Question 1

Which of these products is likely to be the MOST differentiated?

Accepted Answer

A)  cotton sold to a fabric maker 
B)  fabric sold to a garment maker 
C)  garments sold to a garment distributor 
D)  garments sold to a retail customer 
A)  cotton sold to a fabric maker 
B)  fabric sold to a garment maker 
C)  garments sold to a garment distributor 
D)  garments sold to a retail customer

Question 2

Mutually interdependent decision making among firms is a key characteristic of

Accepted Answer

A)  monopolistic competition. 
B)  an oligopoly. 
C)  perfect competition. 
D)  a monopoly. 
A)  monopolistic competition. 
B)  an oligopoly. 
C)  perfect competition. 
D)  a monopoly.

Question 3

Under monopolistic competition, entry of new firms typically causes price to _____ and profits to _____.

Accepted Answer

A)  decrease; decrease 
B)  decrease; increase 
C)  increase; increase 
D)  increase; decrease 
A)  decrease; decrease 
B)  decrease; increase 
C)  increase; increase 
D)  increase; decrease

Question 4

There is always a winner and a loser in a game.

Accepted Answer

A) True 
 B)False

Question 5

When the producer of Doritos tortilla chips spends money for television commercials, it intends to shift the

Accepted Answer

A)  demand curve to the right and make demand more elastic. 
B)  supply curve to the right and make supply more elastic. 
C)  demand curve to the right and make demand less elastic. 
D)  supply curve to the right and make supply less elastic. 
A)  demand curve to the right and make demand more elastic. 
B)  supply curve to the right and make supply more elastic. 
C)  demand curve to the right and make demand less elastic. 
D)  supply curve to the right and make supply less elastic.

Question 6

Which repeated game strategy does the MOST to reward cooperation and punish defection, while producing the greatest efficiency?

Accepted Answer

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

Question 7

A group of students is enrolled in both a math class and a psychology class. The teacher of each class wants to design the course to maximize the amount of study time students devote to the class that teacher is teaching. If both teachers develop their course syllabi without consulting the other and publish them on the first day of class, this scenario is closely related to a _____ game.

Accepted Answer

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

Question 8

When oligopolies act jointly as a monopoly, they are acting as a

Accepted Answer

A)  contestable market. 
B)  monopolistically competitive market. 
C)  cartel. 
D)  monopsony. 
A)  contestable market. 
B)  monopolistically competitive market. 
C)  cartel. 
D)  monopsony.

Question 9

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

Accepted Answer

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

Question 10

A cartel will maximize its profits as long as it limits industry output to the level found where the MR and MC curves intersect.

Accepted Answer

A) True 
 B)False

Question 11

The strategy that allows an organization to make one mistake before the competitor retaliates forever is known as the grim trigger strategy.

Accepted Answer

A) True 
 B)False

Question 12

Which of these must be TRUE of a prisoner's dilemma outcome?

Accepted Answer

A)  There exists no other outcome that is better for both players. 
B)  There is no opportunity to collude or cooperate to improve both players' payoffs. 
C)  It is a Nash equilibrium resulting from each player using its best-response strategies. 
D)  Neither player has a dominant strategy in the game. 
A)  There exists no other outcome that is better for both players. 
B)  There is no opportunity to collude or cooperate to improve both players' payoffs. 
C)  It is a Nash equilibrium resulting from each player using its best-response strategies. 
D)  Neither player has a dominant strategy in the game.

Question 13

Assume that this Friday you would like to go to the club. You ask your friends to go with you, but they all want to go to the movies. Despite your friends not wanting to go with you, you decide to go to the club anyway because you really want to go dancing. This type of thinking BEST resembles a _____ strategy.

Accepted Answer

A)  best-response 
B)  dominant 
C)  tit-for-tat 
D)  grim 
A)  best-response 
B)  dominant 
C)  tit-for-tat 
D)  grim

Question 14

(Table) Referring to the payoff matrix for Norm and Pete (with Norm's profit in plain text and Pete's profit in italics), who has a dominant strategy?
$\begin{array}{c}
 \quad  \quad  \quad  \quad  \quad  \quad  \quad \text { Pete's Pasta Dinners } \
\begin{array}{|l|l|ll|ll|}
\hline & & {\text { High Price }} & &{\text { Price }} \
\hline \text {Norm's Noodle  Bowls } & \text { High Price } & \$ 4,000 & \$ 4,500 & \$ 700 & \$ 3,500 \
\hline  &\text { Low Price } & \$ 2,800 & \$ 500 & \$ 3,000 & \$ 3,700 \
\hline
\end{array}\end{array}$

Accepted Answer

A)  both Norm and Pete 
B)  neither Norm nor Pete 
C)  Norm, but not Pete 
D)  Pete, but not Norm 
A)  both Norm and Pete 
B)  neither Norm nor Pete 
C)  Norm, but not Pete 
D)  Pete, but not Norm

Question 15

Which statement is NOT true about a Nash equilibrium?

