ECON Final

Which of the following statements about oligopolies is NOT CORRECT?

Unlike monopolies and monopolistically competitive markets, oligopolies prices do not exceed their marginal costs.

In the prisoner's dilemma game, self - interest leads

Each prisoner to confess

The table shows the demand schedule for a particular product. Refer to the table. Suppose the market for this product is served by two firms that have formed a cartel. What price will the cartel charge in this market if the marginal cost of production is 4$

10$ (total revenue) - (production cost)

Celia and Venya are the only producers of safe drinking water in a small town. If Celia and Venya operate as a profit maximizing monopoly in the market for water, what price will they charge?

18, because that's where the total revenue is highest

If Celia and Venya operate as a profit maximizing monopoly in the market for water, how much profit will EACH of them earn, assuming the two split the market equality?

2160, because that is the highest profit divided by 2

Refer to the table. If the marginal cost of production in this market is 4$, what is the socially efficient quantity of output?

4$

Celia and Venya. What is the socially efficient quantity of water?

480, because they make no profit. ''Socially Efficient"

If this market were perfectly competitive instead of oligopolistic and the marginal cost of production was 4$, what quantity would be produced?

50

When the firm is maximizing profit, the markup over marginal cost amounts to

50$ because the price drop from 140-90 is 50

What price will the monopolistically competitive firm charge in this market?

70$, because the ATC meets the MR

When an oligopoly market reaches a nash equilibrium

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

Refer to the figure. Which of the following areas represents the profit for this profit maximizing monopolistically competitive firm?

BCIJ

In monopolistically competitive markets, free entry and exit suggests that

All firms earn zero economic profits in the long run.

Refer to the figure. Efficient scale is reached

Beyond 133.33

Haidy consumes Pepsi exclusively. She claims that there is a clear taste difference and that competing brands of cola leave an unsavory taste in her mouth. The results of her taste test would refute claims by critics of brand names that

Brand names cause consumers to perceive differences that do not really exist.

Cartels are difficult to maintain because

Each firm has an incentive to deviate from its agreed output level

Which of the graphs depicts a short run equilibrium that will encourage the exit of some firms out of this monopolistically competitive industry?

Graph B, because the ATC is way above everything else

An oligopolist will increase production if the output effect is

Greater than the price effect

In both perfect competition and monopolistic competition, each firm

Has many competitors

The equilibrium quantity in markets characterized by oligopoly is

Higher than in monopoly markets and lower than in perfectly competitive markets

The firm in this figure is monopolistically competitive and maximizing profit. This firm

Is earning a short run economic profit.

Which of the following is true about a monopolistically competitive firm?

It can earn an economic profit in the short run, but not the long run

Which of the following is unique to a monopolistically competitive market compared to an oligopoly?

Monopolistic competition features many sellers

In which of the following market structures can firms earn economic profits in the long run?

Monopoly only

If tyler chooses not to clean, then Mathew will

Not clean, and mathew's payoff will be 10

A market structure with only a few sellers, each offering similar or identical products, is known as

Oligopoly

Which of the following conditions is a characteristic of a monopolistically competitive firm in the short run but not in the long run?

P > ATC

Which of the following conditions is a characteristic of a monopolistically competitive firm in both the short run and the long run.

P > MC

Pablo and Zak are competitors in a local market. Each is trying to decide if it is better to advertise or not advertise. The table below gives the profits to each of them based on their strategy. What will the profits be if both follow their dominant strategy?

Pablo earns 8000 and Zak earns 8000

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

Predatory pricing

Scenario: Delish, a moderately priced restaurant, has recently announced its intentions to open a restaurant in Boston, MA. As a result of the new restaurant, consumers in Boston are likely to experience a

Product variety externality, which is a positive externality

Defenders of advertising argue that in some markets, advertising may

Provide information to customers about products, including prices and seller locations.

When a monopolistically competitive firm raises its price,

Quantity demanded declines but not zero

Two CEOs from different firms in the same market collude to fix the price in the market. This action

Sherman antitrust act of 1890

In response to the situation represented by the figure, we would expect,

Some of the firms are currently in the market to exit

A monopolistic competitive firm is currently producing 21 units of output.

The firm is currently maximizing profit

In which of the following markets are strategic interactions among firms most likely to occur?

The market for tennis balls

A cooperative agreement among oligopolists is more likely to be maintained,

The more likely it is that the game among the oligopolists will be played over and over again.

In which of the following games is it clearly the case that the cooperative outcome of the game is good for the two players and bad for society?

Two airlines dominate air travel between City A and City B and each airline decides whether to charge a "high" airfare or a "low" airfare on flights between those two cities

Matthew and Tyler are two college roommates who both prefer a clean common space in their dorm room, but neither enjoys cleaning.

Tyler should always choose don't clean