Question 1

In most models of oligopoly _____.

Accepted Answer

A) the output is higher than the output in a pure monopoly 
B) the price is higher than the price in a pure monopoly 
C) the price is lower than the price under perfect competition 
D) the output is the same as the output under perfect competition 
A) the output is higher than the output in a pure monopoly 
B) the price is higher than the price in a pure monopoly 
C) the price is lower than the price under perfect competition 
D) the output is the same as the output under perfect competition

Question 2

Use the following table to answer the question : Table 15-3: shows the average cost [AC],marginal cost [MC],and demand [D] curves for a natural monopoly;Qi denotes quantity and Pi denotes price.  
-Refer to Figure 15-3.If the firm practices marginal-cost pricing,the equilibrium price would be _____.

Accepted Answer

A) P1 
B) P2 
C) P3 
D) P4 
A) P1 
B) P2 
C) P3 
D) P4

Question 3

Which of the following is not a problem associated with regulation of a natural monopoly?

Accepted Answer

A) Regulation using average-cost pricing reduces a firm's incentive to keep costs down. 
B) Regulation stifles the incentive that firms have to innovate. 
C) Regulators do not have full information about a firm's demand and cost functions. 
D) Regulation increases collusion and cartelization among firms. 
A) Regulation using average-cost pricing reduces a firm's incentive to keep costs down. 
B) Regulation stifles the incentive that firms have to innovate. 
C) Regulators do not have full information about a firm's demand and cost functions. 
D) Regulation increases collusion and cartelization among firms.

Question 4

Use the following table to answer the question : Table 15-3: Abbott and Costello are two firms that compete with each other in the market for ice-cream.They can price their product at a high,medium,or low price.The following matrix shows their profits from their respective pricing strategies.
 
-Refer to Table 15-3.When Costello chooses the low-pricing strategy,Abbott's highest possible profit is:

Accepted Answer

A) $50 
B) $21 
C) $107 
D) $115 
A) $50 
B) $21 
C) $107 
D) $115

Question 5

When a company practices planned obsolescence,it _____.

Accepted Answer

A) produces a product that is of a higher quality at a much lower cost 
B) does not produce goods that are expected to last for a long period of time 
C) recalls goods for which demand has fallen significantly in the market 
D) differentiates its product slightly and sells the product at a much higher price 
A) produces a product that is of a higher quality at a much lower cost 
B) does not produce goods that are expected to last for a long period of time 
C) recalls goods for which demand has fallen significantly in the market 
D) differentiates its product slightly and sells the product at a much higher price

Question 6

Use the following table to answer the question : Table 15-3: shows the average cost [AC],marginal cost [MC],and demand [D] curves for a natural monopoly;Qi denotes quantity and Pi denotes price.  
-In Figure 15-3,if the maximum price allowed in the market is P1,output levels below Q1 will:

Accepted Answer

A) yield more economic profit than at Q1. 
B) yield positive but lesser economic profit than at Q1. 
C) yield negative economic profit. 
D) yield zero economic profit. 
A) yield more economic profit than at Q1. 
B) yield positive but lesser economic profit than at Q1. 
C) yield negative economic profit. 
D) yield zero economic profit.

Question 7

Use the following table to answer the question : Table 15-2: payoff matrix shows the profits accruing to two firms,Company A and Company B,under different pricing strategies.In each cell,the figure on the left indicates Company A's payoff and the figure on the right indicates Company B's payoff.
 
-In Table 15-2,company B's strategy of choosing a _____ price is iteratively dominated by a strategy of _____ price.

Accepted Answer

A) low;high 
B) medium;high 
C) medium;low 
D) high;low 
A) low;high 
B) medium;high 
C) medium;low 
D) high;low

Question 8

Use the following table to answer the question : Table 15-3: Abbott and Costello are two firms that compete with each other in the market for ice-cream.They can price their product at a high,medium,or low price.The following matrix shows their profits from their respective pricing strategies.
 
-Refer to Table 15-3.When the concept of iterated dominance is used,Abbott and Costello will:

Accepted Answer

A) not arrive at a unique pricing strategy. 
B) use the medium-pricing strategy. 
C) use the high-pricing strategy. 
D) use the low-pricing strategy. 
A) not arrive at a unique pricing strategy. 
B) use the medium-pricing strategy. 
C) use the high-pricing strategy. 
D) use the low-pricing strategy.

