Chapter 13, 14, 26
Answer the question based on the payoff matrix for a duopoly in which the numbers indicate the profit in thousands of dollars for a high-price or a low-price strategy. If both firms collude to maximize joint profits, the total profits for the two firms will be
$1,250,000.
Answer the question based on the payoff matrix for a duopoly, in which the numbers indicate the profit from following either an international strategy or a national strategy. If firm A chooses an international strategy while firm B chooses a national strategy, then the payoffs will be
$15 for firm A and $5 for firm B.
Answer the question based on the payoff matrix for a duopoly, in which the numbers indicate the profit from following either an international strategy or a national strategy. When this game reaches a Nash equilibrium, the payoffs will be
$17M for both firm
Answer the question based on the demand and cost schedules for a monopolistically competitive firm given in the table below. At the profit-maximizing level of output, marginal revenue is
$4 difference in total cost
Answer the question based on the payoff matrix for a duopoly in which the numbers indicate the profit in thousands of dollars for a high-price or a low-price strategy. If both firms operate independently and do not collude, the most likely profit is
$400,000 for firm X and $400,000 for firm Y.
Answer the question based on the payoff matrix for a duopoly in which the numbers indicate the profit in millions of dollars for each firm. If the two firms collude to maximize joint profits, the total profits for the two firms will be
$525 million.
The graph depicts a monopolistically competitive firm. At the profit-maximizing level of short-run output, this monopolistically competitive firm will be making a profit of
$525.
The graph depicts a monopolistically competitive firm. In the short run, this monopolistically competitive firm will set the price at
$65 and produce 35 units of output.
Answer the question based on the demand and cost schedules for a monopolistically competitive firm given in the table below. What will be the economic profit or loss for this monopolistically competitive firm at the profit-maximizing level of output?
+$20
Answer the question based on the demand and cost schedules for a monopolistically competitive firm given in the table below. What output quantity will the monopolistically competitive firm produce to maximize profits?
5 (greatest difference in total cost and price)
Wat's Production PossibilitiesProductABCDEFRice7506004503001500Corn050100150200250 Xat's Production PossibilitiesProductABCDEFRice2,5002,0001,5001,0005000Corn0100200300400500 The hypothetical nations Wat and Xat have the production possibilities for rice and corn given in the accompanying tables. Assume that Wat originally produced rice and corn at combination C and that Xat originally produced combination B. If the nations now fully specialize based on comparative advantage, the total gains from specialization and trade are
50 units of rice and 50 units of corn.
Suppose the world economy is composed of just two countries: Italy and Greece. Each can produce steel or chemicals, but at different levels of economic efficiency. The production possibilities curves for the two countries are shown in the graphs. If Italy and Greece open up trade with each other, which of the following terms of trade is mutually beneficial?
9 tons of chemicals = 5 tons of steel
Which country is the United States' largest trading partner in terms of volume of trade?
Canada
Which nation had the largest share of world exports in 2014?
China
The domestic opportunity cost of producing 100 barrels of chemicals in Germany is one ton of steel. In France, the domestic opportunity cost of producing 100 barrels of chemicals is two tons of steel. In this case,
Germany has a comparative advantage in the production of chemicals.
Suppose the world economy is composed of just two countries: Italy and Greece. Each can produce steel or chemicals, but at different levels of economic efficiency. The production possibilities curves for the two countries are shown in the graphs. It can be deduced that
Greece has a comparative advantage in chemicals.
Which of the following is a valid counterargument to a call for higher tariffs "to save U.S. jobs"?
Imports may eliminate some U.S. jobs, but they create others, so they may have little or no effect on employment.
Employing all its available resources, Nation Alpha can produce either 800 units of chemicals or 1,600 units of clothing. Nation Beta can produce either 200 units of chemicals or 800 units of clothing.
Nation Alpha has a comparative advantage in producing chemicals.
WineMachinesBrazil3010Poland1010 The accompanying table gives maximum-output alternatives for Brazil and Poland. It can be seen that if the two nations open up trade with each other, then
Poland will specialize in producing machines and import wine.
