Deck 13: Oligopoly and Strategic Behavior

Question 1

Economists measure oligopoly power present in an industry by using

A) capital ratios.
B) concentration ratios.
C) reserve ratios.
D) inequality ratios.
E) competition ratios.

Answer 1

concentration ratios.

Question 2

The following table shows the total dollar amount of sales in 2012 for the four largest firms in the adhesive manufacturing industry.Total industry sales in 2012 were $782,000.Use this table to answer the following questions:

If Glues R Us split into two separate companies,the concentration ratio would ________ and the market price of adhesive would likely ________.

A) increase; fall
B) increase; rise
C) decrease; not change
D) decrease; fall
E) decrease; rise

Answer 2

decrease; fall

Question 3

The following table shows the total dollar amount of sales in 2012 for the four largest firms in the adhesive manufacturing industry.Total industry sales in 2012 were $782,000.Use this table to answer the following questions:

The four-firm concentration ratio in this industry is __________ percent.

A) 20
B) 40
C) 60
D) 80
E) 100

Answer 3

80

Question 4

Which of the following have greater incentives to collude and to form cartels in an effort to achieve monopoly-like profits?

A) monopolists
B) workers in a competitive labor market
C) monopolistic competitors
D) firms in a perfectly competitive market
E) oligopolists

Question 5

The following table shows the four-firm concentration ratios for five separate industries.Use this table to answer the following questions:

In which industry do the four largest firms collectively have the most market power?

A) beer brewing
B) breakfast cereals
C) chocolate confections
D) adhesive manufacturing
E) plastics product manufacturing

Question 6

Which of the following industries is most likely an oligopoly?

A) wheat
B) construction
C) cell phone
D) computer repair
E) house painting

Question 7

Which of the following industries is most likely an oligopoly?

A) restaurant
B) airline
C) gold mining
D) wheat growing
E) potato growing

Question 8

Like a pure monopoly,an oligopoly is characterized by

A) free entry and exit in the long run.
B) free entry and exit in the short run.
C) significant barriers to entry.
D) all firms in the market producing the socially efficient level of output in the long run.
E) a single firm selling a product with no close substitutes.

Question 9

The following table shows the dollar amount of sales in 2016 for the four largest firms in the above-ground pool industry.Total industry sales in 2016 were $467,000.Use this table to answer the following questions:

The four-firm concentration ratio in this industry is __________ percent.

A) 24
B) 41
C) 62
D) 78
E) 94

Question 10

The Organization of Petroleum Exporting Countries (OPEC)is considered a cartel by economists because the

A) firms agree to restrict output in order to increase prices and profits.
B) firms are controlled by the government.
C) firms in the cartel sell a homogenous (undifferentiated product).
D) firms sell a product with few substitutes.
E) organization is international and thus not subject to antitrust laws.

Question 11

The following table shows the four-firm concentration ratios for five separate industries.Use this table to answer the following questions:

In which two industries is market power the most concentrated?

A) beer brewing and adhesive manufacturing
B) breakfast cereals and adhesive manufacturing
C) chocolate confections and adhesive manufacturing
D) adhesive manufacturing and plastics product manufacturing
E) beer brewing and breakfast cereals

Question 12

A monopolistically competitive market consists of ________ seller(s),an oligopoly consists of ________ seller(s),and a monopoly consists of one seller.

A) one; many
B) one; two
C) a few; many
D) many; one
E) many; a few

Question 13

A firm operating in an oligopolistic market has ________ market power compared to a ________.

A) less; firm operating in a perfectly competitive market
B) the same amount of; firm operating in a perfectly competitive market
C) less; monopolist
D) the same amount of; monopolist
E) more; monopolist

Question 14

Being part of a cartel is generally good for a firm because it can reduce output while increasing prices and profits.Yet most cartels have failed.Why is this the case?

A) Cartels lack a dominant strategy.
B) As the cartel becomes more profitable,competition increases.
C) Cartel members dislike having to equally share profits.
D) Each member of the cartel faces an incentive to cheat and produce more,while all of the other members honor the agreement.
E) Cartel members eventually go out of business.

Question 15

The following table shows the four-firm concentration ratios for five separate industries.Use this table to answer the following questions:

In which industry do the four largest firms collectively have the least market power?

A) beer brewing
B) breakfast cereals
C) chocolate confections
D) adhesive manufacturing
E) plastics product manufacturing

Question 16

When two or more firms set prices or quantities in unison,economists refer to them as a

A) cartel.
B) monopoly.
C) monopolistically competitive market.
D) perfectly competitive market.
E) predatory pricing unit.

