?

The payoff table shows the results of different decisions made by the players of a game.

Assume that a monopolistically competitive firm faces the following situation: P = $20; output = 13,000 units, MC = $16, ATC = $28, AVC = $22, and MR = $16. Which statement BEST describes the firm's situation?

If an individual's primary objective is to maximize his or her salary, then which action would NOT be considered a rational decision?

The reason monopolistically competitive firms have difficulty maintaining a profit in the long run is that

(Figure: Kinked Demand Curves and Oligopolies) Based on the graph, an oligopolistic firm facing a kinked demand curve will NOT increase its price when its marginal cost fluctuates between which two points?

In the prisoner's dilemma, if the prisoners could collude

With a kinked demand curve model, the discontinuity of the marginal revenue curve suggests that

(Table) The game theory table for Barbara and Helen (with Barbara's profits in regular text and Helen's profits in italics) indicates that Barbara's Barbershop Low Price High Price Low Price \ 2,000 \ 2,500 \ 3,500 \ 1,000 High Price \ 600 \ 3,900 \ 2,500 \ 2,700

If the demand curve for air travel to London is kinked and one firm reduces its price, then

Playing a round of golf and negotiating the price of a car are examples of

If Dixie's Dry Cleaners competes in a monopolistically competitive market and if the firm is earning a normal profit, then

In which situation can a prisoner's dilemma outcome MOST likely be avoided?

The monopolistically competitive firm in the following figure is earning a profit of _____; in the long run, _____ will occur in this industry.

Regardless of what Penny (a criminal suspect) does, if Buck (an accomplice) can minimize his jail sentence by informing on Penny, informing would be considered a _____ strategy.

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

Filters

The monopolistically competitive firm in the following figure is earning a profit of _; in the long run, _ will occur in this industry.