Answer the question based on the payoff matrix for a duopoly, in which the numbers indicate the profit from following either an international strategy or a national strategy. Which of the following is true?
The national strategy is the dominant strategy for both firms.
Wat's Production PossibilitiesProductABCDEFRice7506004503001500Corn050100150200250 Xat's Production PossibilitiesProductABCDEFRice2,5002,0001,5001,0005000Corn0100200300400500 The hypothetical nations Wat and Xat have the production possibilities for rice and corn given in the accompanying tables. Which of the following statements about the two nations is correct based on the principle of comparative advantage?
Xat has a comparative advantage in the production of rice.
The characteristic most closely associated with oligopoly is
a few large producers.
A cartel is
a formal agreement among firms to collude.
Which constitutes an obstacle to collusion among oligopolists?
a large number of firms
Adam Smith recognized the benefits from trade based on ____, and David Ricardo recognized the benefits from trade based on ____.
absolute advantage; comparative advantage
In competing with rivals, oligopolistic firms will tend to use
advertising because it is less easily duplicated than price cuts.
Nonprice competition refers to
advertising, product promotion, and changes in the real or perceived characteristics of a product.
Collusion refers to a situation where rival firms decide to
agree with each other to set prices and output.
Which of the following is a likely result of imposing tariffs to increase domestic employment?
an increase in the possibility of retaliatory tariffs
Dumping is the sale of a product in a foreign market
at a price below its domestic price or cost of production.
The variety of products and features that consumers may choose from in monopolistically competitive industries
at least partially offsets the economic inefficiencies of this market structure.
Assume that in a monopolistically competitive industry, firms are earning economic profit. This situation will
attract other firms to enter the industry, causing the existing firms' profits to shrink.
Monopolistic competitive firms are productively inefficient because production occurs where
average total cost is not at its lowest.
Wat's Production PossibilitiesProductABCDEFRice7506004503001500Corn050100150200250 Xat's Production PossibilitiesProductABCDEFRice2,5002,0001,5001,0005000Corn0100200300400500 The hypothetical nations Wat and Xat have the production possibilities for rice and corn given in the accompanying tables. The mutually beneficial terms of trade will be
between 3 and 5 units of rice for 1 unit of corn.
Globalization of resource markets has resulted in the business practice of offshoring, which involves
both an outflow as well as an inflow of jobs in the U.S.
The principal concept behind comparative advantage is that a nation should
concentrate production on those products for which it has the lowest domestic opportunity cost.
Mutual interdependence means that each firm in an oligopoly
considers the reactions of its rivals when it determines its pricing policy.
Suppose the world economy is composed of just two countries: Italy and Greece. Each can produce steel or chemicals, but at different levels of economic efficiency. The production possibilities curves for the two countries are shown in the graphs. The assumption made about the domestic production opportunity costs in both countries is that they are
constant.
Product differentiation in monopolistic competition involves a trade-off between
consumer choice and productive efficiency.
Tariffs and quotas are costly to consumers because
consumers have to switch to higher-priced domestic goods.
A strategy that is better than any alternative strategy—regardless of what the other firm does—is called a
dominant strategy.
In the long run, a representative firm in a monopolistically competitive industry will end up
earning a normal profit, but not an economic profit.
The incentive to cheat within a cartel increases with an increase in the following factors, except
economic performance and industry sales
Product variety in monopolistic competition comes at the cost of
excess capacity.
An example of a nontariff barrier would be
excessive licensing requirements.
The term trade deficit refers to a situation where
exports are less than imports.
The four-firm sales concentration ratio for an industry measures the
extent to which the four largest firms dominate the production of a good.
A defining characteristic of an oligopolistic market is that there are
few sellers.
Monopolistic competition is characterized by excess capacity because
firms produce at an output level less than the least-cost output.
An export subsidy for a product will benefit
foreign consumers of the product.
Answer the question based on the payoff matrix for a duopoly in which the numbers indicate the profit in millions of dollars for each firm. Assume that firm B adopts a low-price strategy, while firm A maintains a high-price strategy. Compared to the results from a high-price strategy for both firms, firm B will now
gain $75 million in profit and firm A will lose $50 million in profit.
