Filters
Question type
Study Flashcards

If duopolists individually pursue their own self-interest when deciding how much to produce,the profit-maximizing price they will charge for their product will be


A) less than the monopoly price.
B) equal to the perfectly competitive market price.
C) greater than the monopoly price.
D) possibly less than or greater than the monopoly price.

E) B) and C)
F) A) and D)

Correct Answer

verifed

verified

If one firm left a duopoly market where the firms did not cooperate then


A) price and quantity would rise
B) price would rise and quantity would fall.
C) quantity would rise and price would fall.
D) quantity and price would fall.

E) B) and C)
F) C) and D)

Correct Answer

verifed

verified

A group of firms that collude is called a cartel.

A) True
B) False

Correct Answer

verifed

verified

Figure 17-1. Two companies, ABC and XYZ, each decide whether to produce a high level of output or a low level of output. In the figure, the dollar amounts are payoffs and they represent annual profits for the two companies. Figure 17-1. Two companies, ABC and XYZ, each decide whether to produce a high level of output or a low level of output. In the figure, the dollar amounts are payoffs and they represent annual profits for the two companies. -Refer to Figure 17-1.Which of the following statements is correct? A) ABC can potentially earn its highest possible profit if it produces a high level of output, and for that reason it is a dominant strategy for ABC to produce a high level of output. B) The highest possible combined profit for the two firms occurs when both produce a low level of output, and for that reason producing a low level of output is a dominant strategy for both firms. C) Regardless of the strategy pursued by ABC, XYZ's best strategy is to produce a high level of output, and for that reason producing a high level of output is a dominant strategy for XYZ. D) Our knowledge of game theory suggests that the most likely outcome of the game, if it is played only once, is for one firm to produce a low level of output and for the other firm to produce a high level of output. -Refer to Figure 17-1.Which of the following statements is correct?


A) ABC can potentially earn its highest possible profit if it produces a high level of output, and for that reason it is a dominant strategy for ABC to produce a high level of output.
B) The highest possible combined profit for the two firms occurs when both produce a low level of output, and for that reason producing a low level of output is a dominant strategy for both firms.
C) Regardless of the strategy pursued by ABC, XYZ's best strategy is to produce a high level of output, and for that reason producing a high level of output is a dominant strategy for XYZ.
D) Our knowledge of game theory suggests that the most likely outcome of the game, if it is played only once, is for one firm to produce a low level of output and for the other firm to produce a high level of output.

E) None of the above
F) C) and D)

Correct Answer

verifed

verified

Table 17-3. 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. Table 17-3. 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 17-3.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 -Refer to Table 17-3.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

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

Correct Answer

verifed

verified

Table 17-3. 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. Table 17-3. 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 17-3.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 -Refer to Table 17-3.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

E) C) and D)
F) B) and C)

Correct Answer

verifed

verified

The story of the prisoners' dilemma shows why


A) predatory pricing is clearly not in society's best interest.
B) economists are unanimous in condemning resale price maintenance, since it inevitably reduces competition.
C) oligopolies can fail to act independently, even when independent decision-making is in their best interest.
D) oligopolies can fail to cooperate, even when cooperation is in their best interest.

E) All of the above
F) C) and D)

Correct Answer

verifed

verified

Which of the following statements is false?


A) The Clayton Act allows triple damages in civil lawsuits in order to encourage lawsuits against conspiring oligopolists.
B) Many economists defend the practice of resale price maintenance on the grounds that it may help solve a free-rider problem.
C) Most economists agree that predatory pricing is a profitable business strategy that usually preserves market power.
D) The U.S. Supreme Court's view that the practice of tying usually allows a firm to extend its market power is not generally supported by economic theory.

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

Correct Answer

verifed

verified

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 in order to capture more profit.
D) each duopolist wants to charge a higher price than the monopoly price.

