LearningCurve - Chapter 14: Oligopoly

A(n) _____ equilibrium is the result when each player chooses the action that maximizes his or her payoff matrix, given the actions of the other players. Nash complementary unstable cooperative

Nash

The table shows the demand schedule for bushels of pears sold by 2 farms, ABC and XYZ. Assume that the marginal cost of selling the pears is zero. If the 2 farms are maximizing industry profit and splitting the profit evenly, each farm's profit will be: Please choose the correct answer from the following choices, and then select the submit answer button. $1050. $600. $625. $1200.

$625.

Antitrust legislation was first passed in the U.S. in the year: 1870. 1895. 1905. 1890.

1890

The table shows the demand schedule for bushels of pears sold by 2 farms, ABC and XYZ. Assume that the marginal cost of selling the pears is zero. Suppose the 2 farms have agreed to maximize industry profit and split the profit evenly. If ABC expands production to 175 bushels while XYZ abides by the agreement: both farms will experience an increase in profit. ABC's profit will decrease and XYZ's profit will increase. both farms will experience a decrease in profit. ABC's profit will increase and XYZ's profit will decrease.

ABC's profit will increase and XYZ's profit will decrease.

The matrix shows the outcomes for Ford and Chevrolet if they offer rebates or not on their best-selling trucks, the F-150 and the Silverado. True or False: The noncooperative equilibrium is when neither company offers a rebate. This is _____.

False

Two logging companies, Peehl Brothers and Stump Logging, share the rights to log national forest land. They agree to cut trees 4 feet in diameter or greater to sustain the plot. They can cheat and cut trees with smaller diameters and earn greater profit. The payoff matrix of their profits under different strategies is shown. Which decision results in Peehl Brothers earning more than Stump Logging? Peehl Brothers cheats; Stump Logging abides by the agreement. Peehl Brothers abides by the agreement; Stump Logging cheats. Both companies abide by the agreement. Both companies cheat.

Peehl Brothers cheats; Stump Logging abides by the agreement.

True or False: Tit for tat behavior often leads to successful tacit collusion. This is _____.

True

If several companies agree to restrict output so as to maximize joint profits, the group of companies is called: a duopoly. a cartel. oligopolistic competition. monopolistic competition.

a cartel.

If the Herfindahl-Hirschman Index (HHI) for an industry is 2100, the market is: perfectly competitive. somewhat competitive. strongly competitive. an oligopoly.

an oligopoly.

If one firm in a duopoly cartel expands output beyond the agreed-upon amount: the other firm will be able to charge a higher price. both firms will face a lower market price. the other firm will have no incentive to expand its output as well. the other firm will earn more profit.

both firms will face a lower market price.

If several companies agree to produce an amount that maximizes the joint profits of the group one would say the companies are: engaging in noncooperative behavior. in a cartel. perfectly competitive. monopolistically competitive.

in a cartel.

Game theory is the study of behavior in situations of: perfect competition. imperfect information. interdependence. imperfect competition.

interdependence

When one firm's decisions significantly affect the profits of other firms in the industry, the firms are in a situation of: independence. interdependence. collusion. perfect competition.

interdependence

The matrix shows the outcomes for Ford and Chevrolet if they offer rebates or not on their best-selling trucks, the F-150 and the Silverado. If Chevrolet and Ford collude, then: neither firm offers a rebate. Chevrolet offers a rebate and Ford doesn't. both offer rebates. Ford offers a rebate and Chevrolet doesn't.

neither firm offers a rebate.

Which of the following makes it easier for firms to tacitly collude? buyers with high bargaining power large numbers of firms differences in interests similarity in interests

similarity in interests

The table shows the demand schedule and total revenue for textbook sales by University Bookstore and College Bookstore combined. Assume that the marginal cost of selling the books is zero. If the 2 stores form a cartel and agree to split profits evenly, each store will receive profits of _____ dollars.

108

The table shows the demand schedule and total revenue for textbook sales by University Bookstore and College Bookstore combined. Assume that the marginal cost of selling the books is zero. If industry sales are 16 books, the price per book will be _____ dollars.

12

The table shows the demand schedule for bushels of pears sold by 2 farms, ABC and XYZ. Assume that the marginal cost of selling the pears is zero. If the 2 farms are maximizing industry profit and splitting the profit evenly, each farm will produce _____ bushels. 50 100 150 125

125

The table shows the demand schedule and total revenue for textbook sales by University Bookstore and College Bookstore combined. Assume that the marginal cost of selling the books is zero. Suppose that the 2 stores have agreed to maximize industry profit and split that profit evenly. If both stores cheat on the agreement by selling 2 additional books, industry profit will fall to $ _____. 192 120 210 162

192

The matrix shows the outcomes for Ford and Chevrolet if they offer rebates or not on their best-selling trucks, the F-150 and the Silverado. If Chevrolet is convinced that Ford will NOT offer a rebate, Chevrolet can increase its profits by _____ billion dollars if it chooses to offer a rebate rather than to not offer a rebate.

4

Two logging companies, Peehl Brothers and Stump Logging, share the rights to log national forest land. They agree to cut trees 4 feet in diameter or greater to sustain the plot. They can cheat and cut trees with smaller diameters and earn greater profit. The payoff matrix of their profits under different strategies is shown. If both companies cheat, what are their profit amounts? Peehl Brothers earns $1 million; Stump Logging earns $7 million. Both companies earn $2 million. Both companies earn $5 million. Peehl Brothers earns $7 million; Stump Logging earns $1 million.

Both companies earn $2 million.

