Question 1

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.  14.
-Refer to Table 17-13. If both stores follow a dominant strategy, Lopes's annual profit will grow by

Accepted Answer

A)   $0.4 million.
B)   $1.0 million.
C)   $2.0 million.
D)   $3.2 million.E) A) and B)
F) None of the above

Question 2

Table 17-32
Suppose that Angelina and Brad own the only two professional photography stores in town. Each must choose between a low price and a high price for senior photo packages. The annual economic profit from each strategy is indicated in the table below:
Angelina
Low price High price 
-Refer to Table 17-32. Does Brad have a dominant strategy? If so, describe it.

Accepted Answer

Yes, regardless of Angelina's strategy, ...

Question 3

In a duopoly situation, the logic of self-interest results in a total output level that

Accepted Answer

A)   equals the output level that would prevail in a competitive market.
B)   equals the output level that would prevail in a monopoly.
C)   exceeds the monopoly level of output, but falls short of the competitive level of output.
D)   falls short of the monopoly level of output.E) None of the above
F) B) and D)

Question 4

Government regulators might suspect a firm of engaging in predatory pricing if it charges prices that seem to be too
__________.

Accepted Answer

The answer of Government regulators might suspect a firm of...

Question 5

The Clayton Act of 1914 allows those harmed by illegal arrangements to restrain trade to

Accepted Answer

A)   sue for up to two times the damages they incurred.
B)   sue for up to three times the damages they incurred.
C)   sue for up to four times the damages they incurred.
D)   sue for damages, but only for the actual amount of damages they incurred.E) A) and D)
F) A) and C)

Question 6

In which of the following games is it clearly the case that the cooperative outcome of the game is good for the two players and good for society?

Accepted Answer

A)   Two guilty criminals have been captured by the police, and each prisoner decides whether to confess or to remain silent.
B)   Two airlines dominate air travel between City A and City B, and each airline decides whether to charge a "high" airfare or a "low" airfare.
C)   Two duopoly firms account for all of the production in a market, and each firm decides whether to produce a "high" amount of output or a "low" amount of output.
D)   Two oil companies own adjacent oil fields over a common pool of oil, and each company decides whether to drill one well or two wells.E) C) and D)
F) B) and D)

Question 7

Antitrust laws tend to target restraint of trade as characterized by .

Accepted Answer

agreements among com...

Question 8

As the number of firms in an oligopoly increases, the price approaches

Accepted Answer

A)   zero.
B)   marginal cost.
C)   infinity.
D)   the monopoly price.E) A) and B)
F) B) and C)

Question 9

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

Question 10

Table 17-30
Imagine a small town in which only two residents, Abby and Brad, own wells that produce safe drinking water. Each week Abby and Brad work together to decide how many gallons of water to pump. They bring water to town and sell it at whatever price the market will bear. To keep things simple, suppose that Abby and Brad can pump as much water as they want without cost so that the marginal cost is zero. The weekly town demand schedule and total revenue schedule for water is shown in the table below: 
-Refer to Table 17-30. Discuss the difference between the monopoly outcome and the Nash equilibrium.

Accepted Answer

The monopoly outcome occurs at the highe...

Question 11

All cartels are inherently reliant on

Accepted Answer

A)   a horizontal demand curve.
B)   an inelastic demand for their product.
C)   the cooperation of their members.
D)   enforcement of antitrust laws.E) A) and B)
F) B) and C)

Question 12

Which of the controversial business practices, resale price maintenance, predatory pricing, or tying, was a part of a long-running antitrust lawsuit against Microsoft and why?

Accepted Answer

The government accused Microsoft of tyin...

Question 13

Explain the practice of tying and discuss why it is controversial.

Accepted Answer

Tying is the practice of bundling goods ...

Question 14

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) None of the above
F) All of the above

Question 15

Once a cartel is formed, the market is in effect served by

Accepted Answer

A)   a monopoly.
B)   an oligopoly.
C)   imperfect competition.
D)   monopolistic competition.E) B) and D)
F) None of the above

Question 16

Table 17-32
Suppose that Angelina and Brad own the only two professional photography stores in town. Each must choose between a low price and a high price for senior photo packages. The annual economic profit from each strategy is indicated in the table below:
Angelina
Low price High price 
-Refer to Table 17-32. Does Angelina have a dominant strategy? If so, describe it.

Accepted Answer

Yes, regardless of Brad's strategy, Ange...

