Question 1

The diagram shows the extensive form version of a strategic game between the two nationally dominant coffee sellers, Corporate Coffee and Jumbo Java, both of whom are considering opening coffee shops in a new town. The payoffs represent, in thousands per month, the profit (or loss) the firm will realize from its decision. What is the solution to this extensive form game?

Accepted Answer

A)  Corporate Coffee will open a new coffee shop in this town; Jumbo Java will not.
B)  Jumbo Java will open a new coffee shop in this town; Corporate Coffee will not.
C)  Both firms will open a new coffee shop in this town.
D)  Neither firm will open a new coffee shop in this town.E) A) and C)
F) B) and C)

Question 2

Refer to the payoff matrix. Bob's Burgers and Sam's Sandwiches are competing restaurants in a small town. Both are considering adding pizza to their line of products. If this is a sequential game and Bob's moves first, which cell represents the final outcome?

Accepted Answer

A)  A
B)  B
C)  C
D)  DE) C) and D)
F) B) and D)

Question 3

Some observers assert that oligopolies are less socially desirable than pure monopolies because

Accepted Answer

A)  monopolies are often government-regulated, whereas collusion among oligopolies may lead to similar results as a monopoly yet, having several firms, may give the illusion of competition.
B)  monopolies have unique products, whereas product differentiation in oligopolies would lead to economic inefficiencies.
C)  mutual interdependence among firms in an oligopoly would lead to more inefficiencies than in the case of a monopoly.
D)  oligopolies tend to engage in advertising more so than monopolies.E) None of the above
F) All of the above

Question 4

Interindustry competition refers to the fact that

Accepted Answer

A)  oligopolistic producers establish a common price for their products.
B)  products are identical in a purely competitive industry.
C)  firms that sell a product at one stage of production buy materials and parts from other firms at prior stages of production.
D)  in some markets, the producers of a certain commodity might face competition from products of other industries.E) B) and C)
F) A) and C)

Question 5

Use your basic knowledge and your understanding of market structures to answer this question. Which of the following companies most closely approximates a homogeneous oligopolist in a highly concentrated industry?

Accepted Answer

A)  Kellogg's Cereals
B)  Pittsburgh Plate Glass
C)  Ford Motor Company
D)  Starbucks CoffeeE) B) and C)
F) A) and D)

Question 6

In repeated games, players may be willing to accept lower payoffs in the short run in exchange for greater net payoffs over the long run.

Accepted Answer

A) True 
 B)False  True

Question 7

In which set of market models are there the most significant barriers to entry?

Accepted Answer

A)  monopolistic competition and pure competition
B)  monopolistic competition and pure monopoly
C)  oligopoly and monopolistic competition
D)  oligopoly and pure monopolyE) None of the above
F) B) and C) D

Question 8

The kinked-demand curve model shows that oligopolistic firms tend to change their prices frequently.

Accepted Answer

A) True 
 B)False

Question 9

An oligopolistic firm tends to have less control over its own pricing decisions than a firm in

Accepted Answer

A)  pure competition or monopolistic competition.
B)  monopoly only.
C)  pure competition or monopoly.
D)  pure competition only.E) A) and B)
F) B) and C)

Question 10

Answer the question based on the payoff matrices for a repeated game involving two firms that are considering introducing new products to the market. The numbers indicate the profit from following either a strategy to introduce a new product or a strategy to not introduce a new product.First game.  Second game.  In the first game, if firm B doesn't introduce a new product and firm A does, then firm A would be better off if

Accepted Answer

A)  both firms introduce new products in game 2.
B)  neither firm introduces new products in game 2.
C)  firm B reciprocates in game 2.
D)  game 2 reaches a Nash equilibrium.E) None of the above
F) A) and B)

Question 11

Refer to the payoff matrix. Bob's Burgers and Sam's Sandwiches are competing restaurants in a small town. Both are considering adding pizza to their line of products. If this is a sequential game but we don't know who moves first, what can we say about the final outcome?

Accepted Answer

A)  There is no Nash equilibrium attainable for this game.
B)  Cell A represents the only Nash equilibrium possible for this game.
C)  Cell D represents the only Nash equilibrium possible for this game.
D)  Cells B and C both represent possible Nash equilibrium outcomes for this game.E) All of the above
F) A) and B)

Question 12

In which of the following market models do demand and marginal revenue not diverge?

Accepted Answer

A)  pure competition
B)  monopolistic competition
C)  pure monopoly
D)  oligopolyE) All of the above
F) A) and B)

Question 13

A positive effect of advertising for society is that it

Accepted Answer

A)  increases market share for the dominant firm in the industry.
B)  provides useful information to reduce search cost for consumers.
C)  raises barriers to entry into the industry and protects existing firms.
D)  creates price leadership and gives firms guidance in dealing with rivals.E) B) and C)
F) A) and D)

Question 14

When firms in an industry reach an agreement to fix prices, divide up market share, or otherwise restrict competition, they are practicing the strategy of

Accepted Answer

A)  interindustry competition.
B)  limit pricing.
C)  price leadership.
D)  collusion.E) C) and D)
F) A) and B)

Question 15

Which of the following nations is not a member of the OPEC oil cartel?