Question 17

Which of the following is NOT a characteristic of an oligopoly?

A) small number of firms
B) has some pricing power
C) the firms are interdependent
D) the good produced may be unique or not
E) low barriers to entry

Question 18

A monopolistically competitive market consists of many sellers,an oligopoly consists of ________ seller(s),and a monopoly consists of ________ seller(s).

A) one; one
B) one; two
C) a few; many
D) a few; one
E) many; one

Question 19

The levels of profits in a cartel are

A) initially high,but then decrease as substitute goods emerge.
B) initially low,but then decrease as the level of competition increases.
C) initially low,but then increase as the level of competition increases.
D) near the monopoly level of profits.
E) zero.

Question 20

The following table shows the dollar amount of sales in 2016 for the four largest firms in the above-ground pool industry.Total industry sales in 2016 were $467,000.Use this table to answer the following questions:

If Clear Water Island acquired Poolside Paradise,the concentration ratio would ________ and the market price of pools would likely ________.

A) increase; fall
B) increase; rise
C) decrease; not change
D) decrease; fall
E) decrease; rise

Question 21

When a market is characterized by mutual interdependence

A) one firm's pricing decision does not affect the market share of any other firm.
B) one firm's quantity decision does not affect the market share of any other firm.
C) all firms always act in unison to produce the monopoly quantity.
D) the actions of one firm have an impact on the price and output of its competitors.
E) the actions of one firm have no impact on the price and output decisions of its competitors.

Question 22

The ________ effect occurs when the market price either decreases or increases by the respective entrance or exit of a rival firm in the market.

A) competitive
B) price
C) output
D) market
E) oligopoly

Question 23

When a third firm enters a market that was previously categorized as a duopoly,the equilibrium price will ________ and the equilibrium quantity will ________.

A) be lower; be lower
B) be higher; be lower
C) be lower; be higher
D) be higher; be higher
E) not change; not change

Question 24

Assume all markets are in long-run equilibrium.Market price in a duopoly would be ________ the market price in a monopoly,and ________ the market price in a competitive market.

A) less than or equal to; less than or equal to
B) less than or equal to; greater than or equal to
C) less than; equal to
D) greater than; equal to
E) greater than or equal to; less than or equal to

Question 25

The following table shows a small community's demand for monthly subscriptions to a streaming movie service.Assume that only two firms (Nextflix and Flixbuster)sell in this market,that each firm offers the same quality of service and movie selection,and that each firm's marginal cost is constant and equal to 0 (zero)due to excess capacity.Use this information to answer the following questions:

If this market were a monopoly instead of a duopoly,the market price would be ________ and the quantity of streaming movie subscriptions purchased each month would be ________.

A) $0; 1,000
B) $3; 700
C) $5; 500
D) $7; 300
E) $9; 100

Question 26

The following table shows a small community's demand for monthly subscriptions to a streaming movie service.Assume that only two firms (Nextflix and Flixbuster)sell in this market,that each firm offers the same quality of service and movie selection,and that each firm's marginal cost is constant and equal to 0 (zero)due to excess capacity.Use this information to answer the following questions:

The following list includes four different collusive agreements that Nextflix and Flixbuster are considering.Assuming both firms will abide by the terms,which collusive agreement(s)would maximize total profit in the market?
I.Nextflix supplies 400 subscriptions and Flixbuster supplies 500 subscriptions.
II.Nextflix supplies 500 subscriptions and Flixbuster supplies 300 subscriptions.
III.Nextflix supplies 250 subscriptions and Flixbuster supplies 250 subscriptions.
IV.Nextflix supplies 100 subscriptions and Flixbuster supplies 400 subscriptions.

A) agreement I
B) agreements I and II
C) agreements II and III
D) agreement IV
E) agreements III and IV

Question 27

Oligopolistic markets are socially ________ because price is ________ marginal cost.

A) efficient; equal to
B) efficient; less than
C) efficient; greater than
D) inefficient; less than
E) inefficient; greater than

Question 28

Listed below are four different collusive agreements that Nextflix and Flixbuster are considering.Assuming both firms will abide by the terms,which collusive agreement(s)would maximize total profit in the market?
I.Nextflix supplies 50 subscriptions and Flixbuster supplies 450 subscriptions.
II.Nextflix supplies 450 subscriptions and Flixbuster supplies 50 subscriptions.
III.Nextflix supplies 300 subscriptions and Flixbuster supplies 100 subscriptions.
IV.Nextflix supplies 100 subscriptions and Flixbuster supplies 100 subscriptions.

