Microeconomics: Chapter 10 Graded Homework

Suppose a firm produces 20 units of output. At this level of output, ATC = 35, P = 50, MR = 30, and MC = 30. The firm's economic profit is:

$300

Which characteristic does monopolistic competition NOT have in common with perfect competition?

ANSWER: Products of individual firms are different. MONO COMP AND PERF COMP SIMILARITIES: Individual firms earn normal profits in the long run. Entry and exit are easy. Each firm has an insignificantly small market share.

Which game does NOT describe a Prisoner's Dilemma outcome?

DOES NOT: a game of chicken in which one player backs down while the other player does not DOES: cartel members attempting to increase profits by cheating on their production quotas competing electronics stores attempting to undercut each other's prices rival department stores agreeing to accept each other's coupons and advertised specials

(Table) In the game table, the Nash equilibrium is:

Down, Left = (6,5) This is each of their own best strategies

(Table) In the game table represented above, the dominant strategies are:

Jesse plays Down and Katy plays Left. By doing this, they have the best outcome between the two of them.

(Table) Referring to the game theory table for Natasha and Marla (which shows Natasha's profits in plain text and Marla's profits in italic), who has a dominant strategy, Natasha or Marla?

Neither Natasha nor Maria Neither of them will have a good outcome together.

If Rosco's Tacos competes with eight other fast-food restaurants in the same neighborhood, and two of those rival firms exit the market, then:

Rosco's demand curve will shift to the right

Before deciding on a pricing strategy, Worldwide Widgets consults with its market intelligence team to understand what discounts the Gargantuan Gizmo Company is offering. The model that BEST fits this industry is:

an oligopoly

A Nash equilibrium:

assumes that each player chooses his or her best strategy.

The industrial structure of cartels is an example of a(n):

cooperative game

Monopolistically competitive markets and perfectly competitive markets do NOT share which characteristic?

differentiated products

If firms in a monopolistically competitive industry are experiencing economic losses in the short run, some firms will _____ the industry, _____ demand until each firm earns a normal profit.

exit; increasing

Which of the following products is likely to be the MOST differentiated?

garments sold to a retail customer

If Nintendo lowers the price of its product by $10, Sony responds by lowering the price of its own product by $10 and chooses not to cooperate again. This is an example of what type of game strategy?

grim trigger

Which action can help increase the stability of a cartel?

increase government protection

If a cartel member is considering cheating in order to earn profits, it should:

increase the quantity it sells at the quota quantity.

In an oligopoly, all the firms:

take their competitors into account when they make pricing decisions

The notion that individuals and firms are compelled to retaliate or punish others for engaging in noncooperative actions, but leaving the door open for future reconciliation, is BEST referred to as a(n):

tit-for-tat strategy

If Nintendo lowers the price of its product by $10, Sony waits to see whether Nintendo's price cut was a temporary mistake. This is an example of what type of game strategy?

trembling hand trigger

(Table) Boeing and Airbus can either comply with a cartel agreement or cheat. Based on the table, if this game is only played once, and each firm plays rationally:

Both Boeing and Airbus will cheat. This is because neither of them will trust the other actually comply, so they both cheat, and end up with $0 each.