Accepted Answer

A)  It represents an outcome that maximizes all players' expected payoffs. 
B)  It results from each player using a best-response strategy to all other players. 
C)  There can be more than one Nash equilibrium in a game. 
D)  A Nash equilibrium gives each player the highest possible payoff in the game. 
A)  It represents an outcome that maximizes all players' expected payoffs. 
B)  It results from each player using a best-response strategy to all other players. 
C)  There can be more than one Nash equilibrium in a game. 
D)  A Nash equilibrium gives each player the highest possible payoff in the game.

Question 16

Two different markets each have many buyers and many sellers, none of which have market power. Which of these would be MOST helpful in determining whether each market is monopolistically competitive or perfectly competitive?

Accepted Answer

A)  information on the barriers to entry in each market 
B)  information on the level of information available to buyers and sellers 
C)  information on the degree of product differentiation in each market 
D)  information on the size of each industry 
A)  information on the barriers to entry in each market 
B)  information on the level of information available to buyers and sellers 
C)  information on the degree of product differentiation in each market 
D)  information on the size of each industry

Question 17

The notion that individuals and firms are compelled to retaliate or punish others for engaging in noncooperative actions, but leaving the door open for future reconciliation, is BEST referred to as a(n) _____ strategy.

Accepted Answer

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

Question 18

In a zero-sum game, the amount won is NOT equal to the amount lost.

Accepted Answer

A) True 
 B)False

Question 19

Football is an example of a sequential-move game.

Accepted Answer

A) True 
 B)False

Question 20

When firms collude, they are looking to operate as a monopoly by

Accepted Answer

A)  raising prices and output in the market. 
B)  lowering prices and output in the market. 
C)  raising prices and reducing output in the market. 
D)  determining output where price equals marginal cost. 
A)  raising prices and output in the market. 
B)  lowering prices and output in the market. 
C)  raising prices and reducing output in the market. 
D)  determining output where price equals marginal cost.

Which of these products is likely to be the MOST differentiated?

Mutually interdependent decision making among firms is a key characteristic of

Under monopolistic competition, entry of new firms typically causes price to _ and profits to _.

There is always a winner and a loser in a game.

When the producer of Doritos tortilla chips spends money for television commercials, it intends to shift the

Which repeated game strategy does the MOST to reward cooperation and punish defection, while producing the greatest efficiency?

When oligopolies act jointly as a monopoly, they are acting as a

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

A cartel will maximize its profits as long as it limits industry output to the level found where the MR and MC curves intersect.

The strategy that allows an organization to make one mistake before the competitor retaliates forever is known as the grim trigger strategy.

Which of these must be TRUE of a prisoner's dilemma outcome?

(Table) Referring to the payoff matrix for Norm and Pete (with Norm's profit in plain text and Pete's profit in italics), who has a dominant strategy? Pete's Pasta Dinners High Price Price Norm's Noodle Bowls High Price \ 4,000 \ 4,500 \ 700 \ 3,500 Low Price \ 2,800 \ 500 \ 3,000 \ 3,700

Which statement is NOT true about a Nash equilibrium?

Two different markets each have many buyers and many sellers, none of which have market power. Which of these would be MOST helpful in determining whether each market is monopolistically competitive or perfectly competitive?

The notion that individuals and firms are compelled to retaliate or punish others for engaging in noncooperative actions, but leaving the door open for future reconciliation, is BEST referred to as a(n) _____ strategy.

In a zero-sum game, the amount won is NOT equal to the amount lost.

Football is an example of a sequential-move game.

When firms collude, they are looking to operate as a monopoly by

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Exam 10: Monopolistic Competition, Oligopoly, and Game Theory

Which of these products is likely to be the MOST differentiated?

Mutually interdependent decision making among firms is a key characteristic of

Under monopolistic competition, entry of new firms typically causes price to _____ and profits to _____.

There is always a winner and a loser in a game.

When the producer of Doritos tortilla chips spends money for television commercials, it intends to shift the

Which repeated game strategy does the MOST to reward cooperation and punish defection, while producing the greatest efficiency?

When oligopolies act jointly as a monopoly, they are acting as a

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

A cartel will maximize its profits as long as it limits industry output to the level found where the MR and MC curves intersect.

The strategy that allows an organization to make one mistake before the competitor retaliates forever is known as the grim trigger strategy.

Which of these must be TRUE of a prisoner's dilemma outcome?

(Table) Referring to the payoff matrix for Norm and Pete (with Norm's profit in plain text and Pete's profit in italics), who has a dominant strategy? Pete's Pasta Dinners High Price Price Norm's Noodle Bowls High Price \ 4,000 \ 4,500 \ 700 \ 3,500 Low Price \ 2,800 \ 500 \ 3,000 \ 3,700

Which statement is NOT true about a Nash equilibrium?

Two different markets each have many buyers and many sellers, none of which have market power. Which of these would be MOST helpful in determining whether each market is monopolistically competitive or perfectly competitive?

The notion that individuals and firms are compelled to retaliate or punish others for engaging in noncooperative actions, but leaving the door open for future reconciliation, is BEST referred to as a(n) _____ strategy.

In a zero-sum game, the amount won is NOT equal to the amount lost.

Football is an example of a sequential-move game.

When firms collude, they are looking to operate as a monopoly by

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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Under monopolistic competition, entry of new firms typically causes price to _ and profits to _.