A) agreement I
B) agreements I and II
C) agreements II and III
D) agreement III
E) agreements III and IV

Question 29

When two or more firms form a ________ agreement and set price and quantity in unison,economists refer to them as ________.

A) competitive; a cartel
B) collusive; social benefactors
C) collusive; a cartel
D) monopolistically competitive; social benefactors
E) monopolistically competitive; a cartel

Question 30

Airline A and Airline B are the two largest airlines in the country.The chief executive officer of Airline A calls the chief executive officer of Airline B and says,"Why don't we both raise prices 25 percent across the board next week?" This is an example of

A) spirited competition.
B) attempted collusive behavior.
C) predatory pricing.
D) a corporate merger.
E) a tying arrangement.

Question 31

Assume all markets are in long-run equilibrium.The market quantity supplied in a duopoly would be ________ the market quantity supplied in a monopoly and ________ the market quantity supplied in a competitive market.

A) less than or equal to; less than or equal to
B) less than or equal to; greater than or equal to
C) less than; equal to
D) greater than; equal to
E) greater than or equal to; less than or equal to

Question 32

An agreement between Nike and Adidas to raise prices of the track shoes that each company produces by 50 percent is an example of a collusive agreement,and economists generally agree that

A) this agreement is in the best interest of society because the price of track shoes is significantly above marginal cost.
B) this agreement is in the best interest of society because the quantity of track shoes bought and sold is significantly less than the quantity that would be bought and sold in a perfectly competitive market.
C) this agreement is not in the best interest of society because the price of track shoes is significantly below marginal cost.
D) this agreement is not in the best interest of society because the price of track shoes is significantly above marginal cost.
E) the price of track shoes does not affect societal welfare.

Question 33

The following table shows a small community's demand for monthly subscriptions to a streaming movie service.Assume that only two firms (Nextflix and Flixbuster)sell in this market,that each firm offers the same quality of service and movie selection,and that each firm's marginal cost is constant and equal to 0 (zero)due to excess capacity.Use this information to answer the following questions:

If the two firms operating in this market agreed to each supply one-half of the quantity a monopolist would supply,the contract would specify that

A) Nextflix supplies 400 subscriptions and Flixbuster supplies 100 subscriptions.
B) Flixbuster supplies 400 subscriptions and Nextflix supplies 100 subscriptions.
C) Nextflix supplies 0 (zero)subscriptions and Flixbuster supplies 500 subscriptions.
D) Flixbuster supplies 0 (zero)subscriptions and Nextflix supplies 500 subscriptions.
E) Nextflix supplies 250 subscriptions and Nextflix supplies 250 subscriptions.

Question 34

If antitrust laws did not prohibit efforts to restrict competition in markets,then

A) no firms would attempt to collude on price and/or quantity.
B) attempts at collusion with rival firms on price and or/quantity would succeed all the time.
C) attempts at collusion with rival firms would probably often fail.
D) all firms in the economy would earn negative economic profit in the long run.
E) all firms in the market would earn zero economic profit in the long run.

Question 35

In the United States,________ laws prohibit collusion between rivals.

A) competitive arbitration
B) immigration
C) anticompetition
D) union
E) antitrust

Question 36

Firm A and Firm B are duopolists.They are choosing the price at which they will sell their products and the quantity they will sell.Both firms make their decisions simultaneously.The ________ equilibrium in this situation occurs when Firm B chooses a pricing strategy given the strategy that Firm A chooses,and Firm A chooses a pricing strategy given the strategy that Firm B chooses.

A) antitrust
B) Nash
C) Von Neumman
D) Morgenstern
E) cartel

Question 37

The following table shows a small community's demand for monthly subscriptions to a streaming movie service.Assume that only two firms (Nextflix and Flixbuster)sell in this market,that each firm offers the same quality of service and movie selection,and that each firm's marginal cost is constant and equal to 0 (zero)due to excess capacity.Use this information to answer the following questions:

An agreement between Nextflix and Flixbuster to each supply 250 subscriptions is an example of

A) price discrimination.
B) Bertrand competition.
C) price leadership.
D) collusion.
E) increasing marginal costs.

