(ECON 105) Practice Problems 18

In the figure above, ________ firms will share the market and the ________.

2; efficient scale is 40 units

The players in a game theory situation often do not act in their joint interest because of which of the following?

It is not in each player's self-interest to cooperate.

When oligopolies seek to operate as a single-price monopoly, the firms produce at the point where ________.

MR = MC

In the above figure, the output of an oligopoly will range between ________.

Q1 and Q2

________ is an agreement between a manufacturer and a distributor on the price at which a product will be resold.

Resale price maintenance

A cartel is ________.

a group of firms acting together to raise price, decrease output, and increase economic profit

The figure shows the market for the tourist trolley service in a resort town. These trolley services provide transportation to tourists to alleviate parking shortages and traffic congestion. The figure shows ________.

a natural duopoly where the efficient scale is 100 riders per day

"Duopoly" is ________.

a two-firm oligopoly

A cartel is a group of firms ________.

acting together to limit output, raise price, and increase economic profit

Sammy's Inc. competes with a few other firms because there are natural barriers to entry. Sammy's operates in ________.

an oligopoly

A Nash equilibrium occurs when each player in a game takes the ________ given the action of the other player.

best possible action for himself or herself

Federal Trade Commission guidelines state that it will examine mergers in markets for which the Herfindahl-Hirschman Index is ________.

between 1,000 and 1,800, and the merger would increase the index by 100 points

The concepts of mutual interdependence and game theory illustrate the fact that firms competing in oligopoly ________.

consider the actions of the rivals before changing the price of their product

Game theory is the tool that economists use to analyze strategic behavior, which is behavior that takes into account the ________ behavior of others and the mutual recognition of ________.

expected; interdependence

The prisoners' dilemma is an example of ________.

game theory

The tool that economists use to analyze the mutual interdependence of oligopolies is ________.

game theory

Boeing and Airbus have entered into a cartel agreement that will enable them to boost their profits. What occurs if Boeing decides to cheat on the agreement? i. Boeing lowers the price of its airplanes. ii. The total industry output increases. iii. The total profits in the airplane industry will decrease.

i, ii, and iii

Which of the following are characteristics of an oligopoly? i. The HHI for an oligopoly is between 100 and 1800. ii. There are a few firms that compete. iii. The firms can increase their profit by forming a cartel.

ii and iii

The possible alternatives for an oligopoly range from the monopoly case with ________ to the perfectly competitive case with ________.

low output; high output

The focus of antitrust legislation is to ________.

maintain competition

When firms in an oligopoly successfully collude and do not cheat on a cartel agreement, they can make a long-run economic profit similar to ________.

monopoly

The fact that firms in oligopoly are interdependent means that ________.

one firm's profits are affected by other firms' actions

Which of the following is true? In the above figure, if the market is ________.

perfect competition, output will be Q2 and price will be P2

When an oligopoly reduces its price with the intent of driving away its competitors, it is said to be engaging in ________.

predatory pricing

Under the Clayton Act and its amendments, which of the following activities is illegal if it creates monopoly?

price discrimination

Which of the following is always a violation of the antitrust law?

price fixing

Tying arrangements ________.

require a buyer to purchase one product in order to buy another, different product

Economists use game theory to analyze strategic behavior, which takes into account ________.

the expected behavior of others and the recognition of mutual interdependence

If the HHI for an industry equals 3,200, ________.

the industry is probably an oligopoly

When a market has barriers to entry, ________.

then in the long run it might be possible for the firms to make a positive economic profit