Question 1

Oligopolies are able to earn more than "Normal" profit.

Accepted Answer

A) True 
 B)False  True

Question 2

Tactic collusion occurs when firms limit competition with one another.

Accepted Answer

A) True 
 B)False  True

Question 3

If your economics class was graded on a curve and everyone agrees to study only half as much, everyone would get the same grade that they otherwise would earn. You, however, will earn an A if you study more than the others, a C if you study the same amount as others, and an F if everyone else studies more than you. You don't like studying, but you'd rather study and get an A than get a C without studying, or study and get a C than get an F without studying. If everyone else is studying, what is it in your best interest to do?

Accepted Answer

A)  study and get a C 
B)  not study and get an F 
C)  drop the class 
D)  randomize over studying and not studying 
A)  study and get a C 
B)  not study and get an F 
C)  drop the class 
D)  randomize over studying and not studying A

Question 4

High prices maintained by a cartel usually make the cartel less successful because high price of the good:

Accepted Answer

A)  leads to more conservation. 
B)  motivates demand to switch to substitutes of the goods. 
C)  encourages a search for new supplies. 
D)  All of the answers are correct. 
A)  leads to more conservation. 
B)  motivates demand to switch to substitutes of the goods. 
C)  encourages a search for new supplies. 
D)  All of the answers are correct.

Question 5

The NBA and NCAA are examples of:

Accepted Answer

A)  a buyer's cartel, keeping the salaries of players lower than they would be in a competitive market. 
B)  monopolistically competitive markets. 
C)  natural resource monopolies. 
D)  markets with low barriers to entry. 
A)  a buyer's cartel, keeping the salaries of players lower than they would be in a competitive market. 
B)  monopolistically competitive markets. 
C)  natural resource monopolies. 
D)  markets with low barriers to entry.

Question 6

Cheaters in cartels make ________ profit when the other cartel members ________ their promise.

Accepted Answer

A)  more; break 
B)  less; keep 
C)  zero; break 
D)  more; keep 
A)  more; break 
B)  less; keep 
C)  zero; break 
D)  more; keep

Question 7

What are three reasons that cartels collapse? Provide an example of each.

Accepted Answer

There are three reasons cartels collapse

Question 8

Game theory is the study of independent decision making.

Accepted Answer

A) True 
 B)False

Question 9

A 2006 paper by Margeret Levenstein and Valerie Suslow ("What Determines Cartel Success?") found that although cheating is a common cause of why cartels broke down, the following causes are even more common: entering firms, the nature of the demand curve, growth of the industry, and difficulty of bargaining between conspirators. What other cause is also associated with bargaining difficulties?

Accepted Answer

A)  cheating 
B)  exiting firms 
C)  the nature of the industry 
D)  the nature of the supply curve 
A)  cheating 
B)  exiting firms 
C)  the nature of the industry 
D)  the nature of the supply curve

Question 10

How can the pursuit of market power lead to the social good?

Accepted Answer

A)  It always leads to the lowest prices for the customers. 
B)  It can lead to innovation. 
C)  It leads to less product differentiation. 
D)  It can lead to price discrimination. 
A)  It always leads to the lowest prices for the customers. 
B)  It can lead to innovation. 
C)  It leads to less product differentiation. 
D)  It can lead to price discrimination.

Question 11

Use the following to answer questions:
Figure: Demand 1  
-(Figure: Demand 1) A cartel facing the market in this diagram would try to cause industry output to:

Accepted Answer

A)  increase from 5 to 10. 
B)  increase from 3 to 6. 
C)  decrease from 6 to 3. 
D)  decrease from 5 to 2. 
A)  increase from 5 to 10. 
B)  increase from 3 to 6. 
C)  decrease from 6 to 3. 
D)  decrease from 5 to 2.

Question 12

All cartels and cartel-like behavior are illegal in the United States.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is NOT a reason why cartels collapse?

Accepted Answer

A)  cheating by the cartel members 
B)  new entrants and demand response 
C)  government prosecution 
D)  increasing production costs 
A)  cheating by the cartel members 
B)  new entrants and demand response 
C)  government prosecution 
D)  increasing production costs

Question 14

Which of the following explains why the NBA cartel is sustainable?