Question 38

A ________ agreement among rival firms will most likely specify the price each firm will charge and the quantity each firm will produce/sell.

A) friendly
B) competitive
C) monopolistic
D) collusive
E) price-quantity

Question 39

The following table shows a small community's demand for monthly subscriptions to a streaming movie service.Assume that only two firms (Nextflix and Flixbuster)sell in this market,that each firm offers the same quality of service and movie selection,and that each firm's marginal cost is constant and equal to 0 (zero)due to excess capacity.Use this information to answer the following questions:

If this market were highly competitive instead of a duopoly,the market price would be __________ and the quantity of streaming movie subscriptions purchased each month would be __________.

A) $0; 1,000
B) $2; 800
C) $4; 600
D) $6; 400
E) $8; 800

Question 40

When more firms enter into a market that was previously characterized as a duopoly,it will

A) be easier for firms in the market to form a successful cartel.
B) be more difficult for firms in the market to form a successful cartel.
C) be just as difficult for firms in the market to form a successful cartel as it was before the new firms entered.
D) be impossible for firms in the market to form a successful cartel,whereas before the new firms entered,it would have been possible.
E) still be impossible for firms in the market to form a successful cartel.

Question 41

Five firms are currently producing and selling in a market.When two more firms enter the market,economists expect that the equilibrium price will ________ and the equilibrium quantity will ________.

A) be lower; be lower
B) be higher; be lower
C) be lower; be higher
D) be higher; be higher
E) not change; not change

Question 42

Use the following scenario to answer the following questions:
In 2011,three firms (Firm A,Firm B,and Firm C)were selling cellular phone service for a price of $40 per month in Playa del Carmen,Mexico.Each firm serviced 100 cell phone customers; thus,all firms together serviced a total of 300 customers.Assume marginal cost is $0 (zero)for all firms and thus total revenue is equal to total profit.In 2012,Firms A and B each continued to service 100 customers,but Firm C now serviced 150 customers; thus,all firms together serviced a total of 350 customers.All firms now charge $30 per month.
Due only to the price effect,profits for each firm decline by $1,000.Due only to the output effect,profits for both Firm A and Firm B did not change,and profits for Firm C increased by $1,500.It was in Firm C's interest to increase output because Firm C realized only ________ of the total $3,000 price effect,but it realized the full ________ of the total quantity effect.

A)
$1,000; $1,500
B) $2,500; $1,500
C) $2,250; $1,500
D) $1,750; $1,250
E) $2,000; $1,250

Question 43

Refer to the following table.Assume that Keisha keeps quiet.Larry will spend ________ years in jail if he confesses,and ________ years in jail if he also keeps quiet.

A) 12; 1.5
B) 1.5; 12
C) 0; 12
D) 12; 12
E) 0; 1.5

Question 44

Use the following scenario to answer the following questions:
In 2011,three firms (Firm A,Firm B,and Firm C)were selling cellular phone service for a price of $40 per month in Playa del Carmen,Mexico.Each firm serviced 100 cell phone customers; thus,all firms together serviced a total of 300 customers.Assume marginal cost is $0 (zero)for all firms and thus total revenue is equal to total profit.In 2012,Firms A and B each continued to service 100 customers,but Firm C now serviced 150 customers; thus,all firms together serviced a total of 350 customers.All firms now charge $30 per month.
Firm C's monthly profit increased by ________ due only to the output effect and decreased by ________ due only to the price effect,for a net increase of $500.

A) $2,500; $2,000
B) $3,000; $2,500
C) $500; $0
D) $1,500; $1,000
E) $3,500; $3,000

Question 45

An equilibrium in a game in which players pursue their own self-interest is called

A) collusion.
B) a sequential equilibrium.
C) a prisoner's dilemma.
D) a noncooperative equilibrium.
E) a cooperative equilibrium.

Question 46

The branch of economics that studies strategic decision making is called ________ theory.

A) interdependence
B) game
C) competitive
D) noncompetitive
E) strategic

Question 47

When a particular strategy produces a better outcome for a person regardless of the strategies others choose,we say it is a(n)

A) dominated strategy.
B) dominant strategy.
C) equilibrated strategy.
D) efficient strategy.
E) surplus maximization strategy.

Question 48

Economists use ________ theory to better understand what might happen in situations where strategic interactions are involved.

