Question 1

In a prisoners' dilemma game,

Accepted Answer

A)  the solution when playing the game once will be the same as the solution when the players play the game repeatedly, since agreements cannot be maintained in a prisoners' dilemma.
B)  if the players play the game repeatedly, the players can achieve a higher payoff, on average, than when they play the game only once.
C)  repeated play will always result in a better outcome for both players than when the game is played only once.
D)  the tit-for-tat strategy in repeated play requires players to always select the opposite strategy as their opponent.E) None of the above
F) A) and B)

Question 2

The manufacturer of South Face sells jackets to retail stores for $120 each, and it requires the retail stores to charge customers $150 per jacket. Any retailer that charges less than $150 would violate its contract with South Face. What do economists call this business practice?

Accepted Answer

A)  predatory pricing
B)  resale price maintenance
C)  tying
D)  leverageE) All of the above
F) C) and D)

Question 3

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 town's weekly demand schedule and total revenue schedule for water is shown in the table below: 
-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?

Accepted Answer

A)  600
B)  700
C)  800
D)  900E) B) and C)
F) A) and D)

Question 4

A distinguishing feature of an oligopolistic industry is the tension between

Accepted Answer

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

Question 5

What are the three examples of controversial business practices that antitrust laws often prohibit?

Accepted Answer

resale price mainten...

Question 6

In the prisoners' dilemma game, confessing is a dominant strategy for each of the two prisoners.

Accepted Answer

A) True 
 B)False

Question 7

It is always the case that players in a prisoner's dilemma situation will choose the Nash Equilibrium.
​

Accepted Answer

A) True 
 B)False

Question 8

To be successful, a cartel must

Accepted Answer

A)  find a way to encourage members to produce more than they would otherwise produce.
B)  agree on the total level of production for the cartel, but they need not agree on the amount produced by each member.
C)  agree on the total level of production and on the amount produced by each member.
D)  agree on the prices charged by each member, but they need not agree on amounts produced.E) A) and B)
F) A) and C)

Question 9

For cartels, as the number of firms (members of the cartel)  increases,

Accepted Answer

A)  the monopoly outcome becomes more likely.
B)  the magnitude of the price effect decreases.
C)  the more concerned each seller is about its own impact on the market price.
D)  the easier it becomes to observe members violating their agreements.E) A) and B)
F) A) and C)

Question 10

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

Accepted Answer

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 cornE) None of the above
F) A) and D)

Question 11

Suppose two companies own adjacent oil fields. Under the two fields is a common pool of oil worth $60 million. For each well that is drilled, the company that drills the well incurs a cost of $4 million. Each company can drill up to two wells. What is the likely outcome of this game if each company pursues its own self-interest?

Accepted Answer

A)  Each company drills one well and experiences a profit of $26 million.
B)  Each company drills one well and experiences a profit of $22 million.
C)  Each company drills two wells and experiences a profit of $22 million.
D)  One company drills two wells and experiences a profit of $32 million; the other company drills one well and experiences a profit of $16 million.E) None of the above
F) B) and C)

Question 12

The problems faced by oligopolies with three or more members are entirely different from the problems faced by duopolies.

Accepted Answer

A) True 
 B)False

Question 13

Table 17-17
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: 2 units or 3 units. The profit for each firm is given in the table as (Profit for Firm A, Profit for Firm B) . 
-Refer to Table 17-17. In this game,

Accepted Answer

A)  neither player has a dominant strategy.
B)  both players have a dominant strategy.
C)  Firm A has a dominant strategy, but Firm B does not have a dominant strategy.
D)  Firm B has a dominant strategy, but Firm A does not have a dominant strategy.E) A) and B)
F) A) and C)

Question 14

If nations such as Germany, Japan, and the United States prohibited international trade in automobiles, a likely effect would be that

Accepted Answer

A)  the price effect would become a more significant consideration for each firm that makes automobiles.
B)  the excess of price over marginal cost would become less pronounced in the automobile market.
C)  all countries would become better off.
D)  automobile producers in the U.S. would collude to produce a large number of cars.E) A) and B)
F) A) and C)

Question 15

Assuming that oligopolists do not have the opportunity to collude, once they have reached the Nash equilibrium, it

Accepted Answer

A)  is always in their best interest to supply more to the market.
B)  is always in their best interest to supply less to the market.
C)  is always in their best interest to leave their quantities supplied unchanged.
D)  may be in their best interest to do any of the above, depending on market conditions.E) B) and C)
F) B) and D)

Question 16

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 town's weekly demand schedule and total revenue schedule for water is shown in the table below: 
-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?

Accepted Answer

A)  $15
B)  $20
C)  $25
D)  $30E) All of the above
F) C) and D)

Question 17

Table 17-34
Suppose that two oil companies - BP and Exxon - own adjacent natural gas fields. The profits that each firm earns depends on both the number of wells it drills and the number of wells drilled by the other firm. The table below lists each firm's individual profits:
Exxon
Drill one well Drill two wells 
-Refer to Table 17-34. Does Exxon have a dominant strategy? If so, describe it.