Question 17

The prisoners' dilemma game

Accepted Answer

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) None of the above
F) All of the above

Question 18

The story of the prisoners' dilemma shows why

Accepted Answer

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

Question 19

Table 17-20
Nadia and Maddie are two college roommates who both prefer a clean common space in their dorm room, but neither enjoys cleaning. The roommates must each make a decision to either clean or not clean the dorm room's common space. The payoff table for this situation is provided below, where the higher a player's payoff number, the better off that player is. The payoffs in each cell are shown as (payoff for Nadia, payoff for Maddie) . 
-Refer to Table 17-20. If Maddie chooses to clean, then Nadia will

Accepted Answer

A)   clean and Maddie's payoff will be 30.
B)   not clean and Maddie's payoff will be 7.
C)   clean and Maddie's payoff will be 50.
D)   not clean and Maddie's payoff will be 10.E) A) and B)
F) B) and D)

Question 20

The decisions of the US and Soviet Union to build nuclear weapons is much like the prisoners' dilemma.

Accepted Answer

A) True 
 B)False

Exam 17: Oligopoly

Explain the practice of tying and discuss why it is controversial.

Correct Answer
verified
Tying is the practice of bundling goods ...
View Answer

Correct Answer
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Yes, regardless of Brad's strategy, Ange...
View Answer

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

The story of the prisoners' dilemma shows why

Correct Answer
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Oligopolies would like to act like a

Correct Answer
verified

Antitrust laws tend to target restraint of trade as characterized by .

Correct Answer
verified
agreements among com...
View Answer

In which of the following games is it clearly the case that the cooperative outcome of the game is good for the two players and good for society?

Correct Answer
verified

Correct Answer
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Correct Answer
verified
The monopoly outcome occurs at the highe...
View Answer

Which of the controversial business practices, resale price maintenance, predatory pricing, or tying, was a part of a long-running antitrust lawsuit against Microsoft and why?

Correct Answer
verified
The government accused Microsoft of tyin...
View Answer

In a duopoly situation, the logic of self-interest results in a total output level that

Correct Answer
verified

The prisoners' dilemma game

Correct Answer
verified

The Clayton Act of 1914 allows those harmed by illegal arrangements to restrain trade to

Correct Answer
verified

Correct Answer
verified

Once a cartel is formed, the market is in effect served by

Correct Answer
verified

Government regulators might suspect a firm of engaging in predatory pricing if it charges prices that seem to be too __________.

Correct Answer
verified

Correct Answer
verified
Yes, regardless of Angelina's strategy, ...
View Answer

As the number of firms in an oligopoly increases, the price approaches

Correct Answer
verified

The decisions of the US and Soviet Union to build nuclear weapons is much like the prisoners' dilemma.

Correct Answer
verified

All cartels are inherently reliant on

Correct Answer
verified

Exam 17: Oligopoly

Explain the practice of tying and discuss why it is controversial.

Correct AnswerverifiedTying is the practice of bundling goods ...View AnswerShow Answer

Correct AnswerverifiedYes, regardless of Brad's strategy, Ange...View AnswerShow 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

The story of the prisoners' dilemma shows why

Correct AnswerverifiedShow Answer

Oligopolies would like to act like a

Correct AnswerverifiedShow Answer

Antitrust laws tend to target restraint of trade as characterized by .

Correct Answerverifiedagreements among com...View AnswerShow Answer

In which of the following games is it clearly the case that the cooperative outcome of the game is good for the two players and good for society?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe monopoly outcome occurs at the highe...View AnswerShow Answer

Which of the controversial business practices, resale price maintenance, predatory pricing, or tying, was a part of a long-running antitrust lawsuit against Microsoft and why?

Correct AnswerverifiedThe government accused Microsoft of tyin...View AnswerShow Answer

In a duopoly situation, the logic of self-interest results in a total output level that

Correct AnswerverifiedShow Answer

The prisoners' dilemma game

Correct AnswerverifiedShow Answer

The Clayton Act of 1914 allows those harmed by illegal arrangements to restrain trade to

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Once a cartel is formed, the market is in effect served by

Correct AnswerverifiedShow Answer

Government regulators might suspect a firm of engaging in predatory pricing if it charges prices that seem to be too __________.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedYes, regardless of Angelina's strategy, ...View AnswerShow Answer

As the number of firms in an oligopoly increases, the price approaches

Correct AnswerverifiedShow Answer

The decisions of the US and Soviet Union to build nuclear weapons is much like the prisoners' dilemma.

Correct AnswerverifiedShow Answer

All cartels are inherently reliant on

Correct AnswerverifiedShow Answer

Correct Answer
verified
Tying is the practice of bundling goods ...
View Answer

Correct Answer
verified
Yes, regardless of Brad's strategy, Ange...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
agreements among com...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The monopoly outcome occurs at the highe...
View Answer

Correct Answer
verified
The government accused Microsoft of tyin...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Yes, regardless of Angelina's strategy, ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified