ECON 2302_Chpt 16 MC Practice Test

Refer to Table 16-5. If both stores follow a dominant strategy, SuperDuper Saver's growth-related profits will be a. $250. b. $85. c. $50. d. $25.

$50

Refer to Table 16-5. If both stores follow a dominant strategy, Ultimate Saver's growth-related profits will be a. $35. b. $65. c. $135. d. $275.

$65

The concept of a Nash equilibrium, when applied to an oligopoly situation, a. illustrates the tension between self-interest and cooperation. b. relies on the logic of firms pursuing their own self-interests. c. relies on the notion that each firm chooses its best strategy, given the strategies that other firms have chosen. d. All of the above are correct.

All of the above are correct

Refer to Table 16-5. When this game reaches a Nash equilibrium, the dollar value of growth-related profits will be a. Ultimate Saver $35 and SuperDuper Saver $250. b. Ultimate Saver $65 and SuperDuper Saver $50. c. Ultimate Saver $275 and SuperDuper Saver $25. d. Ultimate Saver $135 and SuperDuper Saver $85.

Ultimate Saver $65 and SuperDuper Saver $50

When an oligopoly market is in Nash equilibrium, a. market price will be different for each firm. b. firms will not behave as profit maximizers. c. a firm will choose its best pricing strategy, given the strategies that it observes other firms taking. d. a firm will not take into account the strategies of competing firms

a firm will choose its best pricing strategy, given the strategies that it observes other firms taking

Once a cartel is formed, the market is in effect served by a. a monopoly. b. an oligopoly. c. imperfect competition. d. monopolistic competition

a monopoly

One key difference between an oligopoly market and a competitive market is that oligopolistic firms a. are price takers while competitive firms are not. b. are interdependent while competitive firms are not. c. sell completely unrelated products while competitive firms do not. d. sell their product at a price equal to marginal cost while competitive firms do not

are interdependent while competitive firms are not

Refer to Table 16-5. The dominant strategy is to increase the size of its store and parking lot for a. SuperDuper Saver, but not for Ultimate Saver. b. Ultimate Saver, but not for SuperDuper Saver. c. both stores. d. neither store.

both stores

When strategic interactions are important to pricing and production decisions, a typical firm will a. set the price of its product equal to marginal cost. b. consider how competing firms might respond to its actions. c. generally operate as if it is a monopolist. d. consider exiting the market

consider how competing firms might respond to its actions

The prisoners' dilemma provides insights into the a. difficulty of maintaining cooperation. b. benefits of avoiding cooperation. c. benefits of government ownership of monopoly. d. ease with which oligopoly firms maintain high prices.

difficulty of maintaining cooperation

A tit-for-tat strategy starts out a. conciliatory and then encourages an optimal social outcome among the other players. b. unfriendly and then encourages friendly strategies among players. c. friendly, then penalizes unfriendly players, and forgives them if warranted. d. aggressive, then compensates losing players, and eventually forgives unfriendly players

friendly, then penalizes unfriendly players, and forgives them if warranted

When firms are faced with making strategic choices in order to maximize profit, economists typically use a. the theory of monopoly to model their behavior. b. the theory of aggressive competition to model their behavior. c. game theory to model their behavior. d. cartel theory to model their behavior.

game theory to model their behavior

The prisoners' dilemma is an important game to study because a. most games present zero-sum alternatives. b. it identifies the fundamental difficulty in maintaining cooperative agreements. c. strategic decisions faced by prisoners are identical to those faced by firms engaged in competitive agreements. d. All of the above are correct

it identifies the fundamental difficulty in maintaining cooperative agreements

As the number of firms in an oligopoly market grows larger, the price will approach a. marginal cost. b. average fixed cost. c. zero. d. the monopoly price.

marginal cost

There are two types of imperfectly competitive markets: a. monopoly and monopolistic competition. b. monopoly and oligopoly. c. monopolistic competition and oligopoly. d. monopolistic competition and cartels.

monopolistic competition and oligopoly

Markets with only a few sellers, each offering a product similar or identical to the others, are typically referred to as a. competitive markets. b. monopoly markets. c. monopolistically competitive markets. d. oligopoly markets

oligopoly markets

Refer to Table 16-5. The owners of SuperDuper Saver and Ultimate Saver meet for a friendly game of golf one afternoon and happen to discuss a strategy to optimize growth related profit. They should both agree to a. increase their store and parking lot sizes. b. refrain from increasing their store and parking lot sizes. c. be more competitive in capturing market share. d. share the context of their conversation with the Federal Trade Commission.

refrain from increasing their store and parking lot sizes

In a game, a dominant strategy is, by definition, a. the best strategy for a player to follow only if other players are cooperative. b. the best strategy for a player to follow, regardless of the strategies followed by other players. c. a strategy that always leads to a Nash equilibrium. d. a strategy that leads to one player's interests dominating the interests of the other players.

the best strategy for a player to follow, regardless of the strategies followed by other players

In markets characterized by oligopoly, a. the oligopolists are best off cooperating and behaving like a monopolist. b. collusive agreements will always prevail. c. collective profits are always lower with cartel arrangements than they are without cartel arrangements. d. pursuit of self-interest by profit-maximizing firms always maximizes collective profits in the market

the oligopolists are best off cooperating and behaving like a monopolist

The "arms race" is similar to which of the following economic scenarios? a. the welfare choice b. cost allocation theory c. the competitive game d. the prisoners' dilemma

the prisoners' dilemma

Because each oligopolist cares about its own profit rather than the collective profit of all the oligopolists together, a. they are unable to maintain the same degree of monopoly power enjoyed by a monopolist. b. each firm's profit always ends up being zero. c. society is worse off as a result. d. All of the above are correct.

they are unable to maintain the same degree of monopoly power enjoyed by a monopolist