Deck 17: Oligopoly

Question 1

In the language of game theory, a situation in which each person must consider how others might respond to his or her own actions is called a

A) quantifiable situation.
B) cooperative situation.
C) strategic situation.
D) tactical situation.

Answer 1

C

Question 2

If two firms comprise the entire soft drink market, the market would be a(n)

A) Nash equilibrium.
B) monopolistically competitive market.
C) oligopolistically competitive market.
D) duopoly.

Answer 2

D

Question 3

Game theory is necessary to understand which kinds of markets? (i) perfectly competitive
(ii) monopolistically competitive
(iii) oligopoly
(iv) duopoly
(v) monopoly

A) (i) and (ii) only
B) (iii), (iv), and (v) only
C) (iii) and (iv) only
D) (i), (ii), (iii), (iv), and (v)

Answer 3

C

Question 4

If four firms comprise the entire golf club industry, the market would be

A) competitive.
B) characterized by interdependence of firms.
C) a duopoly.
D) a monopoly.

Question 5

In choosing among alternative courses of action, Raj must consider how others might respond to the action he takes. In the language of game theory, we say that Raj must think

A) openly.
B) strategically.
C) dominantly.
D) cooperatively.

Question 6

In which of the following markets are strategic interactions among firms most likely to occur?

A) markets to which patent and copyright laws apply
B) the market for piano lessons
C) the market for tennis balls
D) the market for corn

Question 7

Which of the following examples illustrates an oligopoly market?

A) a farmers' market with many individuals selling sweet corn and tomatoes
B) a city whose electrical service is provided by one electric co-operative
C) a city with two firms who are licensed to sell school uniforms for the local schools
D) a city with many independently-owned hair styling salons

Question 8

A special kind of imperfectly competitive market that has only two firms is called

A) a two-tier competitive structure.
B) an incidental monopoly.
C) a doublet.
D) a duopoly.

Question 9

Game theory is important for understanding which of the following market types?

A) perfectly competitive and oligopolistic markets
B) perfectly competitive markets but not oligopolistic markets
C) oligoplistic but not perfectly competitive markets
D) neither oligopolistic nor perfectly competitive markets.

Question 10

Which of the following statements is correct?

A) Strategic situations are more likely to arise when the number of decision-makers is very large rather than very small.
B) Strategic situations are more likely to arise in monopolistically competitive markets than in oligopolistic markets.
C) Game theory is useful in understanding certain business decisions, but it is not really applicable to ordinary games such as chess or tic-tac-toe.
D) Game theory is not necessary for understanding competitive or monopoly markets.

Question 11

In an oligopoly, each firm knows that its profits

A) depend only on how much output it produces.
B) depend only on how much output its rival firms produce.
C) depend on both how much output it produces and how much output its rival firms produce.
D) will be zero in the long run because of free entry.

Question 12

Game theory is necessary to understand which kinds of markets? (i) perfectly competitive
(ii) monopolistically competitive
(iii) oligopoly
(iv) duopoly
(v) monopoly

A) (i) and (ii) only
B) (iii), (iv), and (v) only
C) (iii) and (iv) only
D) (i), (ii), (iii), (iv), and (v)

Question 13

The simplest type of oligopoly is

A) monopoly.
B) duopoly.
C) monopolistic competition.
D) oligopolistic competition.

Question 14

We must be knowledgeable of how people behave in strategic situations if we are to understand

A) perfectly competitive markets.
B) monopolistically competitive markets.
C) oligopolistic markets.
D) All of the above are correct.

Question 15

Because oligopoly markets have only a few sellers, the actions of any one seller

A) do not affect other sellers in the market.
B) can have a large impact on the profits of other sellers in the market.
C) will affect how other firms behave in the market.
D) Both b and c are correct.

Question 16

In studying oligopolistic markets, economists assume that

A) there is no conflict or tension between cooperation and self-interest.
B) it is easy for a group of firms to cooperate and thereby establish and maintain a monopoly outcome.
C) each oligopolist cares only about its own profit.
D) strategic decisions do not play a role in such markets.

Question 17

Game theory is necessary to understand which kinds of markets?

A) monopoly
B) competitive
C) oligopoly
D) All of the above are correct.

Question 18

A distinguishing feature of an oligopolistic industry is the tension between

A) profit maximization and cost minimization.
B) cooperation and self interest.
C) producing a small amount of output and charging a price above marginal cost.
D) short-run decisions and long-run decisions.

Question 19

Which of the following statements about oligopolies is not correct?

A) An oligopolistic market has only a few sellers.
B) The actions of any one seller can have a large impact on the profits of all other sellers.
C) Oligopolistic firms are interdependent in a way that competitive firms are not.
D) Unlike monopolies and monopolistically competitive markets, oligopolies prices do not exceed their marginal revenues.

