Question 1

The primary purpose of competition legislation is to

Accepted Answer

A)   protect small businesses.
B)   protect consumers.
C)   ensure firms earn only a fair profit.
D)   All of the above.E) B) and C)
F) A) and D)

Question 2

There is a constant tension in an oligopoly between cooperation and self-interest because after an agreement to reduce production is reached, it is profitable for each individual firm to cheat and produce more.

Accepted Answer

A) True 
 B)False

Question 3

Even when allowed to collude, firms in an oligopoly may choose to cheat on their agreements with the rest of the cartel. Why?

Accepted Answer

Individual profits can be incr...

Question 4

Many economists argue that resale price maintenance

Accepted Answer

A)   has a legitimate purpose of stopping discount retailers from free riding on the services provided by full service retailers.
B)   is price fixing and, therefore, is prohibited by law.
C)   is price fixing and, therefore, is prohibited by law and enhances the market power of the producer.
D)   enhances the market power of the producer.E) B) and C)
F) C) and D)

Question 5

As the number of firms in an oligopoly increases, the

Accepted Answer

A)   price approaches marginal cost, and the quantity approaches the socially efficient level.
B)   price and quantity approach the monopoly levels.
C)   price effect exceeds the output effect.
D)   individual firms' profits increase.E) B) and C)
F) C) and D)

Question 6

The unique feature of an oligopoly market is that the actions of one seller have a significant impact on the profits of all of the other sellers in the market.

Accepted Answer

A) True 
 B)False

Question 7

Resale price maintenance may be justified if

Accepted Answer

A)   a manufacturer wishes to ensure that its retailers are able to provide knowledgeable sales staff to advise consumers.
B)   a manufacturer wishes to ensure that its retailers are able to pay a high price for its products.
C)   a manufacturer wishes to ensure that its retailers do not compete with each other.
D)   a manufacturer's product is one that has a long life,
E)  g. cars.F) C) and D)
G) A) and D)

Question 8

If oligopolists engage in collusion and successfully form a cartel, the market outcome is

Accepted Answer

A)   the same as if it were served by competitive firms.
B)   efficient because cooperation improves efficiency.
C)   the same as if it were served by a monopoly.
D)   known as a Nash equilibrium.E) A) and D)
F) None of the above

Question 9

As a group, oligopolists would always be better off if they would act collectively

Accepted Answer

A)   as if they were each seeking to maximize their own individual profits.
B)   in a manner that would prohibit collusive agreements.
C)   as a single monopolist.
D)   as a single perfectly competitive firm.E) All of the above
F) C) and D)

Question 10

When an oligopolist individually chooses its level of production to maximize its profits, it produces an output that is

Accepted Answer

A)   more than the level produced by a monopoly and less than the level produced by a competitive market.
B)   less than the level produced by a monopoly and more than the level produced by a competitive market.
C)   less than the level produced by either monopoly or a competitive market.
D)   more than the level produced by either monopoly or a competitive market.E) B) and C)
F) None of the above

Question 11

As the concentration ratio decreases, an oligopolistic market looks more like

Accepted Answer

A)   monopoly.
B)   duopoly.
C)   monopolistic competition.
D)   a collusion solution.E) A) and D)
F) A) and C)

Question 12

A dominant strategy is one that

Accepted Answer

A)   makes every player better off.
B)   makes at least one player better off without hurting the competitiveness of any other player.
C)   increases the total pay-off for the player concerned.
D)   is best for the player concerned, regardless of what strategy other players follow.E) A) and D)
F) A) and C)

Question 13

The price and quantity generated by a Nash equilibrium is closer to the competitive solution than the price and quantity generated by a cartel.

Accepted Answer

A) True 
 B)False

Question 14

When firms cooperate with one another, it is generally good for the cooperating firms.

Accepted Answer

A) True 
 B)False  True

Question 15

Explain how the output effect and the price effect influence the production decision of the individual oligopolist.

Accepted Answer

Since the individual oligopolist faces a...

Question 16

Figure 1   Price  Quantity €60510004200033000240001500006000\begin{array}{|c|c|}\hline 	ext { Price } & 	ext { Quantity } \\hline € 6 & 0 \\hline 5 & 1000 \\hline 4 & 2000 \\hline 3 & 3000 \\hline 2 & 4000 \\hline 1 & 5000 \\hline 0 & 6000 \\hline\end{array} Price €6543210​ Quantity 0100020003000400050006000​​ 
-Refer to Figure 1. If the duopolists in this football market collude and successfully form a cartel, how much profit will each earn?

Accepted Answer

A)   €4,500
B)   €4,000
C)   €1,500
D)   €9,000
E)   €3,000 F) B) and C)
G) A) and C)

Question 17

Figure 1   Price  Quantity €60510004200033000240001500006000\begin{array}{|c|c|}\hline 	ext { Price } & 	ext { Quantity } \\hline € 6 & 0 \\hline 5 & 1000 \\hline 4 & 2000 \\hline 3 & 3000 \\hline 2 & 4000 \\hline 1 & 5000 \\hline 0 & 6000 \\hline\end{array} Price €6543210​ Quantity 0100020003000400050006000​​ 
-Refer to Figure 1. If the duopolists are unable to collude, how much profit will each earn when the market reaches a Nash equilibrium?

