Question 1

Government policy toward cartels and oligopolies typically leads to all of the following, EXCEPT:

Accepted Answer

A)  higher prices. 
B)  more innovation. 
C)  lower quality. 
D)  lower output. 
A)  higher prices. 
B)  more innovation. 
C)  lower quality. 
D)  lower output.

Question 2

There was a dramatic increase in the price of oil in:

Accepted Answer

A)  the early 1970s. 
B)  the early 1980s. 
C)  the early 1990s. 
D)  the late 1990s. 
A)  the early 1970s. 
B)  the early 1980s. 
C)  the early 1990s. 
D)  the late 1990s.

Question 3

Within a cartel, cheating is often a(n) ______ strategy.

Accepted Answer

A)  dominated 
B)  dominant 
C)  unused 
D)  unavailable 
A)  dominated 
B)  dominant 
C)  unused 
D)  unavailable

Question 4

Cartels are:

Accepted Answer

A)  extremely powerful and able to keep prices and profits high indefinitely. 
B)  unstable and tend to lose market power over time. 
C)  like monopolies that try to earn normal or competitive profits. 
D)  firms that face perfectly elastic demand curves and increase profits by restricting output and raising prices. 
A)  extremely powerful and able to keep prices and profits high indefinitely. 
B)  unstable and tend to lose market power over time. 
C)  like monopolies that try to earn normal or competitive profits. 
D)  firms that face perfectly elastic demand curves and increase profits by restricting output and raising prices.

Question 5

If most cartel members keep their agreement to cut back production:

Accepted Answer

A)  it's not profitable in the short run for another member to increase production. 
B)  it's profitable in the short run for another member to increase production. 
C)  cheating by another member won't be detected. 
D)  the losses associated with cheating are internalized by the cheater. 
A)  it's not profitable in the short run for another member to increase production. 
B)  it's profitable in the short run for another member to increase production. 
C)  cheating by another member won't be detected. 
D)  the losses associated with cheating are internalized by the cheater.

Question 6

List the four most common "Barriers to Entry" for oligopolies.

Accepted Answer

1. Control over a key resource

Question 7

The more firms there are in an oligopolistic market, the closer prices will be to monopoly levels.

Accepted Answer

A) True 
 B)False

Question 8

What are some reasons why cartels could fail?

Accepted Answer

Cheating by the cartel members

Question 9

The NBA is a like a cartel because:

Accepted Answer

A)  the owners use the NBA league structure to collectively restrict the salaries of players. 
B)  it is the most popular professional sport. 
C)  ticket prices are high. 
D)  teams use average cost pricing. 
A)  the owners use the NBA league structure to collectively restrict the salaries of players. 
B)  it is the most popular professional sport. 
C)  ticket prices are high. 
D)  teams use average cost pricing.

Question 10

The prisoner's dilemma describes a scenario in which each player, acting out of self-interest, will make a decision that results in all players being worse off.

Accepted Answer

A) True 
 B)False

Question 11

Game theory is the study of:

Accepted Answer

A)  strategic decision making. 
B)  strategies involved in board games, such as Monopoly. 
C)  theories of hunting big game. 
D)  strategies to play Sudoku. 
A)  strategic decision making. 
B)  strategies involved in board games, such as Monopoly. 
C)  theories of hunting big game. 
D)  strategies to play Sudoku.

Question 12

If women conspired together and demanded that any man wishing to take them on a date must take them to a nice restaurant, why would this be unsustainable?

Accepted Answer

A)  Some women will secretly allow guys to take them to cheaper restaurants. 
B)  Some women will cheat on their boyfriends to go out to nice restaurants. 
C)  Some men will cheat and take dates out to an even more expensive restaurant than is required. 
D)  The government will arrest all women for conspiring against the public. 
A)  Some women will secretly allow guys to take them to cheaper restaurants. 
B)  Some women will cheat on their boyfriends to go out to nice restaurants. 
C)  Some men will cheat and take dates out to an even more expensive restaurant than is required. 
D)  The government will arrest all women for conspiring against the public.

Question 13

When all members of a cartel cheat, the cartel:

Accepted Answer

A)  earns monopoly profits. 
B)  fails to earn monopoly profits. 
C)  cannot profit. 
D)  may or may not earn monopoly profits. 
A)  earns monopoly profits. 
B)  fails to earn monopoly profits. 
C)  cannot profit. 
D)  may or may not earn monopoly profits.

Question 14

Oligopolies are large dominant firms that can influence the industry output but not the industry price.

Accepted Answer

A) True 
 B)False

Question 15

One reason cartels have limited power is that demand curves become:

Accepted Answer

A)  less elastic over time. 
B)  more elastic over time. 
C)  fragmented over time. 
D)  stable once the cartel is established. 
A)  less elastic over time. 
B)  more elastic over time. 
C)  fragmented over time. 
D)  stable once the cartel is established.

Question 16

Loyalty programs, such as frequent flyer programs:
I. are a form of price discrimination.
II. save money for the consumer.
III. sometimes encourage customers to pay higher prices.

Accepted Answer

A)  I only 
B)  II only 
C)  I and III only 
D)  I, II, and III 
A)  I only 
B)  II only 
C)  I and III only 
D)  I, II, and III

Question 17

Barriers to entry include:

Accepted Answer

A)  control over a key resource or input. 
B)  economies of scale. 
C)  government barriers. 
D)  They are all barriers to entry. 
A)  control over a key resource or input. 
B)  economies of scale. 
C)  government barriers. 
D)  They are all barriers to entry.

Question 18

A cartel is a group of suppliers who try to create greater competition among their industry.

Accepted Answer

A) True 
 B)False

Question 19

Without knowing the specifics of an industry, it is difficult to know the correct oligopoly model to apply.

Accepted Answer

A) True 
 B)False

Question 20

Businesses can increase their incentives to lower prices by using loyalty plans.

Accepted Answer

A) True 
 B)False

Exam 15: Oligopoly and Game Theory

Government policy toward cartels and oligopolies typically leads to all of the following, EXCEPT:

There was a dramatic increase in the price of oil in:

Within a cartel, cheating is often a(n) ______ strategy.

Cartels are:

If most cartel members keep their agreement to cut back production:

List the four most common "Barriers to Entry" for oligopolies.

The more firms there are in an oligopolistic market, the closer prices will be to monopoly levels.

What are some reasons why cartels could fail?

The NBA is a like a cartel because:

The prisoner's dilemma describes a scenario in which each player, acting out of self-interest, will make a decision that results in all players being worse off.

Game theory is the study of:

If women conspired together and demanded that any man wishing to take them on a date must take them to a nice restaurant, why would this be unsustainable?

When all members of a cartel cheat, the cartel:

Oligopolies are large dominant firms that can influence the industry output but not the industry price.

One reason cartels have limited power is that demand curves become:

Loyalty programs, such as frequent flyer programs: I. are a form of price discrimination. II. save money for the consumer. III. sometimes encourage customers to pay higher prices.

Barriers to entry include:

A cartel is a group of suppliers who try to create greater competition among their industry.

Without knowing the specifics of an industry, it is difficult to know the correct oligopoly model to apply.

Businesses can increase their incentives to lower prices by using loyalty plans.

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

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