Question 20

In general, game theory is the study of

A) how people behave in strategic situations.
B) how people behave when the possible actions of other people are irrelevant.
C) oligopolistic markets.
D) all types of markets, including competitive markets, monopolistic markets, and oligopolistic markets.

Question 21

As the number of firms in an oligopoly increases, the

A) price approaches marginal cost, and the quantity approaches the socially efficient level.
B) price and quantity approach the monopoly levels.
C) price effect exceeds the output effect.
D) individual firms' profits increase.

Question 22

Table 17-1
Imagine a small town in which only two residents, Rochelle and Alec, own wells that produce safe drinking water. Each week Rochelle and Alec work together to decide how many gallons of water to pump. They bring the water to town and sell it at whatever price the market will bear. To keep things simple, suppose that Rochelle and Alec can pump as much water as they want without cost so that the marginal cost of water equals zero. The weekly town demand schedule and total revenue schedule for water is shown in the table below:
21.
Refer to Table 17-1. If the market for water were perfectly competitive instead of monopolistic, how many gallons of water would be produced and sold?

A) 0 gallons
B) 600 gallons
C) 900 gallons
D) 1,200 gallons

Question 23

Table 17-1
Imagine a small town in which only two residents, Rochelle and Alec, own wells that produce safe drinking water. Each week Rochelle and Alec work together to decide how many gallons of water to pump. They bring the water to town and sell it at whatever price the market will bear. To keep things simple, suppose that Rochelle and Alec can pump as much water as they want without cost so that the marginal cost of water equals zero. The weekly town demand schedule and total revenue schedule for water is shown in the table below:
21.
Refer to Table 17-1. Suppose the town enacts new antitrust laws that prohibit Rochelle and Alec from operating as a monopoly. What will be the price of water once Rochelle and Alec reach a Nash equilibrium?

A) $15
B) $20
C) $25
D) $30

Question 24

Suppose that Bieber and Rihanna are duopolists in the music industry. In May, they agree to work together as a monopolist, charging the monopoly price for their music and producing the monopoly quantity of songs. By June, each singer is considering breaking the agreement. What would you expect to happen next?

A) Bieber and Rihanna will determine that it is in each singer's self interest to maintain the agreement.
B) Bieber and Rihanna will each break the agreement. Both singers' profits will decrease.
C) Bieber and Rihanna will each break the agreement. Both singers' profits will increase.
D) Bieber and Rihanna will each break the agreement. The new equilibrium quantity of songs will increase, and the new equilibrium price also will increase.

Question 25

In markets characterized by oligopoly,

A) the oligopolists earn the highest profit when they cooperate and behave like a monopolist.
B) collusive agreements will always prevail.
C) collective profits are always lower with cartel arrangements than they are without cartel arrangements.
D) pursuit of self-interest by profit-maximizing firms always maximizes collective profits in the market.

Question 26

Because each oligopolist cares about its own profit rather than the collective profit of all the oligopolists together,

A) they are unable to maintain the same degree of monopoly power enjoyed by a monopolist.
B) each firm's profit always ends up being zero.
C) society is worse off as a result.
D) Both a and c are correct.

Question 27

Which of the following statements is correct?

A) When duopoly firms reach a Nash equilibrium, their combined level of output is the monopoly level of output.
B) When oligopoly firms collude, they are behaving as a cartel.
C) In an oligopoly, self-interest drives the market to the competitive outcome.
D) An oligopoly is an example of monopolistic competition.

Question 28

Table 17-1
Imagine a small town in which only two residents, Rochelle and Alec, own wells that produce safe drinking water. Each week Rochelle and Alec work together to decide how many gallons of water to pump. They bring the water to town and sell it at whatever price the market will bear. To keep things simple, suppose that Rochelle and Alec can pump as much water as they want without cost so that the marginal cost of water equals zero. The weekly town demand schedule and total revenue schedule for water is shown in the table below:
21.
Refer to Table 17-1. If Rochelle and Alec operate as a profit-maximizing monopoly in the market for water, how much profit will each of them earn?

A) $8,750
B) $9,000
C) $12,000
D) $18,000

Question 29

Table 17-1
Imagine a small town in which only two residents, Rochelle and Alec, own wells that produce safe drinking water. Each week Rochelle and Alec work together to decide how many gallons of water to pump. They bring the water to town and sell it at whatever price the market will bear. To keep things simple, suppose that Rochelle and Alec can pump as much water as they want without cost so that the marginal cost of water equals zero. The weekly town demand schedule and total revenue schedule for water is shown in the table below:
21.
Refer to Table 17-1. If Rochelle and Alec operate as a profit-maximizing monopoly in the market for water, how many gallons of water will be produced and sold?

