Question 1

Oligopolies would like to act like a

Accepted Answer

A)  duopoly, but self-interest often drives them closer to the perfectly competitive outcome.
B)  competitive firm, but self-interest often drives them closer to the duopoly outcome.
C)  monopoly, but self-interest often drives them to charge a higher price than would be charged by a monopoly.
D)  monopoly, but self-interest often drives them closer to the perfectly competitive outcome.E) A) and C)
F) A) and B)

Question 2

Briefly describe the practice of predatory pricing.

Accepted Answer

Predatory pricing occurs when ...

Question 3

In cartels, the reason that the monopoly output is unstable is due to the factors that are present in a prisoner's dilemma.​

Accepted Answer

A) True 
 B)False  True

Question 4

If an oligopolist is part of a cartel that is collectively producing the monopoly level of output, then that oligopolist has the incentive to increase production with the aim of

Accepted Answer

A)  increasing prices.
B)  increasing profits for the group of firms as a whole.
C)  increasing profits for itself, regardless of the impact on profits for the group of firms as a whole.
D)  decreasing costs of production.E) B) and C)
F) All of the above

Question 5

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

Accepted Answer

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.E) A) and B)
F) All of the above

Question 6

Figure 17-2. Two companies, Acme and Pinnacle, each decide whether to produce a good quality product or a poor quality product. In the figure, the dollar amounts are payoffs and they represent annual profits for the two companies. 
-Refer to Figure 17-2. If this game is played only once, then the most likely outcome is that

Accepted Answer

A)  both firms produce a poor quality product.
B)  Acme produces a poor quality product and Pinnacle produces a good quality product.
C)  Acme produces a good quality product and Pinnacle produces a poor quality product.
D)  both firms produce a good quality product.E) A) and C)
F) None of the above D

Question 7

Suppose that Makemoney Movies produces two new films - The Hulk and The Piano. Makemoney offers theaters the two films together at a single price but will not supply the movies separately. What do economists call this business practice?

Accepted Answer

A)  predatory pricing
B)  resale price maintenance
C)  tying
D)  leverageE) B) and C)
F) A) and D)

Question 8

In an oligopoly, each firm knows that its profits

Accepted Answer

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.E) None of the above
F) A) and D)

Question 9

When prisoners' dilemma games are repeated over and over, sometimes the threat of penalty causes both parties to cooperate.

Accepted Answer

A) True 
 B)False

Question 10

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?

Accepted Answer

A)  $30
B)  $60
C)  $90
D)  $150E) None of the above
F) B) and C)

Question 11

Cartels are difficult to maintain because

Accepted Answer

A)  antitrust laws are difficult to enforce.
B)  cartel agreements are conducive to monopoly outcomes.
C)  there is always tension between cooperation and self-interest in a cartel.
D)  firms pay little attention to the decisions made by other firms.E) B) and C)
F) None of the above

Question 12

The equilibrium quantity in markets characterized by oligopoly is

Accepted Answer

A)  higher than in monopoly markets and higher than in perfectly competitive markets.
B)  higher than in monopoly markets and lower than in perfectly competitive markets.
C)  lower than in monopoly markets and higher than in perfectly competitive markets.
D)  lower than in monopoly markets and lower than in perfectly competitive markets.E) A) and B)
F) None of the above

Question 13

Figure 17-5. Two companies, ABC and QRS, are sellers in the same market. Each company decides whether to charge a high price or a low price. In the figure, the dollar amounts are payoffs and they represent annual profits for the two companies. 
-Refer to Figure 17-5. The dominant strategy for ABC is to

Accepted Answer

A)  charge a high price, and the dominant strategy for QRS is to charge a high price.
B)  charge a high price, and the dominant strategy for QRS is to charge a low price.
C)  charge a low price, and the dominant strategy for QRS is to charge a high price.
D)  charge a low price, and the dominant strategy for QRS is to charge a low price.E) All of the above
F) C) and D) D

Question 14

If Levi Strauss & Co. were to require every retailer that carried its clothing to charge customers $42 for each pair of jeans, Levi Strauss & Co. would be practicing

Accepted Answer

A)  resale price maintenance.
B)  fixed retail pricing.
C)  tying.
D)  cost plus pricing.E) A) and B)
F) All of the above

Question 15

The practice of selling a product to retailers and requiring the retailers to charge a specific price for the product is called

Accepted Answer

A)  fixed retail pricing.
B)  resale price maintenance.
C)  cost plus pricing.
D)  unfair trade.E) A) and B)
F) None of the above

Question 16

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

Accepted Answer

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.E) A) and B)
F) B) and C)

Question 17

Table 17-18
This table shows a game played between two firms, Firm A and Firm B. In this game each firm must decide how much output (Q)  to produce: 10 units or 12 units. The profit for each firm is given in the table as (Profit for Firm A, Profit for Firm B) . 
-Refer to Table 17-18. If these two firms play this game repeatedly, the likely outcome will be

Accepted Answer

A)  10 units of output for Firm A and 10 units of output for Firm B.
B)  10 units of output for Firm A and 12 units of output for Firm B.
C)  12 units of output for Firm A and 10 units of output for Firm B.
D)  12 units of output for Firm A and 12 units of output for Firm B.E) A) and D)
F) A) and C)

Question 18

Table 17-12
The table shows the town of Driveaway's demand schedule for gasoline. Assume the town's gasoline seller(s)  incurs a cost of $2 for each gallon sold, with no fixed cost. 
-Refer to Table 17-12. Suppose we observe that the price of a gallon of gasoline in Driveaway is $2. Given this observation, which of the following scenarios is most likely?

