ECO Chapter 17

Refer to Table 17-1. If Rochelle and Alec operate as a profit-maximizing monopoly in the market for water, what price will they charge? a. $30 b. $25 c. $35 d. $40

$30

Refer to Table 17-1. Suppose the town enacts new antitrust laws that prohibit Rochelle and Alec from operating as a monopoly. How many gallons of water will be produced and sold once Rochelle and Alec reach a Nash equilibrium? a. 600 b. 700 c. 900 d. 800

800

Refer to Table 17-4. ABC and XYZ agree to maximize joint profits. However, while ABC produces the agreed-upon amount, XYZ breaks the agreement and produces 5 more than agreed. How much profit does XYZ make? a. $280 b. $140 c. $90 d. $240

$140

Refer to Figure 17-1. Suppose this market is served by two firms who each face the marginal cost curve shown in the diagram and have zero fixed cost. The marginal revenue curve that a monopolist would face in this market is also shown. If the firms are able to collude successfully, each firm should earn a profit equal to a. $2. b. $1. c. $6. d. $4.

a. $2

If duopoly firms that are not colluding were able to successfully collude, then a. price would rise and quantity would fall. b. price and quantity would fall. c. price and quantity would rise. d. price would fall and quantity would rise.

a. Price would rise and quantity would fall

Juan Pablo and Zak are competitors in a local market. Each is trying to decide if it is better to advertise on TV, on radio, or not at all. If they both advertise on TV, each will earn a profit of $8,000. If they both advertise on radio, each will earn a profit of $14,000. If neither advertises at all, each will earn a profit of $20,000. If one advertises on TV and other advertises on radio, then the one advertising on TV will earn $12,000 and the other will earn $10,000. If one advertises on TV and the other does not advertise, then the one advertising on TV will earn $22,000 and the other will earn $4,000. If one advertises on radio and the other does not advertise, then the one advertising on radio will earn $24,000 and the other will earn $8,000. If both follow their dominant strategy, then Juan Pablo will a. advertise on radio and earn $14,000. b. not advertise and earn $20,000. c. advertise on TV and earn $22,000. d. advertise on TV and earn $8,000.

a. advertise radio for $14000

As the number of firms in an oligopoly increases, a. the total quantity of output produced by firms in the market gets closer to the socially efficient quantity. b. the oligopoly has more market power and firms earn a greater profit. c. the output effect decreases. d. each seller becomes more concerned about its impact on the market price

a. the total quantity of output produced by firms in the market gets closer to the socially efficient quantity

Which of the following groups or entities has the authority to initiate legal suits to enforce antitrust laws? a. Only the U.S. Justice Department b. Only the President of the United States c. Both the U.S. Justice Department and private citizens d. Only private citizens

b. Bothe U.S Justice Department and private citizens

Refer to Table 17-5. If there are exactly five sellers of gasoline in Driveaway and if they collude, then which of the following outcomes is most likely? a. Each seller will sell 30 gallons and charge a price of $4. b. Each seller will sell 30 gallons and charge a price of $5. c. Each seller will sell 40 gallons and charge a price of $4. d. Each seller will sell 50 gallons and charge a price of $3.

b. Each seller will sell 30 gallon and charge a price of $5

Consider a market served by a monopolist, Firm A. A new firm, Firm B, enters the market and, as a result, Firm A lowers its price to try to drive Firm B out of the market. This practice is known as a. predatory tying. b. predatory pricing. c. tying. d. resale price maintenance.

b. Predatory pricing

As the number of sellers in an oligopoly becomes very large, a. the price effect is magnified. b. the quantity of output approaches the socially efficient quantity. c. the price approaches the monopoly price. d. the quantity of output approaches the monopoly quantity.

b. the quantity of output approches socially efficient quantity

Scenario 17-1 Assume that a local restaurant sells two items, salads and steaks. The restaurant's only two customers on a particular day are Mr. Carnivore and Ms. Leafygreens. Mr. Carnivore is willing to pay $20 for a steak and $7 for a salad. Ms. Leafygreens is willing to pay only $8 for a steak, but is willing to pay $12 for a salad. Assume that the restaurant can provide each of these items at zero marginal cost. Refer to Scenario 17-1. If the restaurant is unable to use tying, what is the profit-maximizing price to charge for a salad? a. $14 b. $16 c. $7 d. $12

c. $7

When an oligopoly market reaches a Nash equilibrium, a. the market price will be different for each firm. b. a firm will have chosen its best strategy, given the strategies chosen by other firms in the market. c. a firm will not take into account the strategies of competing firms. d. the firms will not have behaved as profit maximizers.

c. a firm will have chosen its best strategy, given the strategies chosen by other firms in the market

The Sherman Antitrust Act a. was passed to encourage judicial leniency in the review of cooperative agreements. b. was concerned with self-interest dominated Nash equilibriums in prisoners' dilemma games. c. enhanced the ability to enforce cartel agreements. d. restricted the ability of competitors to engage in cooperative agreements

d. restricted the ability of competitors to engage in cooperative agreements

The equilibrium quantity in markets characterized by oligopoly is a. lower than in monopoly markets and lower 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. higher than in monopoly markets and higher than in perfectly competitive markets

b. higher than in monopoly market but lower than in perfectly competitive markets

A central issue in the Microsoft antitrust lawsuit involved Microsoft's integration of its Internet browser into its Windows operating system, to be sold as one unit. This practice is known as a. tying. b. predation. c. wholesale maintenance. d. retail maintenance.

a. tying

Refer to Table 17-3. Suppose the market for this product is served by two firms that have formed a cartel. If the marginal cost of production is $4 and each firm incurs a fixed cost of $6, the combined profit of the cartel will be a. $6 b. $24 c. $12 d. $32

a.$6

Which of the following statements is correct? a. The logic of self-interest decreases a duopoly's price below the monopoly price, and it pushes the duopolists to reach the competitive level of output. b. If duopolists successfully collude, then their combined output will be equal to the output that would be observed if the market were a monopoly. c. If duopolists successfully collude, then their combined output will be less than the output that would be observed if the market were a monopoly. d. The logic of self-interest increases a duopoly's level of output above the monopoly level, and it pushes the duopolists to reach the competitive pr

b. If duopolist sucessfully collude, their combined output will be equal to the output that would be observed if the market were a monopoly.

Suppose that Thierry and Abdul are duopolists. Thierry is producing 700 units of output, and Abdul is producing 500 units of output. When Abdul produces 500 units, Thierry maximizes profit by producing 700 units. When Thierry produces 700 units of output, Abdul maximizes profit by producing 500 units. Thierry and Abdul are a. in a competitive market. b. at a Nash equilibrium. c. pricing at the minimum of marginal cost. d. engaging in monopoly pricing.

b. at a Nash Equalibrium

Refer to Table 17-7. Acme and Pinnacle agree to cooperate so as to maximize total profit. If this game is played repeatedly and Acme uses a tit-for-tat strategy, it will choose a a. good quality product in the first round and in subsequent rounds it will choose whatever Pinnacle chose in the previous round. b. good quality product in all rounds, regardless of the choice made by Pinnacle. c. poor quality product in the first round and in subsequent rounds it will choose whatever Pinnacle chose in the previous round. d. poor quality product in all rounds, regardless of the choice made by Pinnacle.

c. Poor quality in the first round and subsequent rounds it will choose whatever Pinnacle chose in the Previouss round