A) 0
B) 500
C) 600
D) 1,200

Question 30

Table 17-1
Imagine a small town in which only two residents, Rochelle and Alec, own wells that produce safe drinking water. Each week Rochelle and Alec work together to decide how many gallons of water to pump. They bring the water to town and sell it at whatever price the market will bear. To keep things simple, suppose that Rochelle and Alec can pump as much water as they want without cost so that the marginal cost of water equals zero. The weekly town demand schedule and total revenue schedule for water is shown in the table below:
21.
Refer to Table 17-1. If this market for water were perfectly competitive instead of monopolistic, what price would be charged?

A) $0
B) $30
C) $40
D) $60

Question 31

Which of the following statements is correct?

A) If duopolists successfully collude, then their combined output will be equal to the output that would be observed if the market were a monopoly.
B) Although the logic of self­interest decreases a duopoly's price below the monopoly price, it does not push the duopolists to reach the competitive price.
C) Although the logic of self­interest increases a duopoly's level of output above the monopoly level, it does not push the duopolists to reach the competitive level.
D) All of the above are correct.

Question 32

If a certain market were a monopoly, then the monopolist would maximize its profit by producing 4,000 units of output. If, instead, that market were a duopoly, then which of the following outcomes would be most likely if the duopolists successfully collude?

A) Each duopolist produces 4,000 units of output.
B) Each duopolist produces 1,500 units of output.
C) One duopolist produces 2,400 units of output and the other produces 1,600 units of output.
D) One duopolist produces 3,000 units of output and the other produces 1,500 units of output.

Question 33

As a group, oligopolists would always be better off if they would act collectively

A) as if they were each seeking to maximize their own individual profits.
B) in a manner that would prohibit collusive agreements.
C) as a single monopolist.
D) as a single perfectly competitive firm.

Question 34

An agreement among firms in a market about quantities to produce or prices to charge is called

A) collusion.
B) Nash equilibrium
C) dominant strategy.
D) behavioral economics.

Question 35

As the number of sellers in an oligopoly becomes very large,

A) the quantity of output approaches the socially efficient quantity.
B) the price approaches marginal cost.
C) the price effect is diminished.
D) All of the above are correct.

Question 36

Table 17-1
Imagine a small town in which only two residents, Rochelle and Alec, own wells that produce safe drinking water. Each week Rochelle and Alec work together to decide how many gallons of water to pump. They bring the water to town and sell it at whatever price the market will bear. To keep things simple, suppose that Rochelle and Alec can pump as much water as they want without cost so that the marginal cost of water equals zero. The weekly town demand schedule and total revenue schedule for water is shown in the table below:
21.
Refer to Table 17-1. If Rochelle and Alec operate as a profit-maximizing monopoly in the market for water, what price will they charge?

A) $25
B) $30
C) $35
D) $40

Question 37

As the number of firms in an oligopoly increases, the magnitude of the

A) output effect increases.
B) output effect decreases.
C) price effect increases.
D) price effect decreases.

Question 38

Table 17-1
Imagine a small town in which only two residents, Rochelle and Alec, own wells that produce safe drinking water. Each week Rochelle and Alec work together to decide how many gallons of water to pump. They bring the water to town and sell it at whatever price the market will bear. To keep things simple, suppose that Rochelle and Alec can pump as much water as they want without cost so that the marginal cost of water equals zero. The weekly town demand schedule and total revenue schedule for water is shown in the table below:
21.
Refer to Table 17-1. What is the socially efficient quantity of water?

A) 0 gallons
B) 600 gallons
C) 900 gallons
D) 1,200 gallons

Question 39

As a group, oligopolists would always earn the highest profit if they would

A) produce the perfectly competitive quantity of output.
B) produce more than the perfectly competitive quantity of output.
C) charge the same price that a monopolist would charge if the market were a monopoly.
D) operate according to their own individual self-interests.

Question 40

An agreement between two duopolists to function as a monopolist usually breaks down because

A) they cannot agree on the price that a monopolist would charge.
B) they cannot agree on the output that a monopolist would produce.
C) each duopolist wants a larger share of the market to capture more profit.
D) each duopolist wants to charge a higher price than the monopoly price.

Question 41

Table 17-4
The table shows the town of Mauston's demand schedule for gasoline. For simplicity, assume the town's gasoline seller(s) incur no costs in selling gasoline.

Refer to Table 17-4. If the market for gasoline in Mauston is a monopoly, then the profit-maximizing monopolist will charge a price of

A) $7 and sell 150 gallons.
B) $5 and sell 250 gallons.
C) $3 and sell 350 gallons.
D) $0 and sell 500 gallons.