A) complexity
B) strategic
C) competitive
D) noncompetitive
E) game

Question 49

Assume that there is an oligopoly consisting of firms of different sizes.If a small firm increases output by 25 percent,the price effect realized by the small firm will be ________.If a large firm increases output by 25 percent,the price effect realized by the large firm will be ________.

A) nonexistent; negligible
B) negligible; nonexistent
C) nonexistent; substantial
D) substantial; nonexistent
E) negligible; substantial

Question 50

Use the following scenario to answer the following questions:
In 2011,three firms were selling cellular phone service for a price of $40 per month in Pittsburgh,Pennsylvania.Each firm serviced 100 cell phone customers; thus,all firms together serviced a total of 300 customers.In 2012,five firms were selling cellular phone service for a price of $30 per month.Each firm serviced 70 cell phone customers; thus,all firms together serviced a total of 350 customers.Assume marginal cost is $0 (zero)for all firms and thus total revenue is equal to total profit.
Which effect best describes the likely decrease in profits experienced by each of the three original firms due only to the lower market price?

A) competitive
B) price
C) output
D) market
E) oligopoly

Question 51

Refer to the following table.Assume that Jeff confesses.Gerry will spend ________ years in jail if he also confesses,and ________ years in jail if he keeps quiet.

A) 15; 15
B) 35; 35
C) 0; 35
D) 35; 0
E) 15; 35

Question 52

Six firms are currently producing and selling in a market.When two of the six firms exit the market,economists expect that the equilibrium price will ________ and the equilibrium quantity will ________.

A) be lower; be lower
B) be higher; be lower
C) be lower; be higher
D) be higher; be higher
E) not change; not change

Question 53

Refer to the following table.Assume that Jane confesses.John will spend ________ years in jail if he also confesses,and ________ years in jail if he keeps quiet.

A) 10; 10
B) 10; 25
C) 10; 0
D) 0; 10
E) 25; 25

Question 54

Economists are more likely to use game theory to analyze a(n)

A) competitive market.
B) monopoly.
C) monopolistically competitive market.
D) oligopoly.
E) monopsony.

Question 55

A game where firms that pursue a dominant strategy that results in noncooperation where all players are worse off is a

A) cartel.
B) prisoner's dilemma.
C) sequential game.
D) tit for tat.
E) cooperative equilibrium.

Question 56

Three firms are currently producing and selling in a market.When one of the three firms exits the market,economists expect that the equilibrium price will ________ and the equilibrium quantity will ________.

A) be lower; be lower
B) be higher; be lower
C) be lower; be higher
D) be higher; be higher
E) not change; not change

Question 57

A ________ consists of a set of players,a set of strategies available to those players,and a specification of the payoffs to each player for each possible combination of strategies.

A) tournament
B) competitive market
C) game
D) firm
E) monopolistically competitive market

Question 58

Use the following scenario to answer the following questions:
In 2011,three firms were selling cellular phone service for a price of $40 per month in Pittsburgh,Pennsylvania.Each firm serviced 100 cell phone customers; thus,all firms together serviced a total of 300 customers.In 2012,five firms were selling cellular phone service for a price of $30 per month.Each firm serviced 70 cell phone customers; thus,all firms together serviced a total of 350 customers.Assume marginal cost is $0 (zero)for all firms and thus total revenue is equal to total profit.
Due to the entrance of two firms in 2012,total monthly profits for all firms in the market decreased by $3,000 due to the ________ effect and increased by $1,500 due to the ________ effect.

A)
Price; output
B) output; price
C) price; price
D) output; output
E) competitive; noncompetitive

Question 59

When modeling economic situations using game theory,the economic participants are generally referred to as

A) gamers.
B) nonmovers.
C) dominators.
D) players.
E) managers.

Question 60

When decision makers face incentives that make it difficult to achieve mutually beneficial outcomes,we say they are in a(n)________ dilemma.

A) oligopoly
B) prisoner's
C) prison guard's
D) monopoly
E) competitive

Question 61

The following table shows two firms in a single-stage game.Each firm makes its decision without knowledge of the other firm's decision.The payoffs for each firm represent economic profits,and each firm strictly prefers more economic profit than less.In the Nash equilibrium of this game,Pepsi earns a profit of ________ and Coca-Cola earns a profit of ________.

A) $67.5 million; $67.5 million
B) $30 million; $30 million
C) $37.5 million; $75 million
D) $75 million; $37.5 million
E) $50 million; $50 million

Question 62

Which of the following is an example of collusion?