The study of how people behave and decide in strategic situations is called
game theory.
Answer the question based on the payoff matrix for a duopoly in which the numbers indicate the profit in millions of dollars for each firm. If Firm A adopts the low-price strategy, then Firm B would adopt the
high-price strategy and earn $200.
Compared to a purely competitive firm in long-run equilibrium, the monopolistic competitor has a
higher price and lower output.
Specialization and trade between individuals or between nations leads to
higher total output.
One inherent factor that tends to destroy collusion among oligopolists is the
incentive to cheat.
A game has a Nash equilibrium when the two players' dominant strategies
intersect in a specific cell of the payoff matrix.
The demand curve faced by a monopolistically competitive firm
is more elastic than the monopolist's demand curve.
Monopolistic competition is characterized by a
large number of firms and low entry barriers.
The use of tariffs and quotas for trade protection results in
less efficiency in the economy.
A major goal of the World Trade Organization is to
liberalize international trade among nations.
Monopolistic competition means
many firms producing differentiated products.
A major reason that firms form a cartel is to
maximize joint profits
In the long run, an oligopoly
may be able to earn positive economic profits.
The product in an oligopolistic market
may be homogeneous or differentiated.
The effects of advertising on a firm's profits and efficiency
may be positive or negative.
"Variety is the spice of life" is best applied to which market structure?
monopolistic competition
A unique feature of an oligopolistic industry is
mutual interdependence.
At long-run equilibrium in monopolistic competition, there is
neither allocative nor productive efficiency.
In an oligopolistic market, there is likely to be
neither allocative nor productive efficiency.
In a two-nation, two-good world, if both nations have identical production possibilities curves with constant costs, then one nation would have
no comparative advantage over the other nation.
In the US market, people often refer to the "Big Three" in autos and the "Big Four" in accounting.These terms suggest that these two industries are
oligopolies
Firms must consider the possible reaction of rivals to their own decisions and actions in
oligopoly only.
The slopes of the production possibilities curves for two nations reflect the
opportunity costs of production in the two nations.
A monopolistically competitive industry combines elements of both competition and monopoly. The monopoly element results from
product differentiation.
Excess capacity implies
productive inefficiency.
In which of these continuums of degrees of competition (highest to lowest) is monopolistic competition properly placed?
pure competition, monopolistic competition, oligopoly, pure monopoly
A maximum limit set on the amount of a specific good that may be imported into a country over a given period of time is called a
quota.
Common arguments often raised to present the case for protectionism include the following, except
reducing the price of the product to consumers.
The downward-sloping demand curve of a monopolistic competitor
reflects some level of control over its own price.
The principle of comparative advantage indicates that mutually beneficial international trade can take place only when
relative costs of production differ between nations.
The benefits to trading nations based on comparative advantage accrue from
specialization and trading.
An excise tax on imported items is known as a(n)
tariff
A tariff is a
tax
The ratio at which nations will exchange one product for another is known as the
terms of trade.
The so-called eurozone refers to
the EU nations that have adopted a common currency.
NAFTA established a free-trade area and eliminated trade barriers between
the U.S., Mexico, and Canada.
In a two-nation world, comparative advantage in the production of a particular product means that one nation can produce
the product at a lower domestic opportunity cost than the other nation.
In the long run, the economic profits for a monopolistically competitive firm will be
the same as the profits for a purely competitive firm.
In game theory, a "payoff matrix" is a table that shows the following, except
the target payoffs that each firm or player is aiming for in their different strategies
Answer the question based on the payoff matrix for a duopoly in which the numbers indicate the profit in millions of dollars for each firm. If the two firms collude to maximize joint profits,
there will be no incentive for either Firm A or Firm B to cheat.
If the United States government were to impose a quota on wristwatches imported from Switzerland, then the
total quantity of wristwatches (domestic and imported) purchased would decline as prices rose.
The graph depicts a monopolistically competitive firm. This monopolistically competitive firm is earning economic profits in the short run and
will earn only normal profits in the long run.