Question 42

Table 17-3
Imagine a small town in a remote area where only two residents, Maria and Miguel, own dairies that produce milk that is safe to drink. Each week Maria and Miguel work together to decide how many gallons of milk to produce. They bring milk to town and sell it at whatever price the market will bear. To keep things simple, suppose that Maria and Miguel can produce as much milk as they want without cost so that the marginal cost is zero. The weekly town demand schedule and total revenue schedule for milk is shown in the table below:

Refer to Table 17-3. Suppose the town enacts new antitrust laws that prohibit Maria and Miguel from operating as a monopoly. How much profit will Miguel and Maria each earn once they reach a Nash equilibrium?

A) $40
B) $36
C) $32
D) $30

Question 43

Table 17-3
Imagine a small town in a remote area where only two residents, Maria and Miguel, own dairies that produce milk that is safe to drink. Each week Maria and Miguel work together to decide how many gallons of milk to produce. They bring milk to town and sell it at whatever price the market will bear. To keep things simple, suppose that Maria and Miguel can produce as much milk as they want without cost so that the marginal cost is zero. The weekly town demand schedule and total revenue schedule for milk is shown in the table below:

Refer to Table 17-3. Suppose that Maria and Miguel work together in order to operate as a profit-maximizing monopolist. How many gallons of milk will be produced and sold?

A) 5 gallons
B) 6 gallons
C) 7 gallons
D) 8 gallons

Question 44

Table 17-5
The information in the table below shows the total demand for premium-channel digital cable TV subscriptions in a small urban market. Assume that each digital cable TV operator pays a fixed cost of $200,000 (per year) to provide premium digital channels in the market area and that the marginal cost of providing the premium channel service to a household is zero.

Refer to Table 17-5. If there is only one digital cable TV company in this market, what price would it charge for a premium digital channel subscription to maximize its profit?

A) $30
B) $60
C) $90
D) $150

Question 45

Table 17-4
The table shows the town of Mauston's demand schedule for gasoline. For simplicity, assume the town's gasoline seller(s) incur no costs in selling gasoline.

Refer to Table 17-4. If there are exactly four sellers of gasoline in Mauston and if they collude, then which of the following outcomes is most likely?

A) Each seller will sell 62.5 gallons and charge a price of $1.25.
B) Each seller will sell 62.5 gallons and charge a price of $5.
C) Each seller will sell 100 gallons and charge a price of $2.
D) Each seller will sell 250 gallons and charge a price of $0.

Question 46

Table 17-2
Imagine a small town in which only two residents, Abby and Brad, own wells that produce safe drinking water. Each week Abby and Brad work together to decide how many gallons of water to pump. They bring water to town and sell it at whatever price the market will bear. To keep things simple, suppose that Abby and Brad can pump as much water as they want without cost so that the marginal cost is zero. The weekly town demand schedule and total revenue schedule for water is shown in the table below:

Refer to Table 17-2. If this market for water were perfectly competitive instead of monopolistic, how many gallons of water would be produced and sold?

A) 12 gallons
B) 8 gallons
C) 6 gallons
D) 0 gallons

Question 47

Table 17-3
Imagine a small town in a remote area where only two residents, Maria and Miguel, own dairies that produce milk that is safe to drink. Each week Maria and Miguel work together to decide how many gallons of milk to produce. They bring milk to town and sell it at whatever price the market will bear. To keep things simple, suppose that Maria and Miguel can produce as much milk as they want without cost so that the marginal cost is zero. The weekly town demand schedule and total revenue schedule for milk is shown in the table below:

Refer to Table 17-3. Suppose the town enacts new antitrust laws that prohibit Maria and Miguel from operating as a monopoly. What will be the price of milk once Maria and Miguel reach a Nash equilibrium?

A) $14
B) $12
C) $10
D) $8

Question 48

Table 17-2
Imagine a small town in which only two residents, Abby and Brad, own wells that produce safe drinking water. Each week Abby and Brad work together to decide how many gallons of water to pump. They bring water to town and sell it at whatever price the market will bear. To keep things simple, suppose that Abby and Brad can pump as much water as they want without cost so that the marginal cost is zero. The weekly town demand schedule and total revenue schedule for water is shown in the table below:

Refer to Table 17-2. Suppose the town enacts new antitrust laws that prohibit Abby and Brad from operating as a monopoly. How much profit will Abby and Brad each earn once they reach a Nash equilibrium?

A) $36
B) $32
C) $18
D) $16

Question 49

Table 17-3
Imagine a small town in a remote area where only two residents, Maria and Miguel, own dairies that produce milk that is safe to drink. Each week Maria and Miguel work together to decide how many gallons of milk to produce. They bring milk to town and sell it at whatever price the market will bear. To keep things simple, suppose that Maria and Miguel can produce as much milk as they want without cost so that the marginal cost is zero. The weekly town demand schedule and total revenue schedule for milk is shown in the table below:

Refer to Table 17-3. Suppose that Maria and Miguel work together in order to operate as a profit-maximizing monopolist. What price will they charge for milk?