E) A) and D)
F) All of the above

Correct Answer

verifed

verified

Table 17-2. The table shows the town of Pittsville's demand schedule for gasoline. For simplicity, assume the town's gasoline seller(s) incur no costs in selling gasoline. Table 17-2. The table shows the town of Pittsville's demand schedule for gasoline. For simplicity, assume the town's gasoline seller(s) incur no costs in selling gasoline. -Refer to Table 17-2.If there are exactly three sellers of gasoline in Pittsville and if they collude,then which of the following outcomes is most likely? A) Each seller will sell 166.67 gallons and charge a price of $1.33. B) Each seller will sell 166.67 gallons and charge a price of $5. C) Each seller will sell 200 gallons and charge a price of $4. D) Each seller will sell 233.33 gallons and charge a price of $5. -Refer to Table 17-2.If there are exactly three sellers of gasoline in Pittsville and if they collude,then which of the following outcomes is most likely?


A) Each seller will sell 166.67 gallons and charge a price of $1.33.
B) Each seller will sell 166.67 gallons and charge a price of $5.
C) Each seller will sell 200 gallons and charge a price of $4.
D) Each seller will sell 233.33 gallons and charge a price of $5.

E) B) and C)
F) All of the above

Correct Answer

verifed

verified

The prisoners' dilemma game


A) is a situation in which two players both have dominant strategies which lead to the highest total payoff for the two players.
B) has no Nash equilibrium since players, after agreeing to play their dominant strategy, will have an incentive to switch to another strategy.
C) has a Nash equilibrium, but the Nash equilibrium outcome is not the outcome the players would agree to if they could cooperate with each other.
D) Both a and c are correct.

E) B) and D)
F) All of the above

Correct Answer

verifed

verified

Table 17-24 Two firms are considering going out of business and selling their assets. Each considers what happens if the other goes out of business. The payoff matrix below shows the net gain or loss to each firm. Table 17-24 Two firms are considering going out of business and selling their assets. Each considers what happens if the other goes out of business. The payoff matrix below shows the net gain or loss to each firm. -Refer to Table 17-24.What is the Nash equilibrium? A) A and B both stay in business B) A stays in business, B sells C) B stays in business, A sells D) Both A and B sell -Refer to Table 17-24.What is the Nash equilibrium?


A) A and B both stay in business
B) A stays in business, B sells
C) B stays in business, A sells
D) Both A and B sell

E) A) and B)
F) A) and D)

Correct Answer

verifed

verified

Table 17-13 Two home-improvement stores (Lopes and HomeMax) in a growing urban area are interested in expanding their market share. Both are interested in expanding the size of their store and parking lot to accommodate potential growth in their customer base. The following game depicts the strategic outcomes that result from the game. Increases in annual profits of the two home-improvement stores are shown in the table below. Table 17-13 Two home-improvement stores (Lopes and HomeMax) in a growing urban area are interested in expanding their market share. Both are interested in expanding the size of their store and parking lot to accommodate potential growth in their customer base. The following game depicts the strategic outcomes that result from the game. Increases in annual profits of the two home-improvement stores are shown in the table below. -Refer to Table 17-13.Increasing the size of its store and parking lot is a dominant strategy for A) Lopes, but not for HomeMax. B) HomeMax, but not for Lopes. C) both stores. D) neither store. -Refer to Table 17-13.Increasing the size of its store and parking lot is a dominant strategy for


A) Lopes, but not for HomeMax.
B) HomeMax, but not for Lopes.
C) both stores.
D) neither store.

E) C) and D)
F) A) and B)

Correct Answer

verifed

verified

Some business practices that appear to reduce competition,such as resale price maintenance,may have legitimate economic purposes.