A) Nike and Reebok compete on price.
B) Dell and Gateway compete on quantity.
C) American Airlines and United Airlines agree to raise prices.
D) Coca-Cola and Pepsi do not attempt to fix prices.
E) Verizon builds more cell phone towers.

Question 63

The following table shows two firms in a single-stage duopoly game.Each firm makes its decision without knowledge of the other firm's decision.The payoffs for each firm represent economic profits,and each firm strictly prefers more economic profit than less.This game would be considered a prisoner's dilemma if X is between

A) $10,000 and $25,000.
B) $25,000 and $35,000.
C) $10,000 and $35,000.
D) $35,000 and $70,000.
E) $45,000 and $70,000.

Question 64

The Nash equilibrium in an oligopolistic market is generally ________ for society than the outcome under collusion because the price is ________ marginal cost.

A) better; closer to
B) better; further above
C) worse; closer to
D) worse; further above
E) worse; equal to

Question 65

Refer to the following table.In the Nash equilibrium of this game,Derrick will go to jail for ________ years and Brandy will go to jail for ________ years.

A) 0.5; 0.5
B) 25; 25
C) 0.5; 18
D) 0.5; 25
E) 18; 18

Question 66

Game theorist Robert Axelrod decided to examine the choices that participants make in a long-run setting.He ran a sophisticated computer simulation in which he invited scholars to submit strategies for securing points in a prisoner's dilemma tournament over many rounds.All the submissions were collected and paired,and the results were scored.After each simulation,he eliminated the weakest strategy and reran the tournament with the remaining strategies.This evolutionary approach continued until the best strategy remained.Among all strategies submitted,which strategy dominated?

A) tit-for-tat strategy
B) tit-for-two-tats strategy
C) Axelrod equivalency strategy
D) profit-maximization strategy
E) grim trigger

Question 67

Player A and Player B are playing a game involving several rounds of a prisoner's dilemma where their choices are to "cooperate" or "defect." After each round ends,one player rolls a six-sided die.If the die lands on 6,the game ends; however,if the die lands on any other number,the game continues and players play another round.Prior to the game starting,the players formulate a strategy that specifies what they will do in every possible round they might find themselves in.If Player A is playing the tit-for-tat strategy,in the ________ round,Player A will definitely choose ________.

A) first; defect
B) second; defect
C) first; cooperate
D) second; cooperate
E) third; cooperate

Question 68

The following table shows two firms in a single-stage duopoly game.Each firm makes its decision without knowledge of the other firm's decision.The payoffs for each firm represent economic profits,and each firm strictly prefers more economic profit than less.If both firms were able to write a binding contract,this contract would specify that Bobbles.com agrees to produce ________ bobbleheads and Bobbles R' Us agrees to produce ________ bobbleheads.

A) 5,000; 7,000
B) 7,000; 5,000
C) 7,000; 7,000
D) 5,000; 5,000
E) 12,000; 0

Question 69

Player A and Player B are playing a game involving several rounds of a prisoner's dilemma where their choices are to "cooperate" or "defect." After each round ends,one player rolls a six-sided die.If the die lands on 6,the game ends; however,if the die lands on any other number,the game continues and players play another round.Prior to the game starting,the players formulate a strategy that specifies what they will do in every possible round they might find themselves in.If Player A is playing the tit-for-tat strategy,in the ________ round,Player A will ________.

A) first; definitely choose defect.
B) second; definitely choose defect.
C) second; choose whatever Player B chose in the first round.
D) second; definitely choose cooperate.
E) third; definitely choose cooperate.

Question 70

Walmart and Target are the only stores in a remote town that currently stock and sell the PlayStation 5 video game console.Managers at both stores are simultaneously deciding whether to charge a price of $1,000 or $1,500 for each console.If both stores charge $1,000,they earn a profit of $100,000 each.If both stores charge $1,500,they earn a profit of $200,000 each.If one store charges $1,000 and the other store charges $1,500,the store that charges $1,000 earns a profit of $250,000 and the firm that charges $1,500 earns a profit of $50,000.If Walmart and Target ________,they can both charge $1,500 and earn the highest combined profit available.

A) collude with each other
B) privately undercut each other after making an agreement
C) engage in spirited price competition
D) compete with each other only with regard to quantity and not price
E) compete with each other only with regard to price and not quantity

Question 71

The following table shows two firms in a duopoly.Each firm makes its decision without knowledge of the other firm's decision.The payoffs for each firm represent economic profits,and each firm strictly prefers more economic profit than less.If both firms were able to collude and make their supply decisions collectively,Flixbuster would sell ________ subscriptions per month and Nextflix would sell ________ subscriptions per month.