Accepted Answer

Yes, regardless of BP's strate...

Question 18

Reaching and enforcing an agreement between members of a cartel becomes more difficult as the size of the group __________.

Accepted Answer

The answer of Reaching and enforcing an agreement between members...

Question 19

Who wrote, "People of the same trade seldom meet together, but the conversation ends in a conspiracy against the public, or in some diversion to raise prices."?

Accepted Answer

A)  Thomas Jefferson
B)  Adam Smith
C)  Bill Gates
D)  Robert AxelrodE) B) and D)
F) B) and C)

Question 20

A dominant strategy is one that

Accepted Answer

A)  makes every player better off.
B)  makes at least one player better off without hurting the competitiveness of any other player.
C)  increases the total payoff for the player.
D)  is best for the player, regardless of what strategies other players follow.E) A) and B)
F) B) and C)

Exam 17: Oligopoly

It is always the case that players in a prisoner's dilemma situation will choose the Nash Equilibrium.

Correct Answer
verified

Assuming that oligopolists do not have the opportunity to collude, once they have reached the Nash equilibrium, it

Correct Answer
verified

Correct Answer
verified
Yes, regardless of BP's strate...
View Answer

If nations such as Germany, Japan, and the United States prohibited international trade in automobiles, a likely effect would be that

Correct Answer
verified

The manufacturer of South Face sells jackets to retail stores for $120 each, and it requires the retail stores to charge customers $150 per jacket. Any retailer that charges less than $150 would violate its contract with South Face. What do economists call this business practice?

Correct Answer
verified

A distinguishing feature of an oligopolistic industry is the tension between

Correct Answer
verified

Correct Answer
verified

In a prisoners' dilemma game,

Correct Answer
verified

For cartels, as the number of firms (members of the cartel) increases,

Correct Answer
verified

Reaching and enforcing an agreement between members of a cartel becomes more difficult as the size of the group __________.

Correct Answer
verified

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

Correct Answer
verified

Table 17-17 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: 2 units or 3 units. The profit for each firm is given in the table as (Profit for Firm A, Profit for Firm B) . -Refer to Table 17-17. In this game,

Correct Answer
verified

To be successful, a cartel must

Correct Answer
verified

Correct Answer
verified

Who wrote, "People of the same trade seldom meet together, but the conversation ends in a conspiracy against the public, or in some diversion to raise prices."?

Correct Answer
verified

Correct Answer
verified

What are the three examples of controversial business practices that antitrust laws often prohibit?

Correct Answer
verified
resale price mainten...
View Answer

In the prisoners' dilemma game, confessing is a dominant strategy for each of the two prisoners.

Correct Answer
verified

A dominant strategy is one that

Correct Answer
verified

The problems faced by oligopolies with three or more members are entirely different from the problems faced by duopolies.

Correct Answer
verified

Exam 17: Oligopoly

It is always the case that players in a prisoner's dilemma situation will choose the Nash Equilibrium. ​

Correct AnswerverifiedShow Answer

Assuming that oligopolists do not have the opportunity to collude, once they have reached the Nash equilibrium, it

Correct AnswerverifiedShow Answer

Correct AnswerverifiedYes, regardless of BP's strate...View AnswerShow Answer

If nations such as Germany, Japan, and the United States prohibited international trade in automobiles, a likely effect would be that

Correct AnswerverifiedShow Answer

The manufacturer of South Face sells jackets to retail stores for $120 each, and it requires the retail stores to charge customers $150 per jacket. Any retailer that charges less than $150 would violate its contract with South Face. What do economists call this business practice?

Correct AnswerverifiedShow Answer

A distinguishing feature of an oligopolistic industry is the tension between

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In a prisoners' dilemma game,

Correct AnswerverifiedShow Answer

For cartels, as the number of firms (members of the cartel) increases,

Correct AnswerverifiedShow Answer

Reaching and enforcing an agreement between members of a cartel becomes more difficult as the size of the group __________.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Table 17-17 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: 2 units or 3 units. The profit for each firm is given in the table as (Profit for Firm A, Profit for Firm B) . -Refer to Table 17-17. In this game,

Correct AnswerverifiedShow Answer

To be successful, a cartel must

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Who wrote, "People of the same trade seldom meet together, but the conversation ends in a conspiracy against the public, or in some diversion to raise prices."?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

What are the three examples of controversial business practices that antitrust laws often prohibit?

Correct Answerverifiedresale price mainten...View AnswerShow Answer

In the prisoners' dilemma game, confessing is a dominant strategy for each of the two prisoners.

Correct AnswerverifiedShow Answer

A dominant strategy is one that

Correct AnswerverifiedShow Answer

The problems faced by oligopolies with three or more members are entirely different from the problems faced by duopolies.

Correct AnswerverifiedShow Answer

It is always the case that players in a prisoner's dilemma situation will choose the Nash Equilibrium.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Yes, regardless of BP's strate...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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resale price mainten...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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