Question 9

Use the following table to answer the question : Table 15-2: payoff matrix shows the profits accruing to two firms,Company A and Company B,under different pricing strategies.In each cell,the figure on the left indicates Company A's payoff and the figure on the right indicates Company B's payoff.
 
-Refer to Table 15-2.Which of the following is true?

Accepted Answer

A) Company B's dominant strategy is to set a high price. 
B) Company B's dominant strategy is to set a medium price. 
C) Company B's dominant strategy is to set a low price. 
D) Company B does not have a dominant strategy. 
A) Company B's dominant strategy is to set a high price. 
B) Company B's dominant strategy is to set a medium price. 
C) Company B's dominant strategy is to set a low price. 
D) Company B does not have a dominant strategy.

Question 10

Use the following table to answer the question : Table 15-1: shows the marginal cost [MC],marginal revenue [FH],and demand [FG] curves for a monopolist who faces constant costs.
Figure 15-1  
-Refer to Figure 15-1.Under competitive conditions,what is the equilibrium price and output?

Accepted Answer

A) P2 and Q2 
B) P1 and Q1 
C) P3 and Q3 
D) F and zero output 
A) P2 and Q2 
B) P1 and Q1 
C) P3 and Q3 
D) F and zero output

Question 11

Which of the following is true of a Nash equilibrium?

Accepted Answer

A) At least one of the players need to have a dominant strategy to arrive at a Nash equilibrium. 
B) In a Nash equilibrium,one player has an incentive to change his strategy in order to increase his profit. 
C) Each player's strategy in a Nash equilibrium is the best possible strategy given the strategy of the other player. 
D) In order to arrive at a Nash equilibrium,it is necessary for both players to credibly commit to a course of action. 
A) At least one of the players need to have a dominant strategy to arrive at a Nash equilibrium. 
B) In a Nash equilibrium,one player has an incentive to change his strategy in order to increase his profit. 
C) Each player's strategy in a Nash equilibrium is the best possible strategy given the strategy of the other player. 
D) In order to arrive at a Nash equilibrium,it is necessary for both players to credibly commit to a course of action.

Question 12

Use the following table to answer the question : Table 15-1: payoff matrix shows the profits accruing to two firms,Company C and Company D,under different pricing strategies.In each cell,the figure on the left indicates Company C's payoff and the figure on the right indicates Company D's payoff.
 
-Refer to Table 15-1.If X = 135 and Y = 75,the method of iterated dominance can be used to conclude that company C's strategy of choosing a _____ price is dominated by a strategy of a _____ price.

Accepted Answer

A) high;low 
B) medium;low 
C) low;medium 
D) high;medium 
A) high;low 
B) medium;low 
C) low;medium 
D) high;medium

Question 13

Use the following table to answer the question : Table 15-1: shows the marginal cost [MC],marginal revenue [FH],and demand [FG] curves for a monopolist who faces constant costs.
Figure 15-1  
-Refer to Figure 15-1.The monopolist produces output equal to _____ in equilibrium.

Accepted Answer

A) Q2 
B) Q1 
C) Q3 
D) Q4 
A) Q2 
B) Q1 
C) Q3 
D) Q4

Question 14

Use the following table to answer the question : Table 15-3: shows the average cost [AC],marginal cost [MC],and demand [D] curves for a natural monopoly;Qi denotes quantity and Pi denotes price.  
-In Figure 15-3,under marginal-cost pricing,a firm would require a government subsidy of at least _____ to remain profitable.

Accepted Answer

A) P3CBP2 
B) P1AFP2 
C) P3CQ2O 
D) FBQ2Q1 
A) P3CBP2 
B) P1AFP2 
C) P3CQ2O 
D) FBQ2Q1

Question 15

Use the following table to answer the question : Table 15-3: shows the average cost [AC],marginal cost [MC],and demand [D] curves for a natural monopoly;Qi denotes quantity and Pi denotes price.  
-In Figure 15-3,if the maximum price allowed is P1,the firm will produce a quantity equal to_____.

