Question 1

The market for hand tools (such as hammers and screwdrivers)  is dominated by Draper, Stanley, and Craftsman. This market is best described as

Accepted Answer

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

Question 2

In markets characterized by oligopoly,

Accepted Answer

A)   the oligopolists earn the highest profit when they cooperate and behave like a monopolist.
B)   collusive agreements will always prevail.
C)   collective profits are always lower with cartel arrangements than they are without cartel arrangements.
D)   pursuit of self-interest by profit-maximizing firms always maximizes collective profits in the market.E) B) and D)
F) B) and C)

Question 3

An oligopoly is a market structure in which many firms sell products that are similar but not identical.

Accepted Answer

A) True 
 B)False

Question 4

When firms cooperate with one another, it is generally good for society as a whole.

Accepted Answer

A) True 
 B)False

Question 5

To move the allocation of resources closer to the social optimum, policymakers should typically try to induce firms in an oligopoly to

Accepted Answer

A)   collude with each other.
B)   form various degrees of cartels.
C)   compete rather than cooperate with each other.
D)   cooperate rather than compete with each other.E) C) and D)
F) A) and C)

Question 6

In studying oligopolistic markets, economists assume that

Accepted Answer

A)   there is no conflict or tension between cooperation and self-interest.
B)   it is easy for a group of firms to cooperate and thereby establish and maintain a monopoly outcome.
C)   each oligopolist cares only about its own profit.
D)   strategic decisions do not play a role in such markets.E) A) and B)
F) B) and C)

Question 7

The prisoners' dilemma demonstrates why it is difficult to maintain cooperation even when cooperation is mutually beneficial.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following statements is correct?

Accepted Answer

A)   If duopolists successfully collude, then their combined output will be equal to the output that would be observed if the market were a monopoly.
B)   Although the logic of self-interest decreases a duopoly's price below the monopoly price, it does not push the duopolists to reach the competitive price.
C)   Although the logic of self-interest increases a duopoly's level of output above the monopoly level, it does not push the duopolists to reach the competitive level.
D)   All of the above are correct.E) A) and D)
F) B) and C)

Question 9

An agreement among firms in a market about quantities to produce or prices to charge is called

Accepted Answer

A)   collusion.
B)   a strategic situation.
C)   excess capacity.
D)   tying.E) All of the above
F) B) and D)

Question 10

Explain the practice of tying and discuss why it is controversial.

Accepted Answer

Tying is the practice of bundling goods ...

Question 11

Collusion is difficult for an oligopoly to maintain

Accepted Answer

A)   all of these answers.
B)   if additional firms enter of the oligopoly.
C)   because competition laws make collusion illegal.
D)   because, in the case of oligopoly, self-interest is in conflict with cooperation.E) B) and D)
F) A) and D)

Question 12

An agreement between two duopolists to function as a monopolist usually breaks down because

Accepted Answer

A)   they cannot agree on the price that a monopolist would charge.
B)   they cannot agree on the output that a monopolist would produce.
C)   each duopolist wants a larger share of the market in order to capture more profit.
D)   each duopolist wants to charge a higher price than the monopoly price.E) All of the above
F) A) and B)

Question 13

In which of the following games is it clearly the case that the cooperative outcome of the game is good for the two players and bad for society?

Accepted Answer

A)   Two oil companies own adjacent oil fields over a common pool of oil, and each company decides whether to drill one well or two wells.
B)   Two airlines dominate air travel between City A and City B, and each airline decides whether to charge a "high" airfare or a "low" airfare on flights between those two cities.
C)   Two superpowers decide whether to build new weapons or to disarm.
D)   In all of the above cases, the cooperative outcome of the game is good for the two players and bad for societyE) A) and D)
F) C) and D)

Question 14

Describe the source of tension between cooperation and self-interest in a market characterized by oligopoly.

Accepted Answer

The source of the tension exists because...

Question 15

Suppose an oligopolist individually maximizes its profits. When calculating profits, if the output effect exceeds the price effect on the marginal unit of production, then the oligopolist

Accepted Answer

A)   should produce more units.
B)   has maximized profits.
C)   is in a Nash equilibrium.
D)   should produce fewer units.
E)   should exit the industry.F) All of the above
G) None of the above

Exam 16: Market Structures Iii: Oligopoly

An agreement among firms in a market about quantities to produce or prices to charge is called

Correct Answer
verified

To move the allocation of resources closer to the social optimum, policymakers should typically try to induce firms in an oligopoly to

Correct Answer
verified

Explain the practice of tying and discuss why it is controversial.

Correct Answer
verified
Tying is the practice of bundling goods ...
View Answer

Collusion is difficult for an oligopoly to maintain

Correct Answer
verified

The market for hand tools (such as hammers and screwdrivers) is dominated by Draper, Stanley, and Craftsman. This market is best described as

Correct Answer
verified

Suppose an oligopolist individually maximizes its profits. When calculating profits, if the output effect exceeds the price effect on the marginal unit of production, then the oligopolist

Correct Answer
verified

In studying oligopolistic markets, economists assume that

Correct Answer
verified

Describe the source of tension between cooperation and self-interest in a market characterized by oligopoly.

Correct Answer
verified
The source of the tension exists because...
View Answer

The prisoners' dilemma demonstrates why it is difficult to maintain cooperation even when cooperation is mutually beneficial.

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
verified

An oligopoly is a market structure in which many firms sell products that are similar but not identical.

Correct Answer
verified

When firms cooperate with one another, it is generally good for society as a whole.

Correct Answer
verified

In markets characterized by oligopoly,

Correct Answer
verified

In which of the following games is it clearly the case that the cooperative outcome of the game is good for the two players and bad for society?

Correct Answer
verified

An agreement between two duopolists to function as a monopolist usually breaks down because

Correct Answer
verified

Exam 16: Market Structures Iii: Oligopoly

An agreement among firms in a market about quantities to produce or prices to charge is called

Correct AnswerverifiedShow Answer

To move the allocation of resources closer to the social optimum, policymakers should typically try to induce firms in an oligopoly to

Correct AnswerverifiedShow Answer

Explain the practice of tying and discuss why it is controversial.

Correct AnswerverifiedTying is the practice of bundling goods ...View AnswerShow Answer

Collusion is difficult for an oligopoly to maintain

Correct AnswerverifiedShow Answer

The market for hand tools (such as hammers and screwdrivers) is dominated by Draper, Stanley, and Craftsman. This market is best described as

Correct AnswerverifiedShow Answer

Suppose an oligopolist individually maximizes its profits. When calculating profits, if the output effect exceeds the price effect on the marginal unit of production, then the oligopolist

Correct AnswerverifiedShow Answer

In studying oligopolistic markets, economists assume that

Correct AnswerverifiedShow Answer

Describe the source of tension between cooperation and self-interest in a market characterized by oligopoly.

Correct AnswerverifiedThe source of the tension exists because...View AnswerShow Answer

The prisoners' dilemma demonstrates why it is difficult to maintain cooperation even when cooperation is mutually beneficial.

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

An oligopoly is a market structure in which many firms sell products that are similar but not identical.

Correct AnswerverifiedShow Answer

When firms cooperate with one another, it is generally good for society as a whole.

Correct AnswerverifiedShow Answer

In markets characterized by oligopoly,

Correct AnswerverifiedShow Answer

In which of the following games is it clearly the case that the cooperative outcome of the game is good for the two players and bad for society?

Correct AnswerverifiedShow Answer

An agreement between two duopolists to function as a monopolist usually breaks down because

Correct AnswerverifiedShow Answer

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Tying is the practice of bundling goods ...
View Answer

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The source of the tension exists because...
View Answer

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