A) $14
B) $12
C) $10
D) $8

Question 50

Table 17-4
The table shows the town of Mauston's demand schedule for gasoline. For simplicity, assume the town's gasoline seller(s) incur no costs in selling gasoline.

Refer to Table 17-4. If the market for gasoline in Mauston is perfectly competitive, then the equilibrium price of gasoline is

A) $7 and the equilibrium quantity is 150 gallons.
B) $5 and the equilibrium quantity is 250 gallons.
C) $3 and the equilibrium quantity is 350 gallons.
D) $0 and the equilibrium quantity is 500 gallons.

Question 51

Table 17-5
The information in the table below shows the total demand for premium-channel digital cable TV subscriptions in a small urban market. Assume that each digital cable TV operator pays a fixed cost of $200,000 (per year) to provide premium digital channels in the market area and that the marginal cost of providing the premium channel service to a household is zero.

Refer to Table 17-5. Assume there are two digital cable TV companies operating in this market. If they are able to collude on the quantity of subscriptions that will be sold and on the price that will be charged for subscriptions, then their agreement will stipulate that

A) each firm will charge a price of $90 and each firm will sell 4,500 subscriptions.
B) each firm will charge a price of $90 and each firm will sell 9,000 subscriptions.
C) each firm will charge a price of $120 and each firm will sell 3,000 subscriptions.
D) each firm will charge a price of $150 and each firm will sell 1,500 subscriptions.

Question 52

Table 17-2
Imagine a small town in which only two residents, Abby and Brad, own wells that produce safe drinking water. Each week Abby and Brad work together to decide how many gallons of water to pump. They bring water to town and sell it at whatever price the market will bear. To keep things simple, suppose that Abby and Brad can pump as much water as they want without cost so that the marginal cost is zero. The weekly town demand schedule and total revenue schedule for water is shown in the table below:

Refer to Table 17-2. Suppose that Abby and Brad work together to operate as a profit-maximizing monopolist. What price will they charge for water?

A) $8
B) $7
C) $6
D) $4

Question 53

Table 17-2
Imagine a small town in which only two residents, Abby and Brad, own wells that produce safe drinking water. Each week Abby and Brad work together to decide how many gallons of water to pump. They bring water to town and sell it at whatever price the market will bear. To keep things simple, suppose that Abby and Brad can pump as much water as they want without cost so that the marginal cost is zero. The weekly town demand schedule and total revenue schedule for water is shown in the table below:

Refer to Table 17-2. Suppose the town enacts new antitrust laws that prohibit Abby and Brad from operating as a monopoly. What will be the price of water once Abby and Brad reach a Nash equilibrium?

A) $12
B) $8
C) $6
D) $4

Question 54

Table 17-3
Imagine a small town in a remote area where only two residents, Maria and Miguel, own dairies that produce milk that is safe to drink. Each week Maria and Miguel work together to decide how many gallons of milk to produce. They bring milk to town and sell it at whatever price the market will bear. To keep things simple, suppose that Maria and Miguel can produce as much milk as they want without cost so that the marginal cost is zero. The weekly town demand schedule and total revenue schedule for milk is shown in the table below:

Refer to Table 17-3. If this market for milk were perfectly competitive instead of monopolistic, what would be the price for milk?

A) $0
B) $10
C) $12
D) $16

Question 55

Table 17-2
Imagine a small town in which only two residents, Abby and Brad, own wells that produce safe drinking water. Each week Abby and Brad work together to decide how many gallons of water to pump. They bring water to town and sell it at whatever price the market will bear. To keep things simple, suppose that Abby and Brad can pump as much water as they want without cost so that the marginal cost is zero. The weekly town demand schedule and total revenue schedule for water is shown in the table below:

Refer to Table 17-2. Suppose that Abby and Brad work together to operate as a profit-maximizing monopolist. How many gallons of water will be produced and sold?

A) 4 gallons
B) 5 gallons
C) 6 gallons
D) 8 gallons

Question 56

Table 17-4
The table shows the town of Mauston's demand schedule for gasoline. For simplicity, assume the town's gasoline seller(s) incur no costs in selling gasoline.

Refer to Table 17-4. If there are exactly two sellers of gasoline in Mauston and if they collude, then which of the following outcomes is most likely?

A) Each seller will sell 250 gallons and charge a price of $5.
B) Each seller will sell 175 gallons and charge a price of $3.
C) Each seller will sell 125 gallons and charge a price of $2.5.
D) Each seller will sell 125 gallons and charge a price of $5.

Question 57

Table 17-4
The table shows the town of Mauston's demand schedule for gasoline. For simplicity, assume the town's gasoline seller(s) incur no costs in selling gasoline.