A) True
B) False

Correct Answer

verifed

verified

Figure 17-1. Two companies, ABC and XYZ, each decide whether to produce a high level of output or a low level of output. In the figure, the dollar amounts are payoffs and they represent annual profits for the two companies. Figure 17-1. Two companies, ABC and XYZ, each decide whether to produce a high level of output or a low level of output. In the figure, the dollar amounts are payoffs and they represent annual profits for the two companies. -Refer to Figure 17-1.If this game is played only once,then the most likely outcome is that A) both firms produce a low level of output. B) ABC produces a low level of output and XYZ produces a high level of output. C) ABC produces a high level of output and XYZ produces a low level of output. D) both firms produce a high level of output. -Refer to Figure 17-1.If this game is played only once,then the most likely outcome is that


A) both firms produce a low level of output.
B) ABC produces a low level of output and XYZ produces a high level of output.
C) ABC produces a high level of output and XYZ produces a low level of output.
D) both firms produce a high level of output.

E) A) and D)
F) A) and C)

Correct Answer

verifed

verified

Table 17-14 This table shows a game played between two players, A and B. The payoffs in the table are shown as (Payoff to A, Payoff to B) . Table 17-14 This table shows a game played between two players, A and B. The payoffs in the table are shown as (Payoff to A, Payoff to B) . -Refer to Table 17-14.Which of the following statements about this game is true? A) Up is a dominant strategy for A and Right is a dominant strategy for B. B) Up is a dominant strategy for A and Left is a dominant strategy for B. C) Down is a dominant strategy for A and Right is a dominant strategy for B. D) Down is a dominant strategy for A and Left is a dominant strategy for B. -Refer to Table 17-14.Which of the following statements about this game is true?


A) Up is a dominant strategy for A and Right is a dominant strategy for B.
B) Up is a dominant strategy for A and Left is a dominant strategy for B.
C) Down is a dominant strategy for A and Right is a dominant strategy for B.
D) Down is a dominant strategy for A and Left is a dominant strategy for B.

E) None of the above
F) B) and C)

Correct Answer

verifed

verified

Table 17-9 Only two firms, Acme and Pinnacle, sell a particular product. The table below shows the demand curve for their product. Each firm has the same constant marginal cost of $10 and zero fixed cost. Table 17-9 Only two firms, Acme and Pinnacle, sell a particular product. The table below shows the demand curve for their product. Each firm has the same constant marginal cost of $10 and zero fixed cost. -Refer to Table 17-9.Acme and Pinnacle agree to maximize joint profits.However,while Acme produces the agreed upon amount,Pinnacle breaks the agreement and produces 100 more than agreed,how much profit does Pinnacle make? A) $10,000 B) $9,000 C) $8,750 D) $7500 -Refer to Table 17-9.Acme and Pinnacle agree to maximize joint profits.However,while Acme produces the agreed upon amount,Pinnacle breaks the agreement and produces 100 more than agreed,how much profit does Pinnacle make?


A) $10,000
B) $9,000
C) $8,750
D) $7500

E) A) and D)
F) A) and C)

Correct Answer

verifed

verified

Table 17-21 The Chicken Game is named for a contest in which drivers test their courage by driving straight at each other. John and Paul have a common interest to avoid crashing into each other, but they also have a personal, competing interest to not turn first to demonstrate their courage to those observing the contest. The payoff table for this situation is provided below. The payoffs are shown as (John, Paul) . Table 17-21 The Chicken Game is named for a contest in which drivers test their courage by driving straight at each other. John and Paul have a common interest to avoid crashing into each other, but they also have a personal, competing interest to not turn first to demonstrate their courage to those observing the contest. The payoff table for this situation is provided below. The payoffs are shown as (John, Paul) . -Refer to Table 17-21.How many Nash equilibria are there in this Chicken game? A) 0 B) 1 C) 2 D) 3 -Refer to Table 17-21.How many Nash equilibria are there in this Chicken game?


A) 0
B) 1
C) 2
D) 3

E) C) and D)
F) A) and C)

Correct Answer

verifed

verified

Table 17-22 Brian and Matt own the only two bicycle repair shops in town. Each must choose between a low price for repair work and a high price. The annual economic profit from each strategy is indicated in the table. The profits are shown as (Matt, Brian) in each cell. Table 17-22 Brian and Matt own the only two bicycle repair shops in town. Each must choose between a low price for repair work and a high price. The annual economic profit from each strategy is indicated in the table. The profits are shown as (Matt, Brian) in each cell. -Refer to Table 17-22.Which of the following statements is correct? A) Matt's dominant strategy is to charge a low price. B) Brian's dominant strategy is to charge a high price. C) The dominant strategy for both Brian and Matt is to charge a low price. D) Matt's dominant strategy is to charge a high price. -Refer to Table 17-22.Which of the following statements is correct?