A) 200; 200
B) 400; 400
C) 400; 200
D) 200; 400
E) 600; 600

Question 72

The following table depicts two firms in a single-stage duopoly game.Each firm makes its decision without knowledge of the other firm's decision.The payoffs for each firm represent economic profits,and each firm strictly prefers more economic profit than less.If X is greater than $3,500,then there is/are

A) only one Nash equilibrium,and this game would be considered a prisoner's dilemma.
B) two Nash equilibriums,and this game would be considered a prisoner's dilemma.
C) three Nash equilibriums,and this game would be considered a prisoner's dilemma.
D) only one Nash equilibrium,and this game would not be considered a prisoner's dilemma.
E) two Nash equilibriums,and this game would not be considered a prisoner's dilemma.

Question 73

In January,Home Depot offered a 10 percent-off coupon and Lowe's did not.In February,Lowe's offered a 10 percent-off coupon and Home Depot did not.In March,Home Depot offered a 10 percent-off coupon and Lowe's did not.It is likely that Home Depot and Lowe's are both playing the ________ strategy.

A) grim trigger
B) tit-for-two-tats
C) deterrence
D) tit-for-tat
E) mutually assured destruction

Question 74

In a repeated prisoner's dilemma,a player who is playing tit for tat will

A) defect in the first round and defect in all subsequent rounds.
B) defect in the first round and,in any subsequent round,do what his or her opponent did in the last round.
C) cooperate in the first round and defect in all subsequent rounds.
D) cooperate in the first round and cooperate in all subsequent rounds.
E) cooperate in the first round and,in any subsequent round,do what his or her opponent did in the last round.

Question 75

The following table shows two firms in a single-stage duopoly game.Each firm makes its decision without knowledge of the other firm's decision.The payoffs for each firm represent economic profits,and each firm strictly prefers more economic profit than less.Assume the firms are not able to collude.The Nash equilibrium total quantity of potatoes on the market is

A) 12,000.
B) 4,000.
C) 10,000.
D) 14,000.
E) 24,000.

Question 76

Together,Coca-Cola and Pepsi account for approximately ________ percent of the soft drink market.

A) 35
B) 45
C) 55
D) 65
E) 75

Question 77

The following table shows two firms in a duopoly.Each firm makes its decision without knowledge of the other firm's decision.The payoffs for each firm represent economic profits,and each firm strictly prefers more economic profit than less.In this game,selling ________ subscriptions a month is a dominant strategy for Flixbuster and selling ________ subscriptions a month is a dominant strategy for Nextflix.

A) 200; 200
B) 200; 400
C) 400; 200
D) 400; 400
E) 100; 100

Question 78

Refer to the following table.Confessing is Eddie's dominant strategy because

A) Sharon's dominant strategy is to keep quiet.
B) he spends more time in jail if he confesses,regardless of whether Sharon confesses or keeps quiet.
C) he spends less time in jail if he confesses,regardless of whether Sharon confesses or keeps quiet.
D) he spends the same amount of time in jail by confessing as he would by not confessing.
E) his decision does not depend on Sharon's decision.

Question 79

If two duopolists arrive at the Nash equilibrium output level,the total quantity of the good on the market will be ________ the total quantity on the market if the market were perfectly competitive and ________ the total quantity on the market if the market were controlled by a monopoly.

A) less than; less than
B) less than; greater than
C) greater than; greater than
D) greater than; less than
E) greater than; equal to

Question 80

In January 2011,Coca-Cola and Pepsi agreed to reduce their yearly advertising budgets by $1 million each,and neither firm reneged on the agreement throughout the year.In January 2012,Coca-Cola and Pepsi each announced that its company 2011 profits had increased by $1 million.Which of the following is a likely explanation for this increase?

A) A new entrant in the market caused Coca-Cola and Pepsi to lose substantial market share.
B) The government imposed a punitive tax on both firms for producing a beverage that is a danger to public health.
C) The firms had previously been in a prisoner's dilemma situation where one firm's advertisements were effectively canceling the other firm's advertisements.
D) Coca-Cola drastically reduced the price of its soda relative to the price of Pepsi's soda.
E) Pepsi drastically reduced the price of its soda relative to the price of Coca-Cola's soda.