Question 1

If an industry consisting of two firms produces a total of 12 units, the market price is $10. If 13 units are produced, the price falls to $9. Suppose the two firms form a cartel and agree to produce 6 units each. If one firm cheats and produces 7 units, the cheating firm's revenue rises by _____ and the noncheating firm's revenue falls by _____.

Accepted Answer

A)  $3; $6 
B)  $3; $12 
C)  $6; $6 
D)  $6; $12

Question 2

The kinked demand curve model assumes that if a firm raises its price, then its rivals will _____ the price increase, but if a firm lowers its price, its rivals will _____ the price decrease.

Accepted Answer

A)  ignore; ignore 
B)  match; match 
C)  ignore; match 
D)  match; ignore

Question 3

In the past, successful brands have been named after all of these EXCEPT the

Accepted Answer

A)  company's main product. 
B)  company founder. 
C)  products supplied by the company. 
D)  icon in the company's logo.

Question 4

Both oligopolies and monopolies are allocative efficient.

Accepted Answer

A) True 
 B)False

Question 5

Which statement is TRUE for a monopolistically competitive firm operating in the long run?

Accepted Answer

A)  Price is equal to marginal cost. 
B)  The firm earns an economic profit. 
C)  Price is greater than marginal cost. 
D)  The firm's demand curve is highly inelastic.

Question 6

When firms in a market offer to "match any lower price offered by any competitor" but do not match price increases, then

Accepted Answer

A)  this indicates that the market is perfectly competitive. 
B)  this indicates that firms in this market may face kinked demand curves. 
C)  the market cannot be an oligopoly. 
D)  the market is monopolistically competitive.

Question 7

Which of these is a characteristic shared by both oligopolies and monopolies?

Accepted Answer

A)  mutual interdependence 
B)  significant barriers to entry into the market 
C)  a few dominant firms in the industry 
D)  normal profits in the long run

Question 8

Suppose a monopolistically competitive firm produces 20 units of output. At this level of output, ATC = 35, P = 50, MR = 30, and MC = 30. The firm's economic profit is

Accepted Answer

A)  $1,000. 
B)  $700. 
C)  $600. 
D)  $300.

Question 9

Which of these is NOT part of the basic setup of a game?

Accepted Answer

A)  information 
B)  mistakes 
C)  strategies 
D)  payoffs

Question 10

An assumption underlying the Nash equilibrium is that players in a game try to predict what the other players would do and then choose a strategy based on that prediction.

Accepted Answer

A) True 
 B)False

Question 11

Both oligopolies and monopolies are productive efficient.

Accepted Answer

A) True 
 B)False

Question 12

If Nintendo lowers the price of its product by $10, Sony responds by lowering the price of its own product by $10 and chooses not to cooperate again. This is an example of what type of game strategy?

Accepted Answer

A)  grim trigger 
B)  trembling hand trigger 
C)  tit-for-tat 
D)  predatory pricing

Question 13

If an oligopolist faces a kinked demand curve, then the price

Accepted Answer

A)  will increase whenever demand decreases. 
B)  will decrease when competition is reduced. 
C)  will increase if more firms enter the market. 
D)  is likely to remain stable even if there is a small change in the costs of production.

Question 14

Which of these is NOT a component of a game theory "game"?

Accepted Answer

A)  players 
B)  payoffs 
C)  planning 
D)  information

Question 15

In the following game table, a dominant strategy exists for which player(s)?

Accepted Answer

A)  only Bobby 
B)  only Corbin 
C)  both Bobby and Corbin 
D)  neither Bobby nor Corbin

Question 16

Trigger strategies are actions taken that are contingent on your opponent's future decisions.

Accepted Answer

A) True 
 B)False

Question 17

Which statement provides the BEST example of a grim trigger rule?

Accepted Answer

A)  A price increase by one firm is not met by the other firms in the market. 
B)  A decision by one firm triggers government regulation of all firms in the industry. 
C)  A negative decision triggers a tit-for-tat strategy. 
D)  A decision by one player to defect is met by a permanent retaliatory decision.

Question 18

Monopolistically competitive firms resemble monopolies in that both produce at a lower quantity than a perfectly competitive firm.

Accepted Answer

A) True 
 B)False

Question 19

(Table) Suppose you and your best friend are each deciding whether to spend the weekend in Key West or to stay home and study for next week's exam. The payoffs for each of the four possible outcomes are shown in the table (where higher numbers are better and the first number in each box represents your payoff, while the second number represents your friend's payoff). Which of these scenarios is the Nash equilibrium?
$\begin{array}{c}
\text { Friend }\
\begin{array}{lll} 
\text { You }\
&& \text { Travel } & \text { Study } \
&\text { Travel } & 85,60 & 75,70 \
&\text { Study } & 80,50 & 70,80
\end{array}\end{array}$

Accepted Answer

A)  You and your friend both travel, for a payoff of (85, 60). 
B)  You travel but your friend studies, for a payoff of (75, 70). 
C)  You study but your friend travels, for a payoff of (80, 50). 
D)  You and your friend both study, for a payoff of (70, 80).

Question 20

Which of these is a type of strategy used in a repeated game?

Accepted Answer

A)  price discounting 
B)  advertising 
C)  prisoner's dilemma 
D)  trigger strategies

Exam 10: Monopolistic Competition, Oligopoly, and Game Theory

The kinked demand curve model assumes that if a firm raises its price, then its rivals will _ the price increase, but if a firm lowers its price, its rivals will _ the price decrease.

In the past, successful brands have been named after all of these EXCEPT the

Both oligopolies and monopolies are allocative efficient.

Which statement is TRUE for a monopolistically competitive firm operating in the long run?

When firms in a market offer to "match any lower price offered by any competitor" but do not match price increases, then

Which of these is a characteristic shared by both oligopolies and monopolies?

Suppose a monopolistically competitive firm produces 20 units of output. At this level of output, ATC = 35, P = 50, MR = 30, and MC = 30. The firm's economic profit is

Which of these is NOT part of the basic setup of a game?

An assumption underlying the Nash equilibrium is that players in a game try to predict what the other players would do and then choose a strategy based on that prediction.

Both oligopolies and monopolies are productive efficient.

If Nintendo lowers the price of its product by $10, Sony responds by lowering the price of its own product by $10 and chooses not to cooperate again. This is an example of what type of game strategy?

If an oligopolist faces a kinked demand curve, then the price

Which of these is NOT a component of a game theory "game"?

In the following game table, a dominant strategy exists for which player(s) ?

Trigger strategies are actions taken that are contingent on your opponent's future decisions.

Which statement provides the BEST example of a grim trigger rule?

Monopolistically competitive firms resemble monopolies in that both produce at a lower quantity than a perfectly competitive firm.

Which of these is a type of strategy used in a repeated game?