Question 1

Refer to the diagram, where the numerical data show profits in millions of dollars. Beta's profits are shown in the northeast corner and Alpha's profits in the southwest corner of each cell. If Alpha and Beta engage in collusion, the outcome of the game will be at cell

Accepted Answer

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

Question 2

Repeated games may involve either simultaneous or sequential decision making.

Accepted Answer

A) True 
 B)False

Question 3

A natural monopoly's preemption of entry by other firms by exploiting its economies of scale is an example of

Accepted Answer

A)  first-mover advantage.
B)  a repeated game with reciprocity.
C)  Nash equilibrium in a single-period game.
D)  collusion in game theory.E) B) and C)
F) A) and D)

Question 4

One characteristic of sequential games is that they all have first-mover advantages.

Accepted Answer

A) True 
 B)False

Question 5

Collusive agreements between two firms are most likely to be honored when the game

Accepted Answer

A)  is a one-time game with the opportunity for a prisoner's dilemma.
B)  has a Nash equilibrium that differs from the outcome that maximizes the payoffs to the two firms.
C)  is a zero-sum game.
D)  is repeated and both firms offer credible threats if the other violates the agreement.E) B) and C)
F) A) and D)

Question 6

If the four-firm concentration ratio in an oligopolistic six-firm industry is 66.7 percent, and each firm has an equal percentage of sales, the Herfindahl index is

Accepted Answer

A)  6,667.
B)  1,668.
C)  400.
D)  2,000.E) C) and D)
F) A) and B)

Question 7

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. Which of the following statements is true about this game?

Accepted Answer

A)  There is no Nash equilibrium for this game.
B)  Corporate Coffee's entry into the market is preempted by Jumbo Java's decision.
C)  Jumbo Java's entry into the market is preempted by Corporate Coffee's decision.
D)  The players move simultaneously in this game.E) A) and D)
F) A) and C)

Question 8

Suppose that firms A and F in this table merged into a single firm. The four-firm concentration ratio and the Herfindahl index would

Accepted Answer

A)  remain unchanged and rise, respectively.
B)  rise and remain unchanged, respectively.
C)  both fall.
D)  both rise.E) B) and D)
F) A) and D)

Question 9

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. How would the extensive form figure appear in strategic form?

Accepted Answer

A)   
B)   
C)   
D)   E) None of the above
F) All of the above

Question 10

Which market structure best characterizes the various Internet markets?

Accepted Answer

A)  differentiated oligopoly
B)  homogeneous oligopoly
C)  monopolistic competition
D)  pure monopolyE) B) and C)
F) All of the above

Question 11

In the Internet search market,

Accepted Answer

A)  Yahoo, Bing, and Google have roughly equal market shares.
B)  the Herfindahl index value is 10,000.
C)  Google holds about 63 percent of the market, while Bing and Yahoo together hold about 36 percent.
D)  government subsidies ensure that search engines are provided at no cost to all Internet users.E) A) and B)
F) A) and C)

Question 12

The industry characterized by these data is

Accepted Answer

A)  an oligopoly.
B)  a monopolistically competitive industry.
C)  a purely competitive industry.
D)  a pure monopoly.E) C) and D)
F) A) and B)

Question 13

Refer to the diagram, where the numerical data show profits in millions of dollars. Beta's profits are shown in the northeast corner and Alpha's profits in the southwest corner of each cell. With independent pricing, the outcome of this duopoly game will gravitate to cell

Accepted Answer

A)  A.
B)  B.
C)  C.
D)  D.E) All of the above
F) None of the above

Question 14

If firms E and F in this table merged into a single firm, the Herfindahl index would

Accepted Answer

A)  not change.
B)  rise, as would the four-firm concentration ratio.
C)  rise, but the four-firm concentration ratio would remain unchanged.
D)  fall.E) A) and D)
F) B) and C)

Question 15

Suppose that currently there are no airlines serving the city of South Podunk. Both Accommodating Airlines and Friendly Flyers are looking to enter that market. (They are the only two.) The figure shows in extensive form the possible outcomes of the two firms' decisions. The payoffs represent, in thousands per month, the profit (or loss) the firm will realize from its decision. Which of the following statements is true about this game?

Accepted Answer

A)  The market represented is a collusive duopoly.
B)  The market represented is neither a collusive duopoly nor a Stackelberg duopoly.
C)  The market represented is a Stackelberg duopoly.
D)  The outcome of the game depends on who moves first into this market.E) All of the above
F) B) and C)

Question 16

If the several oligopolistic firms that compose an industry behave collusively, the resulting price and output will most likely resemble those of

Accepted Answer

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

Question 17

Refer to the diagram for a non-collusive oligopolist. Suppose 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, then the firm's demand curve will be (moving from left to right)

Accepted Answer

A)  D₁ ED₂.
B)  D₂ ED₁.
C)  D₁ ED₁.
D)  D₂ ED₂.E) B) and C)
F) All of the above

Question 18

Which one of the following is not illustrated by the so-called Prisoner's Dilemma?