Refer to Table 17-4. Suppose there are exactly two sellers of gasoline in Mauston: Shellon and Standstop. If Shellon sells 150 gallons and Standstop sells 200 gallons, then

A) Shellon's profit is $450 and Standstop's profit is $600.
B) Shellon's profit is $1,050 and Standstop's profit is $1,200.
C) the two firms are colluding and earn monopoly profits.
D) consumers in Mauston are worse off than they would be if the two firms colluded.

Question 58

Table 17-1
Imagine a small town in which only two residents, Rochelle and Alec, own wells that produce safe drinking water. Each week Rochelle and Alec work together to decide how many gallons of water to pump. They bring the water to town and sell it at whatever price the market will bear. To keep things simple, suppose that Rochelle and Alec can pump as much water as they want without cost so that the marginal cost of water equals zero. The weekly town demand schedule and total revenue schedule for water is shown in the table below:
21.
Refer to Table 17-1. Suppose the town enacts new antitrust laws that prohibit Rochelle and Alec from operating as a monopoly. How many gallons of water will be produced and sold once Rochelle and Alec reach a Nash equilibrium?

A) 600
B) 700
C) 800
D) 900

Question 59

Table 17-3
Imagine a small town in a remote area where only two residents, Maria and Miguel, own dairies that produce milk that is safe to drink. Each week Maria and Miguel work together to decide how many gallons of milk to produce. They bring milk to town and sell it at whatever price the market will bear. To keep things simple, suppose that Maria and Miguel can produce as much milk as they want without cost so that the marginal cost is zero. The weekly town demand schedule and total revenue schedule for milk is shown in the table below:

Refer to Table 17-3. If this market for milk were perfectly competitive instead of monopolistic, how many gallons of milk would be produced and sold?

A) 12 gallons
B) 8 gallons
C) 6 gallons
D) 0 gallons

Question 60

Table 17-2
Imagine a small town in which only two residents, Abby and Brad, own wells that produce safe drinking water. Each week Abby and Brad work together to decide how many gallons of water to pump. They bring water to town and sell it at whatever price the market will bear. To keep things simple, suppose that Abby and Brad can pump as much water as they want without cost so that the marginal cost is zero. The weekly town demand schedule and total revenue schedule for water is shown in the table below:

Refer to Table 17-2. If this market for water were perfectly competitive instead of monopolistic, what would be the price for water?

A) $0
B) $4
C) $6
D) $12

Question 61

Table 17-6
Imagine a small town in which only two residents, Kunal and Naj, own wells that produce safe drinking water. Each week Kunal and Naj work together to decide how many gallons of water to pump, to bring the water to town, and to sell it at whatever price the market will bear. Assume Kunal and Naj can pump as much water as they want without cost so that the marginal cost of water equals zero.
The weekly town demand schedule and total revenue schedule for water are shown in the table below.

Refer to Table 17-6. Suppose the town enacts new antitrust laws that prohibit Kunal and Naj from operating as a monopolist. What will quantity of water will each of them produce once the Nash equilibrium is reached?

A) Each will produce 50 gallons, for a total of 100 gallons.
B) Each will produce 75 gallons, for a total of 150 gallons.
C) Each will produce 100 gallons, for a total of 200 gallons.
D) Each will produce 125 gallons, for a total of 250 gallons.

Question 62

Table 17-7
The information in the table below shows the total demand for internet radio subscriptions in a small urban market. Assume that each company that provides these subscriptions incurs an annual fixed cost of $20,000 (per year) and that the marginal cost of providing an additional subscription is always $16.

Refer to Table 17-7. Assume that there are two profit-maximizing internet radio providers operating in this market. Further assume that they are not able to collude on the price and quantity of subscriptions to sell. How much profit will each firm earn when this market reaches a Nash equilibrium?

A) $12,000
B) $16,000
C) $52,000
D) $64,000

Question 63

Table 17-7
The information in the table below shows the total demand for internet radio subscriptions in a small urban market. Assume that each company that provides these subscriptions incurs an annual fixed cost of $20,000 (per year) and that the marginal cost of providing an additional subscription is always $16.

Refer to Table 17-7. Suppose there is only one internet radio provider in this market and it seeks to maximize its profit. The company will

A) sell 2,000 subscriptions and charge a price of $48 for each subscription.
B) sell 3,000 subscriptions and charge a price of $40 for each subscription.
C) sell 4,000 subscriptions and charge a price of $32 for each subscription.
D) sell 5,000 subscriptions and charge a price of $24 for each subscription.

Question 64

Table 17-7
The information in the table below shows the total demand for internet radio subscriptions in a small urban market. Assume that each company that provides these subscriptions incurs an annual fixed cost of $20,000 (per year) and that the marginal cost of providing an additional subscription is always $16.

