MicroEcon Chapter 17

When oligopolists collude and form a cartel, the outcome in the market is similar to that generated by a perfectly competitive market

False

Many economists argue that resale price maintenance

Has a legitimate purpose of stopping discount retailers from free riding on the services provided by full-service retailers

When firms cooperate with one another, it is generally good for *society as a whole*

False

When an oligopolit individually chooses its level of production to maximize its profits, *it produces an output that is*

*A. More than the level produced by a monopoly and less than the level produced by a competitive market* B. Less than the level produced by a monopoly and more than the level produced by a competitive market C. More than the level produced by either a monopoly of a competitive market D. Less than the level produced by either a monopoly or a competitive market

If oligopolists engage in collusion and successfully form a cartel, the market outcome is

*A. The same as if it were served by a monopoly* B. The same as if it were served by competitive firms C. Efficient because cooperation improves efficiency D. Known as Nash equilibrium

As the number of sellers in an oligopoly grows larger, an oligopolistic market looks more like

A competitive market

The market for hand tools (such as hammers and screwdrivers) is dominated by Black & Decker, Stanley, and Craftsman. This market is best described as

An oligopoly

Collusion is difficult for an oligopoly to maintain

A. Because antitrust laws make collusion illegal B. Because, in the case of oligopoly, self-interest is in conflict with cooperation C. If additional firms enter of the oligopoly *D. For all the above reasons*

As the number of sellers in an oligopoly increases,

A. Collusion is more likely to occur because of larger number of firms can place pressure on any firm that defects B. Output in the market tends to fall because each firm must cut back on production C. The price in the market moves further from marginal cost *D. The price in the market moves closer to marginal cost*

When an oligopolist individually chooses its level of production to maximize its profits, *it charges a price that is*

A. More than the price charged by a monopoly and less than the price charged by a competitive market *B. Less than the price charged by a monopoly and more than the price charged by a competitive market* C. More than the price charged by either a monopoly or a competitive market D. Less than the price charged by either a monopoly of a competitive market

A market structure in which many firms sell products that are similar but not identical is known as

A. Perfect competition B. Monopoly C. Oligopoly *D. None of the above*

Laws that make it illegal for firms to conspire to raise prices or reduce production are known as

Antitrust laws

An oligopoly is a market structure in which many firms sell products that are similar but not identical

False

Antitrust laws require manufacturers to engage in resale price maintenance or fair trade

False

Cooperation is easily maintained in an oligopoly because cooperation maximizes each individual firm's profits

False

If a prisoners' dilemma game is repeated, the participants are more likely to independently maximize their profits and reach a Nash equilibrium

False

The dominant strategy for an oligopolist is to cooperate with the group and maintain low production regardless of what the other oligopolists do

False

The greater the number of firms in the oligopoly, the more the outcome of the market looks like that generated by a monopoly

False

A situation in which oligopolists interacting with one another each choose their best strategy given the strategies that all the other oligopolists have chosen is known as a

Nash equilibrium

Suppose an oligopolist individually maximizes its profits. When calculating profits, if the output effect exceeds the price effect on the marginal unit of production, then the oligopolist

Should produce more units

Predatory pricing occurs when a firm cuts prices with the intention of driving competitors out of the market so that the firm can become a monopolist and later raise prices

True

The market for crude oil is an example of an oligopolistic market

True

The price and quantity generated by a Nash equilibrium is closer to the competitive solution than the price and quantity generated by a cartel

True

The prisoners' dilemma demonstrates why it is difficult to maintain cooperation even when cooperation is mutually beneficial

True

The unique feature of an oligopoly market is that the actions of one seller have a significant impact on the profits of all of the other sellers in the market

True

There is a constant tension in an oligopoly between cooperation and self-interest because after an agreement to reduce production is reached, it is profitable for each individual firm to cheat and produce more

True

When firms cooperate with one another, it is generally good for *the cooperating firms*

True