Accepted Answer

A)  Each player in the game ends up with results that depend on the other player's action.
B)  It does not pay for the players to collude with each other.
C)  Both players would be better off, if they could only agree on which action to take.
D)  The results for each player in the game are uncertain, if they are not able to communicate.E) A) and B)
F) A) and C)

Question 19

Refer to the payoff matrix. Which of the following statements is true regarding the outcome of this game?

Accepted Answer

A)  Both firms will price high, and this outcome is a Nash equilibrium.
B)  Both firms will price low, and this outcome is a Nash equilibrium.
C)  Both firms will price high, but this outcome is not a Nash equilibrium.
D)  Both firms will price low, but this outcome is not a Nash equilibrium.E) A) and C)
F) A) and D)

Question 20

The adoption of a limit-pricing strategy by oligopolists would tend to make the price of the product closer to marginal cost.

Accepted Answer

A) True 
 B)False

Exam 14: Oligopoly and Strategic Behavior

If the several oligopolistic firms that compose an industry behave collusively, the resulting price and output will most likely resemble those of

Correct Answer
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Correct Answer
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Suppose that firms A and F in this table merged into a single firm. The four-firm concentration ratio and the Herfindahl index would

Correct Answer
verified

If firms E and F in this table merged into a single firm, the Herfindahl index would

Correct Answer
verified

In the Internet search market,

Correct Answer
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Refer to the diagram, where the numerical data show profits in millions of dollars. Beta's profits are shown in the northeast corner and Alpha's profits in the southwest corner of each cell. If Alpha and Beta engage in collusion, the outcome of the game will be at cell

Correct Answer
verified

A natural monopoly's preemption of entry by other firms by exploiting its economies of scale is an example of

Correct Answer
verified

Repeated games may involve either simultaneous or sequential decision making.

Correct Answer
verified

One characteristic of sequential games is that they all have first-mover advantages.

Correct Answer
verified

Collusive agreements between two firms are most likely to be honored when the game

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Which market structure best characterizes the various Internet markets?

Correct Answer
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Refer to the payoff matrix. Which of the following statements is true regarding the outcome of this game?

Correct Answer
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Refer to the diagram, where the numerical data show profits in millions of dollars. Beta's profits are shown in the northeast corner and Alpha's profits in the southwest corner of each cell. With independent pricing, the outcome of this duopoly game will gravitate to cell

Correct Answer
verified

The adoption of a limit-pricing strategy by oligopolists would tend to make the price of the product closer to marginal cost.

Correct Answer
verified

If the four-firm concentration ratio in an oligopolistic six-firm industry is 66.7 percent, and each firm has an equal percentage of sales, the Herfindahl index is

Correct Answer
verified

The industry characterized by these data is

Correct Answer
verified

Which one of the following is not illustrated by the so-called Prisoner's Dilemma?

Correct Answer
verified

Exam 14: Oligopoly and Strategic Behavior

If the several oligopolistic firms that compose an industry behave collusively, the resulting price and output will most likely resemble those of

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose that firms A and F in this table merged into a single firm. The four-firm concentration ratio and the Herfindahl index would

Correct AnswerverifiedShow Answer

If firms E and F in this table merged into a single firm, the Herfindahl index would

Correct AnswerverifiedShow Answer

In the Internet search market,

Correct AnswerverifiedShow Answer

Refer to the diagram, where the numerical data show profits in millions of dollars. Beta's profits are shown in the northeast corner and Alpha's profits in the southwest corner of each cell. If Alpha and Beta engage in collusion, the outcome of the game will be at cell

Correct AnswerverifiedShow Answer

A natural monopoly's preemption of entry by other firms by exploiting its economies of scale is an example of

Correct AnswerverifiedShow Answer

Repeated games may involve either simultaneous or sequential decision making.

Correct AnswerverifiedShow Answer

One characteristic of sequential games is that they all have first-mover advantages.

Correct AnswerverifiedShow Answer

Collusive agreements between two firms are most likely to be honored when the game

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which market structure best characterizes the various Internet markets?

Correct AnswerverifiedShow Answer

Refer to the payoff matrix. Which of the following statements is true regarding the outcome of this game?

Correct AnswerverifiedShow Answer

Refer to the diagram, where the numerical data show profits in millions of dollars. Beta's profits are shown in the northeast corner and Alpha's profits in the southwest corner of each cell. With independent pricing, the outcome of this duopoly game will gravitate to cell

Correct AnswerverifiedShow Answer

The adoption of a limit-pricing strategy by oligopolists would tend to make the price of the product closer to marginal cost.

Correct AnswerverifiedShow Answer

If the four-firm concentration ratio in an oligopolistic six-firm industry is 66.7 percent, and each firm has an equal percentage of sales, the Herfindahl index is

Correct AnswerverifiedShow Answer

The industry characterized by these data is

Correct AnswerverifiedShow Answer

Which one of the following is not illustrated by the so-called Prisoner's Dilemma?

Correct AnswerverifiedShow Answer

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