A) Matt's dominant strategy is to charge a low price.
B) Brian's dominant strategy is to charge a high price.
C) The dominant strategy for both Brian and Matt is to charge a low price.
D) Matt's dominant strategy is to charge a high price.

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

Correct Answer

verifed

verified

Table 17-12 Each year the United States considers renewal of Most Favored Nation (MFN) trading status with Farland (a mythical nation) . Historically, legislators have made threats of not renewing MFN status because of human rights abuses in Farland. The non-renewal of MFN trading status is likely to involve some retaliatory measures by Farland. The payoff table below shows the potential economic gains associated with a game in which Farland may impose trade sanctions against U.S. firms and the United States may not renew MFN status with Farland. The table contains the dollar value of all trade-flow benefits to the United States and Farland. Table 17-12 Each year the United States considers renewal of Most Favored Nation (MFN) trading status with Farland (a mythical nation) . Historically, legislators have made threats of not renewing MFN status because of human rights abuses in Farland. The non-renewal of MFN trading status is likely to involve some retaliatory measures by Farland. The payoff table below shows the potential economic gains associated with a game in which Farland may impose trade sanctions against U.S. firms and the United States may not renew MFN status with Farland. The table contains the dollar value of all trade-flow benefits to the United States and Farland. -Refer to Table 17-12.Assume that trade negotiators meet to discuss trade policy between the United States and Farland.If neither party to the negotiation is able to trust the other party,then A) each should assume that the other will choose a strategy that optimizes total value of the trade relationship. B) the Nash equilibrium will provide the largest possible gains to each party. C) Farland negotiators should assume that United States negotiators will implement a policy that is in the mutual best interest of both countries. D) each should follow its dominant strategy. -Refer to Table 17-12.Assume that trade negotiators meet to discuss trade policy between the United States and Farland.If neither party to the negotiation is able to trust the other party,then


A) each should assume that the other will choose a strategy that optimizes total value of the trade relationship.
B) the Nash equilibrium will provide the largest possible gains to each party.
C) Farland negotiators should assume that United States negotiators will implement a policy that is in the mutual best interest of both countries.
D) each should follow its dominant strategy.

E) A) and B)
F) B) and D)

Correct Answer

verifed

verified

Showing 161 - 180 of 410

Related Exams

Exam 1

Ten Principles of Economics.

349 Questions

Exam 2

Thinking Like an Economist.

535 Questions

Exam 3

Interdependence and the Gains from Trade.

443 Questions

Exam 4

The Market Forces of Supply and Demand.

571 Questions

Exam 5

Elasticity and Its Application

510 Questions

Exam 6

Supply, Demand, And Government Policies.

557 Questions

Exam 7

Consumers, Producers, and the Efficiency of Markets.

460 Questions

Exam 8

Application: The Costs of Taxation.

424 Questions

Exam 9

Application: International Trade.

410 Questions

Exam 10

Externalities.

441 Questions

Exam 11

Public Goods and Common Resources.

349 Questions

Exam 12

The Design of the Tax System.

478 Questions

Exam 13

The Costs of Production.

533 Questions

Exam 14

Firms in Competitive Markets.

478 Questions

Exam 15

Monopoly.

526 Questions

Exam 16

Monopolistic Competition.

497 Questions

Exam 18

The Market For the Factors of Production.

463 Questions

Exam 19

Earnings and Discrimination.

398 Questions

Exam 20

Income Inequality and Poverty.

374 Questions

Exam 21

The Theory of Consumer Choice.

462 Questions

Exam 22

Frontiers in Microeconomics.

353 Questions

Show Answer