Accepted Answer

A)   €8,000
B)   €9,000
C)   €2,500
D)   €4,000
E)   €4,500 F) A) and B)
G) C) and D)

Question 18

When an oligopolist individually chooses its level of production to maximize its profits, it charges a price that is

Accepted Answer

A)   more than the price charged by either monopoly or a competitive market.
B)   less than the price charged by either monopoly or a competitive market.
C)   more than the price charged by a monopoly and less than the price charged by a competitive market.
D)   less than the price charged by a monopoly and more than the price charged by a competitive market.E) None of the above
F) B) and C) D

Question 19

Predatory pricing occurs when a firm cuts prices with the intention of driving competitors out of the market so that the firm can become a monopolist and later raise prices.

Accepted Answer

A) True 
 B)False

Question 20

Explain the practice of resale price maintenance and discuss why it is controversial.

Accepted Answer

Resale price maintenance is a requirement by producers that retailers sell their product for a price specified by the manufacturer. It is controversial because on the surface it appears to limit the ability of retailers to compete on the basis of price. However, if the manufacturer does not exercise resale price maintenance a free-rider problem may become evident among the retailers and ultimately lead to lower profits for the manufacturer.

Exam 16: Market Structures Iii: Oligopoly

The primary purpose of competition legislation is to

Correct Answer
verified

There is a constant tension in an oligopoly between cooperation and self-interest because after an agreement to reduce production is reached, it is profitable for each individual firm to cheat and produce more.

Correct Answer
verified

Even when allowed to collude, firms in an oligopoly may choose to cheat on their agreements with the rest of the cartel. Why?

Correct Answer
verified
Individual profits can be incr...
View Answer

Many economists argue that resale price maintenance

Correct Answer
verified

As the number of firms in an oligopoly increases, the

Correct Answer
verified

The unique feature of an oligopoly market is that the actions of one seller have a significant impact on the profits of all of the other sellers in the market.

Correct Answer
verified

Resale price maintenance may be justified if

Correct Answer
verified

If oligopolists engage in collusion and successfully form a cartel, the market outcome is

Correct Answer
verified

As a group, oligopolists would always be better off if they would act collectively

Correct Answer
verified

When an oligopolist individually chooses its level of production to maximize its profits, it produces an output that is

Correct Answer
verified

As the concentration ratio decreases, an oligopolistic market looks more like

Correct Answer
verified

A dominant strategy is one that

Correct Answer
verified

The price and quantity generated by a Nash equilibrium is closer to the competitive solution than the price and quantity generated by a cartel.

Correct Answer
verified

When firms cooperate with one another, it is generally good for the cooperating firms.

Correct Answer
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True

Explain how the output effect and the price effect influence the production decision of the individual oligopolist.

Correct Answer
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Since the individual oligopolist faces a...
View Answer

Correct Answer
verified

Correct Answer
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When an oligopolist individually chooses its level of production to maximize its profits, it charges a price that is

Correct Answer
verified
D

Predatory pricing occurs when a firm cuts prices with the intention of driving competitors out of the market so that the firm can become a monopolist and later raise prices.

Correct Answer
verified

Explain the practice of resale price maintenance and discuss why it is controversial.

Exam 16: Market Structures Iii: Oligopoly

The primary purpose of competition legislation is to

Correct AnswerverifiedShow Answer

There is a constant tension in an oligopoly between cooperation and self-interest because after an agreement to reduce production is reached, it is profitable for each individual firm to cheat and produce more.

Correct AnswerverifiedShow Answer

Even when allowed to collude, firms in an oligopoly may choose to cheat on their agreements with the rest of the cartel. Why?

Correct AnswerverifiedIndividual profits can be incr...View AnswerShow Answer

Many economists argue that resale price maintenance

Correct AnswerverifiedShow Answer

As the number of firms in an oligopoly increases, the

Correct AnswerverifiedShow Answer

The unique feature of an oligopoly market is that the actions of one seller have a significant impact on the profits of all of the other sellers in the market.

Correct AnswerverifiedShow Answer

Resale price maintenance may be justified if

Correct AnswerverifiedShow Answer

If oligopolists engage in collusion and successfully form a cartel, the market outcome is

Correct AnswerverifiedShow Answer

As a group, oligopolists would always be better off if they would act collectively

Correct AnswerverifiedShow Answer

When an oligopolist individually chooses its level of production to maximize its profits, it produces an output that is

Correct AnswerverifiedShow Answer

As the concentration ratio decreases, an oligopolistic market looks more like

Correct AnswerverifiedShow Answer

A dominant strategy is one that

Correct AnswerverifiedShow Answer

The price and quantity generated by a Nash equilibrium is closer to the competitive solution than the price and quantity generated by a cartel.

Correct AnswerverifiedShow Answer

When firms cooperate with one another, it is generally good for the cooperating firms.

Correct AnswerverifiedTrue

Explain how the output effect and the price effect influence the production decision of the individual oligopolist.

Correct AnswerverifiedSince the individual oligopolist faces a...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When an oligopolist individually chooses its level of production to maximize its profits, it charges a price that is

Correct AnswerverifiedD

Predatory pricing occurs when a firm cuts prices with the intention of driving competitors out of the market so that the firm can become a monopolist and later raise prices.

Correct AnswerverifiedShow Answer

Explain the practice of resale price maintenance and discuss why it is controversial.

Correct Answer
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Correct Answer
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Correct Answer
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Individual profits can be incr...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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True

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Since the individual oligopolist faces a...
View Answer

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D

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