Question 1

Product differentiation

Accepted Answer

A)  adds product information without increasing product cost. 
B)  contributes to production efficiency. 
C)  reduces price elasticity of demand. 
D)  reduces product price. 
A)  adds product information without increasing product cost. 
B)  contributes to production efficiency. 
C)  reduces price elasticity of demand. 
D)  reduces product price.

Question 2

(Table) Boeing and Airbus can either comply with a cartel agreement or cheat. Based on the table, where Boeing's payoff is listed first in each outcome, if this game is played repeatedly and both firms adopt strategies such that the cooperative equilibrium emerges
$\begin{array}{c}
\quad \quad \quad \quad \quad \quad \quad \quad \text { Airbus }\
\begin{array}{ccc}
&& \text { Cheat } & \text { Comply } \
 \text {Boeing   } &\text { Cheat } & \$ 0, \$ 0 & \$ 3 \text { million, }-\$ 1 \text { million } \
&\text { Comply } & -\$ 1 \text { million, } \$ 3 \text { milton } & \$ 2 \text { million, } \$ 2 \text { million }
\end{array}\end{array}$

Accepted Answer

A)  both Boeing and Airbus will cheat. 
B)  Boeing will cheat and Airbus will comply. 
C)  Boeing will comply and Airbus will cheat. 
D)  both Boeing and Airbus will comply. 
A)  both Boeing and Airbus will cheat. 
B)  Boeing will cheat and Airbus will comply. 
C)  Boeing will comply and Airbus will cheat. 
D)  both Boeing and Airbus will comply.

Question 3

Most markets lie between the extremes of perfect competition and monopoly.

Accepted Answer

A) True 
 B)False

Question 4

Briefly outline how interdependencies of game theory models can be used in business decision making.

Accepted Answer

Game theory assumes that there are two o

Question 5

When one participant's gains have come at the expense of the other participants, it is described as a _____ game.

Accepted Answer

A)  cooperative 
B)  zero-sum 
C)  sequential-move 
D)  dynamic 
A)  cooperative 
B)  zero-sum 
C)  sequential-move 
D)  dynamic

Question 6

In the long run, profits tend to remain high in a monopolistic competitive market.

Accepted Answer

A) True 
 B)False

Question 7

A(n) _____ market is a market in which just a few firms control a large market share.

Accepted Answer

A)  oligopolistic 
B)  monopolistically competitive 
C)  monopsonistic 
D)  monopolistic 
A)  oligopolistic 
B)  monopolistically competitive 
C)  monopsonistic 
D)  monopolistic

Question 8

In an oligopoly, all the firms

Accepted Answer

A)  compete over price alone. 
B)  compete over advertising. 
C)  take their competitors into account when they make pricing decisions. 
D)  face easy entry into and exit from the market. 
A)  compete over price alone. 
B)  compete over advertising. 
C)  take their competitors into account when they make pricing decisions. 
D)  face easy entry into and exit from the market.

Question 9

For a monopolistically competitive firm, profit is maximized when it produces at a level of output where

Accepted Answer

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

Question 10

The model of an oligopoly in which collusive joint profit maximization is a main goal is called the cartel model.

Accepted Answer

A) True 
 B)False

Question 11

Assume that a monopolistically competitive firm faces the following situation: P = $16; output = 9,000 units; MC = $11; ATC = $10; AVC = $7; and MR = $14. Which statement is correct regarding profit maximization?

Accepted Answer

A)  The firm is maximizing profit. 
B)  The firm would earn higher profit by increasing output. 
C)  The firm is minimizing its losses. 
D)  The firm would earn higher profit by decreasing output. 
A)  The firm is maximizing profit. 
B)  The firm would earn higher profit by increasing output. 
C)  The firm is minimizing its losses. 
D)  The firm would earn higher profit by decreasing output.

Question 12

The prisoner's dilemma

Accepted Answer

A)  is a cooperative game. 
B)  is an example of how minimizing your losses can lead to an inferior outcome for all players. 
C)  is applicable to only economic situations. 
D)  explains how maximizing individual welfare leads to maximization of social welfare. 
A)  is a cooperative game. 
B)  is an example of how minimizing your losses can lead to an inferior outcome for all players. 
C)  is applicable to only economic situations. 
D)  explains how maximizing individual welfare leads to maximization of social welfare.

Question 13

Both Lowes and Home Depot must choose how much to advertise. The payoff of the advertising choice of each firm is dependent on the advertising choice of the other. This situation is an example of

Accepted Answer

A)  a competitive market structure. 
B)  a cartel. 
C)  the prisoner's dilemma. 
D)  a cooperative game. 
A)  a competitive market structure. 
B)  a cartel. 
C)  the prisoner's dilemma. 
D)  a cooperative game.

Question 14

Consumer loyalty to existing brands may be a formidable barrier to entry for new companies.

Accepted Answer

A) True 
 B)False

Question 15

If Nintendo lowers the price of its product by $10, Sony waits to see whether Nintendo's price cut was a temporary mistake. This is an example of what type of game strategy?

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 16

Successful monopolistically competitive firms

Accepted Answer

A)  generally earn higher profit than monopolists. 
B)  earn economic profits in the short run only. 
C)  earn economic profits in the long run only. 
D)  are able to drive their competitors out of business. 
A)  generally earn higher profit than monopolists. 
B)  earn economic profits in the short run only. 
C)  earn economic profits in the long run only. 
D)  are able to drive their competitors out of business.