Accepted Answer

A)  There is one seller of gasoline in Driveaway.
B)  There are two sellers of gasoline in Driveaway.
C)  There are a few sellers of gasoline in Driveaway, but the number of sellers exceeds two.
D)  There are many sellers of gasoline in Driveaway.E) A) and D)
F) A) and C)

Question 19

A cooperative agreement among oligopolists is more likely to be maintained,

Accepted Answer

A)  the greater the number of oligopolists.
B)  the larger the number of buyers of the oligopolists' product.
C)  the smaller the number of buyers of the oligopolists' product.
D)  the more likely it is that the game among the oligopolists will be played over and over again.E) B) and D)
F) All of the above

Question 20

Scenario 17-4.
​
Consider two cigarette companies, PM Inc. and Brown Inc. If neither company advertises, the two companies split the market and earn $50 million each. If they both advertise, they again split the market, but profits are lower by $10 million since each company must bear the cost of advertising. Yet if one company advertises while the other does not, the one that advertises attracts customers from the other. In this case, the company that advertises earns $60 million while the company that does not advertise earns only $30 million.
-Refer to Scenario 17-4. PM Inc.'s dominant strategy is to

Accepted Answer

A)  refrain from advertising regardless of whether Brown Inc. advertises.
B)  advertise only if Brown Inc. advertises.
C)  advertise only if Brown Inc. does not advertise.
D)  advertise regardless of whether Brown Inc. advertises.E) All of the above
F) None of the above

Exam 17: Oligopoly

Oligopolies would like to act like a

Correct Answer
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Briefly describe the practice of predatory pricing.

Correct Answer
verified
Predatory pricing occurs when ...
View Answer

In cartels, the reason that the monopoly output is unstable is due to the factors that are present in a prisoner's dilemma.

Correct Answer
verified
True

If an oligopolist is part of a cartel that is collectively producing the monopoly level of output, then that oligopolist has the incentive to increase production with the aim of

Correct Answer
verified

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

Correct Answer
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Correct Answer
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D

Suppose that Makemoney Movies produces two new films - The Hulk and The Piano. Makemoney offers theaters the two films together at a single price but will not supply the movies separately. What do economists call this business practice?

Correct Answer
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In an oligopoly, each firm knows that its profits

Correct Answer
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When prisoners' dilemma games are repeated over and over, sometimes the threat of penalty causes both parties to cooperate.

Correct Answer
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Correct Answer
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Cartels are difficult to maintain because

Correct Answer
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The equilibrium quantity in markets characterized by oligopoly is

Correct Answer
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Correct Answer
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D

If Levi Strauss & Co. were to require every retailer that carried its clothing to charge customers $42 for each pair of jeans, Levi Strauss & Co. would be practicing

Correct Answer
verified

The practice of selling a product to retailers and requiring the retailers to charge a specific price for the product is called

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
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Correct Answer
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A cooperative agreement among oligopolists is more likely to be maintained,

Correct Answer
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Correct Answer
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Exam 17: Oligopoly

Oligopolies would like to act like a

Correct AnswerverifiedShow Answer

Briefly describe the practice of predatory pricing.

Correct AnswerverifiedPredatory pricing occurs when ...View AnswerShow Answer

In cartels, the reason that the monopoly output is unstable is due to the factors that are present in a prisoner's dilemma.​

Correct AnswerverifiedTrue

If an oligopolist is part of a cartel that is collectively producing the monopoly level of output, then that oligopolist has the incentive to increase production with the aim of

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedD

Suppose that Makemoney Movies produces two new films - The Hulk and The Piano. Makemoney offers theaters the two films together at a single price but will not supply the movies separately. What do economists call this business practice?

Correct AnswerverifiedShow Answer

In an oligopoly, each firm knows that its profits

Correct AnswerverifiedShow Answer

When prisoners' dilemma games are repeated over and over, sometimes the threat of penalty causes both parties to cooperate.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Cartels are difficult to maintain because

Correct AnswerverifiedShow Answer

The equilibrium quantity in markets characterized by oligopoly is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedD

If Levi Strauss & Co. were to require every retailer that carried its clothing to charge customers $42 for each pair of jeans, Levi Strauss & Co. would be practicing

Correct AnswerverifiedShow Answer

The practice of selling a product to retailers and requiring the retailers to charge a specific price for the product is called

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A cooperative agreement among oligopolists is more likely to be maintained,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
verified
Predatory pricing occurs when ...
View Answer

In cartels, the reason that the monopoly output is unstable is due to the factors that are present in a prisoner's dilemma.

Correct Answer
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True

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D

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D

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