Accepted Answer

A) Q1 
B) Q2 
C) Q3 
D) 0 
A) Q1 
B) Q2 
C) Q3 
D) 0

Question 16

Until 1992,WordPerfect® produced the dominant word processing system for the personal computer [PC] platform.After 1992,Microsoft's Word for Windows® dominated the PC platform,largely by offering consumers a better program at a much lower price.This example illustrates:

Accepted Answer

A) the dynamic view of a natural monopoly. 
B) the need for government regulation of a monopoly market. 
C) how a lack of competition produces instability in markets. 
D) the inefficiency of a monopoly in the word processing market. 
A) the dynamic view of a natural monopoly. 
B) the need for government regulation of a monopoly market. 
C) how a lack of competition produces instability in markets. 
D) the inefficiency of a monopoly in the word processing market.

Question 17

Suppose that at the competitive equilibrium,the elasticity of demand is 1.50.If the price under monopoly is 10 percent higher than under perfect competition,assuming identical cost curves,it can be concluded that the monopoly output is _____ percent below the competitive output.

Accepted Answer

A) 67 
B) 1.5 
C) 15 
D) 0.67 
A) 67 
B) 1.5 
C) 15 
D) 0.67

Question 18

Assume that Costco Chemicals is a chemical manufacturer located in the U.S.that serves almost the entire market.Based on Costco's market share,antitrust enforcement authorities allege that Costco has monopoly power and is exploiting this monopoly power at the cost of buyers.Assume that Costco hires you as a lawyer to present their case.How would you argue in favor of Costco?

Accepted Answer

It can be argued that Costco is a natura

Question 19

One of the practical difficulties in regulating a natural monopoly using average-cost pricing is:

Accepted Answer

A) that the average-cost pricing rule leads to losses which must be subsidized. 
B) that the price ceiling from average-cost pricing is likely to result in shortages. 
C) that the monopoly has no incentive to minimize costs. 
D) it will result in a surplus in the market leading to a drastic fall in the price. 
A) that the average-cost pricing rule leads to losses which must be subsidized. 
B) that the price ceiling from average-cost pricing is likely to result in shortages. 
C) that the monopoly has no incentive to minimize costs. 
D) it will result in a surplus in the market leading to a drastic fall in the price.

Question 20

For a natural monopoly where average cost declines after intersecting the demand curve,marginal-cost pricing would lead to:

Accepted Answer

A) a horizontal demand curve. 
B) a surplus and a consequent fall in price. 
C) an economic loss for the firm. 
D) a higher price than under average-cost pricing. 
A) a horizontal demand curve. 
B) a surplus and a consequent fall in price. 
C) an economic loss for the firm. 
D) a higher price than under average-cost pricing.

In most models of oligopoly _____.

Use the following table to answer the question : Table 15-3: shows the average cost [AC],marginal cost [MC],and demand [D] curves for a natural monopoly;Qi denotes quantity and Pi denotes price. -Refer to Figure 15-3.If the firm practices marginal-cost pricing,the equilibrium price would be _____.

Which of the following is not a problem associated with regulation of a natural monopoly?

When a company practices planned obsolescence,it _____.

Use the following table to answer the question : Table 15-3: shows the average cost [AC],marginal cost [MC],and demand [D] curves for a natural monopoly;Qi denotes quantity and Pi denotes price. -In Figure 15-3,if the maximum price allowed in the market is P₁,output levels below Q₁ will:

Use the following table to answer the question : Table 15-1: shows the marginal cost [MC],marginal revenue [FH],and demand [FG] curves for a monopolist who faces constant costs. Figure 15-1 -Refer to Figure 15-1.Under competitive conditions,what is the equilibrium price and output?

Which of the following is true of a Nash equilibrium?

Use the following table to answer the question : Table 15-1: shows the marginal cost [MC],marginal revenue [FH],and demand [FG] curves for a monopolist who faces constant costs. Figure 15-1 -Refer to Figure 15-1.The monopolist produces output equal to _____ in equilibrium.

Use the following table to answer the question : Table 15-3: shows the average cost [AC],marginal cost [MC],and demand [D] curves for a natural monopoly;Qi denotes quantity and Pi denotes price. -In Figure 15-3,if the maximum price allowed is P₁,the firm will produce a quantity equal to_____.

Until 1992,WordPerfect® produced the dominant word processing system for the personal computer [PC] platform.After 1992,Microsoft's Word for Windows® dominated the PC platform,largely by offering consumers a better program at a much lower price.This example illustrates:

Suppose that at the competitive equilibrium,the elasticity of demand is 1.50.If the price under monopoly is 10 percent higher than under perfect competition,assuming identical cost curves,it can be concluded that the monopoly output is _____ percent below the competitive output.