Question 17

If a market has twenty competing firms and 20% of those firms produce 80% of the sales, then the market structure would be described as

Accepted Answer

A)  a natural monopoly. 
B)  an oligopoly. 
C)  monopolistically competitive. 
D)  a monopoly. 
A)  a natural monopoly. 
B)  an oligopoly. 
C)  monopolistically competitive. 
D)  a monopoly.

Question 18

If a prisoner's dilemma game is repeated daily, such that two rival stores choose a price simultaneously each morning for an extended number of days, which outcome can happen?

Accepted Answer

A)  The Nash equilibrium will continue to be played throughout the game. 
B)  The Nash equilibrium will continue to be played only until one firm engages a trigger strategy against the other. 
C)  There will more likely be cooperation to achieve an outcome different from the Nash equilibrium that is better for both firms. 
D)  An outcome different from the Nash equilibrium would occur; however, only one firm will be better off. 
A)  The Nash equilibrium will continue to be played throughout the game. 
B)  The Nash equilibrium will continue to be played only until one firm engages a trigger strategy against the other. 
C)  There will more likely be cooperation to achieve an outcome different from the Nash equilibrium that is better for both firms. 
D)  An outcome different from the Nash equilibrium would occur; however, only one firm will be better off.

Question 19

Which of these is a benefit that results from a prisoner's dilemma outcome?

Accepted Answer

A)  Charging high prices leads to more profits. 
B)  Charging high prices leads to more customers. 
C)  Charging low prices leads to fewer customers. 
D)  Charging low prices leads to more customers. 
A)  Charging high prices leads to more profits. 
B)  Charging high prices leads to more customers. 
C)  Charging low prices leads to fewer customers. 
D)  Charging low prices leads to more customers.

Question 20

Which of these is a characteristic of an oligopoly market structure?

Accepted Answer

A)  many firms 
B)  produce at the level of output where price equals marginal revenue 
C)  mutual interdependence 
D)  a unique product 
A)  many firms 
B)  produce at the level of output where price equals marginal revenue 
C)  mutual interdependence 
D)  a unique product

Product differentiation

Most markets lie between the extremes of perfect competition and monopoly.

Briefly outline how interdependencies of game theory models can be used in business decision making.

When one participant's gains have come at the expense of the other participants, it is described as a _____ game.

In the long run, profits tend to remain high in a monopolistic competitive market.

A(n) _____ market is a market in which just a few firms control a large market share.

In an oligopoly, all the firms

For a monopolistically competitive firm, profit is maximized when it produces at a level of output where

The model of an oligopoly in which collusive joint profit maximization is a main goal is called the cartel model.

Assume that a monopolistically competitive firm faces the following situation: P = $16; output = 9,000 units; MC = $11; ATC = $10; AVC = $7; and MR = $14. Which statement is correct regarding profit maximization?

The prisoner's dilemma

Both Lowes and Home Depot must choose how much to advertise. The payoff of the advertising choice of each firm is dependent on the advertising choice of the other. This situation is an example of

Consumer loyalty to existing brands may be a formidable barrier to entry for new companies.

If Nintendo lowers the price of its product by $10, Sony waits to see whether Nintendo's price cut was a temporary mistake. This is an example of what type of game strategy?

Successful monopolistically competitive firms

If a market has twenty competing firms and 20% of those firms produce 80% of the sales, then the market structure would be described as

If a prisoner's dilemma game is repeated daily, such that two rival stores choose a price simultaneously each morning for an extended number of days, which outcome can happen?

Which of these is a benefit that results from a prisoner's dilemma outcome?

Which of these is a characteristic of an oligopoly market structure?

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

Exam 10: Monopolistic Competition, Oligopoly, and Game Theory

Product differentiation

Most markets lie between the extremes of perfect competition and monopoly.

Briefly outline how interdependencies of game theory models can be used in business decision making.

When one participant's gains have come at the expense of the other participants, it is described as a _____ game.

In the long run, profits tend to remain high in a monopolistic competitive market.

A(n) _____ market is a market in which just a few firms control a large market share.

In an oligopoly, all the firms

For a monopolistically competitive firm, profit is maximized when it produces at a level of output where

The model of an oligopoly in which collusive joint profit maximization is a main goal is called the cartel model.

Assume that a monopolistically competitive firm faces the following situation: P = $16; output = 9,000 units; MC = $11; ATC = $10; AVC = $7; and MR = $14. Which statement is correct regarding profit maximization?

The prisoner's dilemma

Both Lowes and Home Depot must choose how much to advertise. The payoff of the advertising choice of each firm is dependent on the advertising choice of the other. This situation is an example of

Consumer loyalty to existing brands may be a formidable barrier to entry for new companies.

If Nintendo lowers the price of its product by $10, Sony waits to see whether Nintendo's price cut was a temporary mistake. This is an example of what type of game strategy?

Successful monopolistically competitive firms

If a market has twenty competing firms and 20% of those firms produce 80% of the sales, then the market structure would be described as

If a prisoner's dilemma game is repeated daily, such that two rival stores choose a price simultaneously each morning for an extended number of days, which outcome can happen?

Which of these is a benefit that results from a prisoner's dilemma outcome?

Which of these is a characteristic of an oligopoly market structure?

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