True or False: Firms that sell to large retailers like Walmart are likely to be successful at tacit collusion. This is _____.

False

True or False: Firms that violate the collusive agreement by producing more than their assigned share of monopoly output are not acting in their own best interest. This is _____.

False

Two logging companies, Peehl Brothers and Stump Logging, share the rights to log national forest land. They agree to cut trees 4 feet in diameter or greater to sustain the plot. They can cheat and cut smaller diameter trees and earn greater profit. The payoff matrix of their profits under different strategies is shown. True or False: If Stump is cutting trees 4 feet and greater, Peehl's dominant strategy is to cut trees 4 feet and greater also. This is _____.

False

Which of the following would make it the MOST difficult for dairy farmers in Wisconsin to collude? There are many firms in the industry producing a standard product. There are only a few firms in the industry with large market shares. There are many firms producing a differentiated product. There are a few producers of a differentiated product.

There are many firms in the industry producing a standard product.

True or False: If firms in the travel industry compete through product differentiation, they are NOT likely to engage in price wars. This is _____.

True

True or False: The intent of the nineteenth-century trusts was to create monopoly prices. This is _____.

True

True or False: When General Motors announced its prices and Ford and Chrysler then matched, this was an example of price leadership in the domestic automobile industry. This is _____.

True

Two logging companies, Peehl Brothers and Stump Logging, share the rights to log national forest land. They agree to cut trees 4 feet in diameter or greater to sustain the plot. They can cheat and cut trees with smaller diameters and earn greater profit. The payoff matrix of their profits under different strategies is shown. True or False: If Peehl is cutting trees 4 feet and greater, Stump's dominant strategy is to cut anything. This is _____.

True

The table shows the demand schedule for bushels of pears sold by two farms, ABC and XYZ. Assume that the marginal cost of selling the pears is zero. Suppose the 2 farms have agreed to maximize industry profit and split the profit evenly. If ABC decides to cheat on the agreement and produce 175 bushels while XYC abides by the agreement, what will be each firm's level of profit? ABC will earn $500 and XYZ will earn $700. Both firms will earn $500 profit. Both firms will earn $700 profit. XYZ will earn $500 and ABC will earn $700.

XYZ will earn $500 and ABC will earn $700.

As the number of firms in an oligopolistic manufacturing industry increases, each firm has less of an incentive to behave cooperatively. it is more likely that firms will collude successfully. it becomes easier for firms to agree to restrict output. it indicates that barriers to entry are high.

each firm has less of an incentive to behave cooperatively.

As the number of firms in an oligopolistic manufacturing industry increases, each firm has less of an incentive to behave cooperatively. it is more likely that firms will collude successfully. it becomes easier for firms to agree to restrict output. it indicates that barriers to entry are high.

each firm has less of an incentive to behave cooperatively.

When one firm's decisions significantly affect the profits of other firms in the industry, the firms are in a situation of: independence. interdependence. collusion. perfect competition.

interdependence.

The matrix shows the outcomes for Ford and Chevrolet if they offer rebates or not on their best-selling trucks, the F-150 and the Silverado. The dominant strategy for Ford is to do which of the following? not offer a rebate do whatever Chevrolet does offer a rebate one does not exist

offer a rebate

Which market structures are characterized by imperfect competition? oligopoly and monopoly oligopoly and monopolistic competition monopoly and monopolistic competition monopolistic competition and perfect competition

oligopoly and monopolistic competition

Price leadership refers to a situation in which: firms compete on price without engaging in any nonprice competition. one company tacitly sets prices for the industry as a whole. the bargaining power of buyers lowers prices to the noncooperative level. firms take turns being the industry leader.

one company tacitly sets prices for the industry as a whole.

The table shows the demand schedule and total revenue for textbook sales by University Bookstore and College Bookstore combined. Suppose that the 2 stores agree to maximize industry profit and split that profit evenly. In this case, noncooperative behavior means: one firm selling fewer than 6 books. advertising a lower price and then not honoring the price. one firm selling more than 6 books. both firms abiding by the agreement.

one firm selling more than 6 books.

When one firm sets the product price and other firms in the industry follow, one says there is: noncooperative behavior. Cournot equilibrium. Bertrand equilibrium. price leadership.

price leadership.

When firms limit production and raise prices to raise each other's profits without a formal agreement, they are engaged in: perfect competition. illegal behavior. tacit collusion. noncooperative behavior.

tacit collusion.

Suppose both participants in the prisoners' dilemma game choose to follow their dominant strategy. Then: there is no other possible outcome in which both players could be better off. the resulting equilibrium is cooperative. the resulting equilibrium is a Nash equilibrium. they will each achieve the highest possible payoff.

the resulting equilibrium is a Nash equilibrium.

The table shows the demand schedule for bushels of pears sold by 2 farms, ABC and XYZ. Assume that the marginal cost of selling the pears is zero. Suppose the 2 farms have agreed to maximize industry profit and split the profit evenly. If both firms abide by the agreement: they will restrict output to 125 bushels each. industry output will be greater than the competitive level of output. they will want the price to be as low as possible. industry output will be greater than the monopoly level of output.

they will restrict output to 125 bushels each.

Which of the following is MOST likely an oligopoly market? two airlines, Northwest and US Airways, that are the only airlines with flights to Iceland from the United States several hundred apple growers in North Carolina that supply the market for apples approximately 50 fast food restaurants in a city with their own special hamburgers the only health insurance company operating in Michigan

two airlines, Northwest and US Airways, that are the only airlines with flights to Iceland from the United States