One of the practical difficulties in regulating a natural monopoly using average-cost pricing is:

For a natural monopoly where average cost declines after intersecting the demand curve,marginal-cost pricing would lead to:

An Introduction to Microeconomics

Supply and Demand

The Theory of Consumer Choice

Individual and Market Demand

Using Consumer Choice Theory

Exchange, Efficiency, and Prices

Production

The Cost of Production

Profit Maximization in Perfectly Competitive Markets

Using the Competitive Model

Monopoly

Product Pricing With Monopoly Power

Monopolistic Competition and Oligopoly

Game Theory and the Economics of Information

Employment and Pricing of Inputs

Wages, Rent, Interest, and Profit

Using Input Market Analysis

General Equilibrium Analysis and Economic Efficiency

Public Goods and Externalities

Filters

Exam 15: Using Noncompetitive Market Models

In most models of oligopoly _____.

Use the following table to answer the question : Table 15-3: shows the average cost [AC],marginal cost [MC],and demand [D] curves for a natural monopoly;Qi denotes quantity and Pi denotes price. -Refer to Figure 15-3.If the firm practices marginal-cost pricing,the equilibrium price would be _____.

Which of the following is not a problem associated with regulation of a natural monopoly?

When a company practices planned obsolescence,it _____.

Use the following table to answer the question : Table 15-3: shows the average cost [AC],marginal cost [MC],and demand [D] curves for a natural monopoly;Qi denotes quantity and Pi denotes price. -In Figure 15-3,if the maximum price allowed in the market is P1,output levels below Q1 will:

Use the following table to answer the question : Table 15-1: shows the marginal cost [MC],marginal revenue [FH],and demand [FG] curves for a monopolist who faces constant costs. Figure 15-1 -Refer to Figure 15-1.Under competitive conditions,what is the equilibrium price and output?

Which of the following is true of a Nash equilibrium?

Use the following table to answer the question : Table 15-1: shows the marginal cost [MC],marginal revenue [FH],and demand [FG] curves for a monopolist who faces constant costs. Figure 15-1 -Refer to Figure 15-1.The monopolist produces output equal to _____ in equilibrium.

Use the following table to answer the question : Table 15-3: shows the average cost [AC],marginal cost [MC],and demand [D] curves for a natural monopoly;Qi denotes quantity and Pi denotes price. -In Figure 15-3,if the maximum price allowed is P1,the firm will produce a quantity equal to_____.

Until 1992,WordPerfect® produced the dominant word processing system for the personal computer [PC] platform.After 1992,Microsoft's Word for Windows® dominated the PC platform,largely by offering consumers a better program at a much lower price.This example illustrates:

Suppose that at the competitive equilibrium,the elasticity of demand is 1.50.If the price under monopoly is 10 percent higher than under perfect competition,assuming identical cost curves,it can be concluded that the monopoly output is _____ percent below the competitive output.

One of the practical difficulties in regulating a natural monopoly using average-cost pricing is:

For a natural monopoly where average cost declines after intersecting the demand curve,marginal-cost pricing would lead to:

An Introduction to Microeconomics

Supply and Demand

The Theory of Consumer Choice

Individual and Market Demand

Using Consumer Choice Theory

Exchange, Efficiency, and Prices

Production

The Cost of Production

Profit Maximization in Perfectly Competitive Markets

Using the Competitive Model

Monopoly

Product Pricing With Monopoly Power

Monopolistic Competition and Oligopoly

Game Theory and the Economics of Information

Employment and Pricing of Inputs

Wages, Rent, Interest, and Profit

Using Input Market Analysis

General Equilibrium Analysis and Economic Efficiency

Public Goods and Externalities

Filters

Use the following table to answer the question : Table 15-3: shows the average cost [AC],marginal cost [MC],and demand [D] curves for a natural monopoly;Qi denotes quantity and Pi denotes price. -In Figure 15-3,if the maximum price allowed in the market is P₁,output levels below Q₁ will:

Use the following table to answer the question : Table 15-3: shows the average cost [AC],marginal cost [MC],and demand [D] curves for a natural monopoly;Qi denotes quantity and Pi denotes price. -In Figure 15-3,if the maximum price allowed is P₁,the firm will produce a quantity equal to_____.