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Assuming that oligopolists do not have the opportunity to collude,once they have reached the Nash equilibrium,it


A) is always in their best interest to supply more to the market.
B) is always in their best interest to supply less to the market.
C) is always in their best interest to leave their quantities supplied unchanged.
D) may be in their best interest to do any of the above, depending on market conditions.

E) None of the above
F) A) and B)

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Table 17-11 Two cigarette manufacturers (Firm A and Firm B) are faced with lawsuits from states to recover the healthcare related expenses associated with cigarette smoking. Both cigarette firms have evidence that indicates that cigarette smoke causes lung cancer (and other related illnesses) . State prosecutors do not have access to the same data used by cigarette manufacturers and thus will have difficulty recovering full costs without the help of at least one cigarette firm study. Each firm has been presented with an opportunity to lower its liability in the suit if it cooperates with attorneys representing the states. Table 17-11 Two cigarette manufacturers (Firm A and Firm B) are faced with lawsuits from states to recover the healthcare related expenses associated with cigarette smoking. Both cigarette firms have evidence that indicates that cigarette smoke causes lung cancer (and other related illnesses) . State prosecutors do not have access to the same data used by cigarette manufacturers and thus will have difficulty recovering full costs without the help of at least one cigarette firm study. Each firm has been presented with an opportunity to lower its liability in the suit if it cooperates with attorneys representing the states. -Refer to Table 17-11.If both firms follow a dominant strategy,Firm A's profits (losses) will be A) $-50 B) $-20 C) $-10 D) $-5 -Refer to Table 17-11.If both firms follow a dominant strategy,Firm A's profits (losses) will be


A) $-50
B) $-20
C) $-10
D) $-5

E) None of the above
F) B) and C)

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In the prisoners' dilemma game with Bonnie and Clyde as the players,the likely outcome is


A) a very good outcome for both players.
B) a very good outcome for Bonnie, but a bad outcome for Clyde.
C) a very good outcome for Clyde, but a bad outcome for Bonnie.
D) a bad outcome for both players.

E) None of the above
F) A) and B)

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An oligopolist will increase production if the output effect is


A) less than the price effect.
B) equal to the price effect.
C) greater than the price effect.
D) The oligopolist never has an incentive to increase production.

E) A) and B)
F) None of the above

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A particular cable TV company requires a household to subscribe to its high-speed Internet service if it subscribes to cable TV,and vice versa.This practice


A) is referred to as tying.
B) is regarded by some economists as a form of price discrimination.
C) is controversial among economists because they disagree on whether it has adverse effects for society as a whole.
D) All of the above are correct.

E) B) and D)
F) B) and C)

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An agreement among firms regarding price and/or production levels is called


A) an antitrust market.
B) a free-trade arrangement.
C) collusion.
D) a Nash agreement.

E) A) and C)
F) A) and B)

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


A) the greater the number of oligopolists.
B) the larger the number of buyers of the oligopolists' product.
C) the smaller the number of buyers of the oligopolists' product.
D) the more likely it is that the game among the oligopolists will be played over and over again.

E) A) and B)
F) A) and D)

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In a typical cartel agreement,the cartel maximizes profit when it


A) behaves as a monopolist.
B) behaves as a duopolist.
C) is flexible in enforcing production targets.
D) behaves as a perfectly competitive firm.

E) B) and C)
F) None of the above

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Table 17-10 The table shows the town of Driveaway's demand schedule for gasoline. Assume the town's gasoline seller(s) incurs a cost of $2 for each gallon sold, with no fixed cost. Table 17-10 The table shows the town of Driveaway's demand schedule for gasoline. Assume the town's gasoline seller(s) incurs a cost of $2 for each gallon sold, with no fixed cost. -Refer to Table 17-10.If the market for gasoline in Driveaway is a monopoly,then the profit-maximizing monopolist will charge a price of A) $6 and sell 100 gallons. B) $5 and sell 150 gallons. C) $4 and sell 200 gallons. D) $3 and sell 250 gallons. -Refer to Table 17-10.If the market for gasoline in Driveaway is a monopoly,then the profit-maximizing monopolist will charge a price of


A) $6 and sell 100 gallons.
B) $5 and sell 150 gallons.
C) $4 and sell 200 gallons.
D) $3 and sell 250 gallons.

E) B) and D)
F) All of the above

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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.

E) A) and B)
F) None of the above

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Which of the following questions about predatory pricing remains unresolved?


A) Are the courts capable of determining which price cuts are competitive and which are predatory?
B) Are the courts capable of determining which price cuts are good for consumers?
C) Is predatory pricing ever a profitable business strategy?
D) All of the above questions about predatory pricing are unresolved.

E) B) and C)
F) A) and D)

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The Sherman Antitrust Act prohibits executives of competing companies from


A) fixing prices, but it does not prohibit them from talking about fixing prices.
B) even talking about fixing prices.
C) sharing with one another their knowledge of game theory.
D) failing to stand by agreements that they had made with one another.