Accepted Answer

A)  Team owners make more money, but players make less money. 
B)  Access to the NBA league is the good that the cartel controls to keep its members from cheating 
C)  NBA games compete against other professional and collegiate sports. 
D)  Consumers benefit from the salary cap that prevents rich teams from buying up all the great players. 
A)  Team owners make more money, but players make less money. 
B)  Access to the NBA league is the good that the cartel controls to keep its members from cheating 
C)  NBA games compete against other professional and collegiate sports. 
D)  Consumers benefit from the salary cap that prevents rich teams from buying up all the great players.

Question 15

Copper is a natural resource. Why is the copper cartel not successful?

Accepted Answer

Because copper is available in

Question 16

The National Basketball Association is a:

Accepted Answer

A)  natural resource cartel. 
B)  fixed-cost cartel. 
C)  buyer's cartel. 
D)  player's cartel. 
A)  natural resource cartel. 
B)  fixed-cost cartel. 
C)  buyer's cartel. 
D)  player's cartel.

Question 17

Explain the impact of new entrants and consumer response on a cartel.

Accepted Answer

Cartel profits encourage new firms to en

Question 18

In the 1970s, the Department of Justice sued:

Accepted Answer

A)  MCI. 
B)  Sprint. 
C)  AT&T. 
D)  GTE 
A)  MCI. 
B)  Sprint. 
C)  AT&T. 
D)  GTE

Question 19

Which federal law makes most cartels in the United States illegal?

Accepted Answer

A)  Interstate Commerce Act of 1901 
B)  Federal Reserve Act of 1914 
C)  Supreme Court case Johnson v. J. P. Morgan 
D)  Sherman Antitrust Act of 1890 
A)  Interstate Commerce Act of 1901 
B)  Federal Reserve Act of 1914 
C)  Supreme Court case Johnson v. J. P. Morgan 
D)  Sherman Antitrust Act of 1890

Question 20

A strategy that has a higher payoff than any other strategy no matter what the other player does is called a:

Accepted Answer

A)  cartel strategy. 
B)  maximizing strategy. 
C)  valuable strategy. 
D)  dominant strategy. 
A)  cartel strategy. 
B)  maximizing strategy. 
C)  valuable strategy. 
D)  dominant strategy.

Exam 15: Oligopoly and Game Theory

Oligopolies are able to earn more than "Normal" profit.

Tactic collusion occurs when firms limit competition with one another.

High prices maintained by a cartel usually make the cartel less successful because high price of the good:

The NBA and NCAA are examples of:

Cheaters in cartels make ________ profit when the other cartel members ________ their promise.

What are three reasons that cartels collapse? Provide an example of each.

Game theory is the study of independent decision making.

How can the pursuit of market power lead to the social good?

Use the following to answer questions: Figure: Demand 1 -(Figure: Demand 1) A cartel facing the market in this diagram would try to cause industry output to:

All cartels and cartel-like behavior are illegal in the United States.

Which of the following is NOT a reason why cartels collapse?

Which of the following explains why the NBA cartel is sustainable?

Copper is a natural resource. Why is the copper cartel not successful?

The National Basketball Association is a:

Explain the impact of new entrants and consumer response on a cartel.

In the 1970s, the Department of Justice sued:

Which federal law makes most cartels in the United States illegal?

A strategy that has a higher payoff than any other strategy no matter what the other player does is called a:

The Big Ideas

The Power of Trade and Comparative

Supply and Demand

Equilibrium

Elasticity and Its Applications

Taxes and Subsidies

The Price System

Price Ceilings and Floors

International Trade

Externalities- When the Price Is Not Right

Costs and Profit Maximization Under Competition

Competition and the Invisible Hand

Monopoly

Price Discrimination

Competing for Monopoly

Monopolistic Competition and Advertising

Labor Markets

Public Goods and the Tragedy of the Commons

Political Economy and Public Choice

Economics, Ethics, and Public Policy

Managing Incentives

Stock Markets and Personal Finance

Price Discrimination

Consumer Choice

Filters

Cheaters in cartels make profit when the other cartel members their promise.