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Exam 16: Oligopoly

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Question 71

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The equilibrium quantity in markets characterized by oligopoly is

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

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Question 72

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One way that public policy encourages cooperation among oligopolists is through antitrust law.

A) True
B) False

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Question 73

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Predatory pricing occurs when a firm

Table 16-1 The following table shows the percentage of output supplied by the top eight firms in four different industries. -Refer to Table 16-1.Which industry has the lowest concentratio ratio?

A law that encourages market competition by prohibiting firms from gaining or exercising excessive market power is

The theory of oligopoly provides a reason as to why

Table 16-6 -Refer to Table 16-6.This table shows the demand schedule for a particular product.Suppose the marginal cost to produce this product is constant at $2 per unit.If this market is served by two duopolists who choose their production levels independently,acting in their own self-interest,what is the Nash equilibrium production level for each firm?

The typical firm in the U.S.economy

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

A firm in a monopolistically competitive market is similar to a monopolist in the sense that it

Assume that Apple Computer has entered into an enforceable resale price maintenance agreement with Computer Super Stores Inc.(CSS Inc.) and Wal-Mart.Which of the following will always be true?

The practice of requiring someone to buy two or more items together,rather than separately,is called

Table 16-9 Each year the United States considers renewal of Most Favored Nation (MFN) trading status with China. Historically, legislators have made threats of not renewing MFN status because of human rights abuses in China. The non renewal of MFN trading status is likely to involve some retaliatory measures by China. The payoff table below shows the potential economic gains associated with a game in which China may impose trade sanctions against U.S. firms and the United States may not renew MFN status with China. The table contains the dollar value of all trade-flow benefits to the United States and China. -Refer to Table 16-9.If trade negotiators are able to communicate effectively about the consequences of various trade policies (i.e.,enter into an agreement about the policy they should adopt) ,then we would expect the countries to agree to which outcome?

To move the allocation of resources closer to the social optimum,policymakers should typically try to induce firms in an oligopoly to

A situation in which firms choose their best strategy given the strategies chosen by the other firms in the market is called

Which of these situations produces the largest profits for oligopolists?

Table 16-16 Consider a small town that has two grocery stores from which residents can choose to buy a gallon of milk. The store owners each must make a decision to set a high milk price or a low milk price. The payoff table, showing profit per week, is provided below. The profit in each cell is shown as (Store 1, Store 2) . -Refer to Table 16-16.What is the Nash Equilibrium of this price-setting game?

All cartels are inherently reliant on

Scenario 16-5 Assume that a local bank sells two services, checking accounts and ATM card services. Mr. Donethat is willing to pay $8 a month for the bank to service his checking account and $2 a month for unlimited use of his ATM card. Ms. Beenthere is willing to pay only $5 for a checking account, but is willing to pay $9 for unlimited use of her ATM card. Assume that the bank can provide each of these services at zero marginal cost. -Refer to Scenario 16-5.If the bank is unable to use tying,what is the profit-maximizing price to charge for a checking account?

Oligopolists may well be able to reach their preferred,cooperative outcome if