E) A) and B)
F) B) and C)

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Table 17-5. Imagine a small town in which only two residents, Kunal and Naj, own wells that produce safe drinking water. Each week Kunal and Naj work together to decide how many gallons of water to pump, to bring the water to town, and to sell it at whatever price the market will bear. Assume Kunal and Naj can pump as much water as they want without cost so that the marginal cost of water equals zero. The weekly town demand schedule and total revenue schedule for water are shown in the table below. Table 17-5. Imagine a small town in which only two residents, Kunal and Naj, own wells that produce safe drinking water. Each week Kunal and Naj work together to decide how many gallons of water to pump, to bring the water to town, and to sell it at whatever price the market will bear. Assume Kunal and Naj can pump as much water as they want without cost so that the marginal cost of water equals zero. The weekly town demand schedule and total revenue schedule for water are shown in the table below. -Refer to Table 17-5.The socially efficient level of water supplied to the market would be A) 50 gallons. B) 150 gallons. C) 225 gallons. D) 300 gallons. -Refer to Table 17-5.The socially efficient level of water supplied to the market would be


A) 50 gallons.
B) 150 gallons.
C) 225 gallons.
D) 300 gallons.

E) B) and D)
F) All of the above

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Table 17-8. For a certain small town, the table shows the demand schedule for water. Assume the marginal cost of supplying water is constant at $4 per bottle. Table 17-8. For a certain small town, the table shows the demand schedule for water. Assume the marginal cost of supplying water is constant at $4 per bottle. -Refer to Table 17-8.If there are two suppliers of water,Victor and Sami,and if they have successfully formed a cartel and split the market evenly,then how many bottles will Sami supply? A) 100 B) 200 C) 300 D) 400 -Refer to Table 17-8.If there are two suppliers of water,Victor and Sami,and if they have successfully formed a cartel and split the market evenly,then how many bottles will Sami supply?


A) 100
B) 200
C) 300
D) 400

E) None of the above
F) A) and D)

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Table 17-24 Two firms are considering going out of business and selling their assets. Each considers what happens if the other goes out of business. The payoff matrix below shows the net gain or loss to each firm. Table 17-24 Two firms are considering going out of business and selling their assets. Each considers what happens if the other goes out of business. The payoff matrix below shows the net gain or loss to each firm. -Refer to Table 17-24.Which firm's dominant strategy is to sell? A) firm A's and firm B's B) firm A's but not firm B's C) firm B's but not firm A's D) neither firm A's nor firm B's -Refer to Table 17-24.Which firm's dominant strategy is to sell?


A) firm A's and firm B's
B) firm A's but not firm B's
C) firm B's but not firm A's
D) neither firm A's nor firm B's

E) A) and B)
F) B) and D)

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The Sherman Antitrust Act prohibits price-fixing in the sense that


A) competing executives cannot even talk about fixing prices.
B) competing executives can talk about fixing prices, but they cannot take action to fix prices.
C) a price-fixing agreement can lead to prosecution provided the government can show that the public was not well-served by the agreement.
D) None of the above is correct. The Sherman Act did not address the matter of price-fixing.

E) All of the above
F) B) and D)

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To increase their individual profits,members of a cartel have an incentive to


A) charge a higher price than the other members of the cartel.
B) increase production above the level agreed upon.
C) ignore the choices made by the other firms and act as a monopolist.
D) charge the same price a monopolist would charge.

E) A) and C)
F) A) and D)

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In a competitive market,strategic interactions among the firms are not important.

A) True
B) False

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Table 17-7. The table shows the demand schedule for a particular product. Table 17-7. The table shows the demand schedule for a particular product. -Refer to Table 17-7.If this market is perfectly competitive and the marginal cost is constant at $2 per unit,then how much output will be produced? A) 20 B) 30 C) 35 D) 40 -Refer to Table 17-7.If this market is perfectly competitive and the marginal cost is constant at $2 per unit,then how much output will be produced?


A) 20
B) 30
C) 35
D) 40

E) All of the above
F) A) and D)

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Table 17-12 Each year the United States considers renewal of Most Favored Nation (MFN) trading status with Farland (a mythical nation) . Historically, legislators have made threats of not renewing MFN status because of human rights abuses in Farland. The non-renewal of MFN trading status is likely to involve some retaliatory measures by Farland. The payoff table below shows the potential economic gains associated with a game in which Farland may impose trade sanctions against U.S. firms and the United States may not renew MFN status with Farland. The table contains the dollar value of all trade-flow benefits to the United States and Farland. Table 17-12 Each year the United States considers renewal of Most Favored Nation (MFN) trading status with Farland (a mythical nation) . Historically, legislators have made threats of not renewing MFN status because of human rights abuses in Farland. The non-renewal of MFN trading status is likely to involve some retaliatory measures by Farland. The payoff table below shows the potential economic gains associated with a game in which Farland may impose trade sanctions against U.S. firms and the United States may not renew MFN status with Farland. The table contains the dollar value of all trade-flow benefits to the United States and Farland. -Refer to Table 17-12.When this game reaches a Nash equilibrium,the value of trade flow benefits will be A) United States $35 b and Farland $285 b. B) United States $65 b and Farland $75 b. C) United States $140 b and Farland $5 b. D) United States $130 b and Farland $275 b. -Refer to Table 17-12.When this game reaches a Nash equilibrium,the value of trade flow benefits will be


A) United States $35 b and Farland $285 b.
B) United States $65 b and Farland $75 b.
C) United States $140 b and Farland $5 b.
D) United States $130 b and Farland $275 b.

E) A) and B)
F) A) and C)

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