Refer to Table 17-7. Assume there are two internet radio providers that operate in this market. If they are able to collude on the quantity of subscriptions that will be sold and on the price that will be charged for subscriptions, then their agreement will stipulate that

A) each firm will charge a price of $40 and each firm will sell 3,000 subscriptions.
B) each firm will charge a price of $40 and each firm will sell 1,500 subscriptions.
C) each firm will charge a price of $32 and each firm will sell 2,000 subscriptions.
D) each firm will charge a price of $20 and each firm will sell 3,000 subscriptions.

Question 65

Table 17-6
Imagine a small town in which only two residents, Kunal and Naj, own wells that produce safe drinking water. Each week Kunal and Naj work together to decide how many gallons of water to pump, to bring the water to town, and to sell it at whatever price the market will bear. Assume Kunal and Naj can pump as much water as they want without cost so that the marginal cost of water equals zero.
The weekly town demand schedule and total revenue schedule for water are shown in the table below.

Refer to Table 17-6. Since Kunal and Naj operate as a profit-maximizing monopoly in the market for water, what price will they charge for water?

A) $2
B) $4
C) $6
D) $7

Question 66

Table 17-7
The information in the table below shows the total demand for internet radio subscriptions in a small urban market. Assume that each company that provides these subscriptions incurs an annual fixed cost of $20,000 (per year) and that the marginal cost of providing an additional subscription is always $16.

Refer to Table 17-7. Assume there are two profit-maximizing internet radio providers operating in this market. Further assume that they are not able to collude on the price and quantity of subscriptions to sell. How many subscriptions will be sold altogether when this market reaches a Nash equilibrium?

A) 2,000
B) 3,000
C) 4,000
D) 5,000

Question 67

Table 17-7
The information in the table below shows the total demand for internet radio subscriptions in a small urban market. Assume that each company that provides these subscriptions incurs an annual fixed cost of $20,000 (per year) and that the marginal cost of providing an additional subscription is always $16.

Refer to Table 17-7. The socially efficient level of output supplied to this market is

A) 4,000
B) 5,000
C) 6,000
D) 8,000

Question 68

Table 17-6
Imagine a small town in which only two residents, Kunal and Naj, own wells that produce safe drinking water. Each week Kunal and Naj work together to decide how many gallons of water to pump, to bring the water to town, and to sell it at whatever price the market will bear. Assume Kunal and Naj can pump as much water as they want without cost so that the marginal cost of water equals zero.
The weekly town demand schedule and total revenue schedule for water are shown in the table below.

Refer to Table 17-6. If the market for water were perfectly competitive instead of monopolistic, how many gallons of water would be produced and sold?

A) 25
B) 100
C) 200
D) 300

Question 69

Table 17-5
The information in the table below shows the total demand for premium-channel digital cable TV subscriptions in a small urban market. Assume that each digital cable TV operator pays a fixed cost of $200,000 (per year) to provide premium digital channels in the market area and that the marginal cost of providing the premium channel service to a household is zero.

Refer to Table 17-5. Assume there are two profit-maximizing digital cable TV companies operating in this market. Further assume that they are not able to collude on the price and quantity of premium digital channel subscriptions to sell. How many premium digital channel cable TV subscriptions will be sold altogether when this market reaches a Nash equilibrium?

A) 6,000
B) 9,000
C) 12,000
D) 15,000

Question 70

Table 17-7
The information in the table below shows the total demand for internet radio subscriptions in a small urban market. Assume that each company that provides these subscriptions incurs an annual fixed cost of $20,000 (per year) and that the marginal cost of providing an additional subscription is always $16.

Refer to Table 17-7. Assume there are two profit-maximizing internet radio providers operating in this market. Further assume that they are able to collude on the quantity of subscriptions that will be sold and on the price that will be charged for subscriptions. If the firms divide the market evenly, how much profit will each company earn?

A) $12,000
B) $16,000
C) $44,000
D) $60,000

Question 71

Table 17-5
The information in the table below shows the total demand for premium-channel digital cable TV subscriptions in a small urban market. Assume that each digital cable TV operator pays a fixed cost of $200,000 (per year) to provide premium digital channels in the market area and that the marginal cost of providing the premium channel service to a household is zero.

Refer to Table 17-5. Assume there are two profit-maximizing digital cable TV companies operating in this market. Further assume that they are able to collude on the quantity of subscriptions that will be sold and on the price that will be charged for subscriptions. How much profit will each company earn?

A) $610,000
B) $550,000
C) $405,000
D) $205,000

Question 72

Table 17-5
The information in the table below shows the total demand for premium-channel digital cable TV subscriptions in a small urban market. Assume that each digital cable TV operator pays a fixed cost of $200,000 (per year) to provide premium digital channels in the market area and that the marginal cost of providing the premium channel service to a household is zero.

Refer to Table 17-5. Assume that there are two profit-maximizing digital cable TV companies operating in this market. Further assume that they are not able to collude on the price and quantity of premium digital channel subscriptions to sell. How much profit will each firm earn when this market reaches a Nash equilibrium?