Accepted Answer

A)  Iraq
B)  Iran
C)  Venezuela
D)  NorwayE) C) and D)
F) A) and D) D

Question 16

In a sequential game with two firms, the first mover into a new market

Accepted Answer

A)  is guaranteed positive economic profits.
B)  is assured of blocking any potential second mover from entering the market.
C)  runs the risk that the untested new market will not provide enough customers.
D)  will likely set a high price to reap greater profits until the second mover enters.E) B) and C)
F) A) and D)

Question 17

Refer to the diagram for a non-collusive oligopolist. We assume that the firm is initially in equilibrium at point E, where the equilibrium price and quantity are P and Q. If the firm's rivals will ignore any price increase but match any price reduction, over what range might marginal cost rise without disturbing equilibrium price and output?

Accepted Answer

A)  bE
B)  ab
C)  Qa
D)  QbE) B) and C)
F) None of the above

Question 18

In an oligopoly, producers' agreements to restrict output tend to be unstable because each firm has an incentive to

Accepted Answer

A)  produce more than its output quota.
B)  lower both its price and its output.
C)  raise its price above the cooperative price.
D)  establish competitive price and output levels.E) None of the above
F) A) and B)

Question 19

The so-called first-mover advantage may be observed in

Accepted Answer

A)  repeated games.
B)  multi-period games.
C)  sequential games.
D)  credible games.E) B) and C)
F) C) and D)

Question 20

A game where players choose their strategies at the same time is called a

Accepted Answer

A)  positive-sum game.
B)  zero-sum game.
C)  simultaneous game.
D)  one-time game.E) All of the above
F) C) and D)

Exam 14: Oligopoly and Strategic Behavior

Correct Answer
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Refer to the payoff matrix. Bob's Burgers and Sam's Sandwiches are competing restaurants in a small town. Both are considering adding pizza to their line of products. If this is a sequential game and Bob's moves first, which cell represents the final outcome?

Correct Answer
verified

Some observers assert that oligopolies are less socially desirable than pure monopolies because

Correct Answer
verified

Interindustry competition refers to the fact that

Correct Answer
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Use your basic knowledge and your understanding of market structures to answer this question. Which of the following companies most closely approximates a homogeneous oligopolist in a highly concentrated industry?

Correct Answer
verified

In repeated games, players may be willing to accept lower payoffs in the short run in exchange for greater net payoffs over the long run.

Correct Answer
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True

In which set of market models are there the most significant barriers to entry?

Correct Answer
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D

The kinked-demand curve model shows that oligopolistic firms tend to change their prices frequently.

Correct Answer
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An oligopolistic firm tends to have less control over its own pricing decisions than a firm in

Correct Answer
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Correct Answer
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Refer to the payoff matrix. Bob's Burgers and Sam's Sandwiches are competing restaurants in a small town. Both are considering adding pizza to their line of products. If this is a sequential game but we don't know who moves first, what can we say about the final outcome?

Correct Answer
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In which of the following market models do demand and marginal revenue not diverge?

Correct Answer
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A positive effect of advertising for society is that it

Correct Answer
verified

When firms in an industry reach an agreement to fix prices, divide up market share, or otherwise restrict competition, they are practicing the strategy of

Correct Answer
verified

Which of the following nations is not a member of the OPEC oil cartel?

Correct Answer
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D

In a sequential game with two firms, the first mover into a new market

Correct Answer
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Correct Answer
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In an oligopoly, producers' agreements to restrict output tend to be unstable because each firm has an incentive to

Correct Answer
verified

The so-called first-mover advantage may be observed in

Correct Answer
verified

A game where players choose their strategies at the same time is called a

Correct Answer
verified

Exam 14: Oligopoly and Strategic Behavior

Correct AnswerverifiedShow Answer

Refer to the payoff matrix. Bob's Burgers and Sam's Sandwiches are competing restaurants in a small town. Both are considering adding pizza to their line of products. If this is a sequential game and Bob's moves first, which cell represents the final outcome?

Correct AnswerverifiedShow Answer

Some observers assert that oligopolies are less socially desirable than pure monopolies because

Correct AnswerverifiedShow Answer

Interindustry competition refers to the fact that

Correct AnswerverifiedShow Answer

Use your basic knowledge and your understanding of market structures to answer this question. Which of the following companies most closely approximates a homogeneous oligopolist in a highly concentrated industry?

Correct AnswerverifiedShow Answer

In repeated games, players may be willing to accept lower payoffs in the short run in exchange for greater net payoffs over the long run.

Correct AnswerverifiedTrue

In which set of market models are there the most significant barriers to entry?

Correct AnswerverifiedD

The kinked-demand curve model shows that oligopolistic firms tend to change their prices frequently.

Correct AnswerverifiedShow Answer

An oligopolistic firm tends to have less control over its own pricing decisions than a firm in

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Refer to the payoff matrix. Bob's Burgers and Sam's Sandwiches are competing restaurants in a small town. Both are considering adding pizza to their line of products. If this is a sequential game but we don't know who moves first, what can we say about the final outcome?

Correct AnswerverifiedShow Answer

In which of the following market models do demand and marginal revenue not diverge?

Correct AnswerverifiedShow Answer

A positive effect of advertising for society is that it

Correct AnswerverifiedShow Answer

When firms in an industry reach an agreement to fix prices, divide up market share, or otherwise restrict competition, they are practicing the strategy of

Correct AnswerverifiedShow Answer

Which of the following nations is not a member of the OPEC oil cartel?

Correct AnswerverifiedD

In a sequential game with two firms, the first mover into a new market

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In an oligopoly, producers' agreements to restrict output tend to be unstable because each firm has an incentive to

Correct AnswerverifiedShow Answer

The so-called first-mover advantage may be observed in

Correct AnswerverifiedShow Answer

A game where players choose their strategies at the same time is called a

Correct AnswerverifiedShow Answer

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True

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D

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D

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