A) $25,000
B) $90,000
C) $160,000
D) $215,000

Question 73

Table 17-8
For a certain small town, the table shows the demand schedule for water. Assume the marginal cost of supplying water is constant at $4 per bottle.

Refer to Table 17-8. If there were only one supplier of water, what would be the price and quantity?

A) The price would be $7 per gallon and the quantity would be 600 gallons.
B) The price would be $6 per gallon and the quantity would be 800 gallons.
C) The price would be $5 per gallon and the quantity would be 1000 gallons.
D) The price would be $4 per gallon and the quantity would be 1200 gallons.

Question 74

Table 17-7
The information in the table below shows the total demand for internet radio subscriptions in a small urban market. Assume that each company that provides these subscriptions incurs an annual fixed cost of $20,000 (per year) and that the marginal cost of providing an additional subscription is always $16.

Refer to Table 17-7. Assume there are two profit-maximizing internet radio providers operating in this market. Further assume that they are not able to collude on the price and quantity of subscriptions to sell. What price will they charge for a subscription when this market reaches a Nash equilibrium?

A) $24
B) $32
C) $40
D) $48

Question 75

Table 17-6
Imagine a small town in which only two residents, Kunal and Naj, own wells that produce safe drinking water. Each week Kunal and Naj work together to decide how many gallons of water to pump, to bring the water to town, and to sell it at whatever price the market will bear. Assume Kunal and Naj can pump as much water as they want without cost so that the marginal cost of water equals zero.
The weekly town demand schedule and total revenue schedule for water are shown in the table below.

Refer to Table 17-6. Suppose the town enacts new antitrust laws that prohibit Kunal and Naj from operating as a monopolist. What will the new price of water be once the Nash equilibrium is reached?

A) $3
B) $4
C) $5
D) $6

Question 76

Table 17-6
Imagine a small town in which only two residents, Kunal and Naj, own wells that produce safe drinking water. Each week Kunal and Naj work together to decide how many gallons of water to pump, to bring the water to town, and to sell it at whatever price the market will bear. Assume Kunal and Naj can pump as much water as they want without cost so that the marginal cost of water equals zero.
The weekly town demand schedule and total revenue schedule for water are shown in the table below.

Refer to Table 17-6. As long as Kunal and Naj operate as a profit-maximizing monopoly, what will their combined weekly revenue amount to?

A) $450
B) $675
C) $875
D) $900

Question 77

Table 17-5
The information in the table below shows the total demand for premium-channel digital cable TV subscriptions in a small urban market. Assume that each digital cable TV operator pays a fixed cost of $200,000 (per year) to provide premium digital channels in the market area and that the marginal cost of providing the premium channel service to a household is zero.

Refer to Table 17-5. Assume there are two profit-maximizing digital cable TV companies operating in this market. Further assume that they are not able to collude on the price and quantity of premium digital channel subscriptions to sell. What price will premium digital channel cable TV subscriptions be sold at when this market reaches a Nash equilibrium?

A) $30
B) $60
C) $90
D) $120

Question 78

Table 17-8
For a certain small town, the table shows the demand schedule for water. Assume the marginal cost of supplying water is constant at $4 per bottle.

Refer to Table 17-8. If there were many suppliers of bottled water, what would be the price and quantity?

A) The price would be $6 per gallon and the quantity would be 800 gallons.
B) The price would be $5 per gallon and the quantity would be 1000 gallons.
C) The price would be $4 per gallon and the quantity would be 1200 gallons.
D) The price would be $3 per gallon and the quantity would be 1400 gallons.

Question 79

Table 17-6
Imagine a small town in which only two residents, Kunal and Naj, own wells that produce safe drinking water. Each week Kunal and Naj work together to decide how many gallons of water to pump, to bring the water to town, and to sell it at whatever price the market will bear. Assume Kunal and Naj can pump as much water as they want without cost so that the marginal cost of water equals zero.
The weekly town demand schedule and total revenue schedule for water are shown in the table below.

Refer to Table 17-6. The socially efficient level of water supplied to the market would be

A) 50 gallons.
B) 150 gallons.
C) 225 gallons.
D) 300 gallons.

Question 80

Table 17-6
Imagine a small town in which only two residents, Kunal and Naj, own wells that produce safe drinking water. Each week Kunal and Naj work together to decide how many gallons of water to pump, to bring the water to town, and to sell it at whatever price the market will bear. Assume Kunal and Naj can pump as much water as they want without cost so that the marginal cost of water equals zero.
The weekly town demand schedule and total revenue schedule for water are shown in the table below.

Refer to Table 17-6. Suppose the town enacts new antitrust laws that prohibit Kunal and Naj from operating as a monopolist. Once the Nash equilibrium is reached, how much profit will each producer earn?

A) $400.00
B) $437.50
C) $450.00
D) $800.00