Question 1

Describe the output and price effects that influence the profit-maximising decision faced by a firm in an oligopoly market. How does this differ from output and price effects in a monopoly market?

Accepted Answer

Output effect: Price > Marginal cost F1S...

Question 2

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 3

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

Question 4

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 5

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) None of the above
F) B) and D)

Question 6

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

Accepted Answer

A)   as if they were each seeking to maximise 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) None of the above
F) All of the above

Question 7

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) B) and C)
F) All of the above C

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

Table 1
 
-Refer to Table 1. Boitumelo and Yusuf own the only two bicycle repair shops in town. Each must choose between a low price for repair work and a high price. The yearly economic profits from each strategy are indicated in the table. The figures on the right side of each rectangle indicate Boitumelo's profits; the figures on the left side indicate Yusuf's profits. Which of the following statements is correct?

Accepted Answer

A)   Yusuf's dominant strategy is to charge a low price.
B)   Boitumelo's dominant strategy is to charge a high price.
C)   The dominant strategy for both Boitumelo and Yusuf is to charge a low price.
D)   Yusuf's dominant strategy is to charge a high price.E) A) and B)
F) All of the above

Question 10

Outline the purpose of competition laws. What do they accomplish?

Accepted Answer

The purpose of competition law...

Question 11

The greater the number of firms in the oligopoly, the more the outcome of the market looks like that generated by a monopoly.

Accepted Answer

A) True 
 B)False  False

Question 12

As a group, oligopolists would always earn the highest profit if they would

Accepted Answer

A)   produce the perfectly competitive quantity of output.
B)   produce more than the perfectly competitive quantity of output.
C)   charge the same price that a monopolist would charge if the market were a monopoly.
D)   operate according to their own individual self-interests.E) None of the above
F) B) and D)

Question 13

Laws that make it illegal for firms to conspire to raise prices or reduce production are known as

Accepted Answer

A)   anti-monopoly laws.
B)   all of these answers.
C)   anti-collusion laws.
D)   pro-competition laws.
E)   competition laws.F) All of the above
G) A) and D) E

Question 14

As the number of sellers in an oligopoly increases,

Accepted Answer

A)   output in the market tends to fall because each firm must cut back on production.
B)   the price in the market moves further from marginal cost.
C)   collusion is more likely to occur because a larger number of firms can place pressure on any firm that defects.
D)   the price in the market moves closer to marginal cost.E) B) and C)
F) A) and C)

Question 15

Suppose an oligopolist individually maximises 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 maximised profits.
C)   is in a Nash equilibrium.
D)   should produce fewer units.
E)   should exit the industry.F) B) and C)
G) A) and B)

Question 16

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 B)
F) A) and C)

Question 17

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) A) and B)
G) B) and E)

Question 18

What effect does the number of firms in an oligopoly have on the characteristics of the market?

Accepted Answer

As the number of firms increas...

Question 19

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 20

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

Accepted Answer

Tension exists because total profits are...

Exam 16: Market Structures Iii: Oligopoly

Describe the output and price effects that influence the profit-maximising decision faced by a firm in an oligopoly market. How does this differ from output and price effects in a monopoly market?

Correct Answer
verified
Output effect: Price > Marginal cost F1S...
View Answer

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

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

In studying oligopolistic markets, economists assume that

Correct Answer
verified

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

A dominant strategy is one that

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified
C

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

Correct Answer
verified

Correct Answer
verified

Outline the purpose of competition laws. What do they accomplish?

Correct Answer
verified
The purpose of competition law...
View Answer

The greater the number of firms in the oligopoly, the more the outcome of the market looks like that generated by a monopoly.

Correct Answer
verified
False

As a group, oligopolists would always earn the highest profit if they would

Correct Answer
verified

Laws that make it illegal for firms to conspire to raise prices or reduce production are known as

Correct Answer
verified
E

As the number of sellers in an oligopoly increases,

Correct Answer
verified

Suppose an oligopolist individually maximises 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

Which of the following statements is correct?

Correct Answer
verified

Resale price maintenance may be justified if

Correct Answer
verified

What effect does the number of firms in an oligopoly have on the characteristics of the market?

Correct Answer
verified
As the number of firms increas...
View 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 Answer
verified

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

Correct Answer
verified
Tension exists because total profits are...
View Answer

Exam 16: Market Structures Iii: Oligopoly

Describe the output and price effects that influence the profit-maximising decision faced by a firm in an oligopoly market. How does this differ from output and price effects in a monopoly market?

Correct AnswerverifiedOutput effect: Price > Marginal cost F1S...View AnswerShow Answer

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

In studying oligopolistic markets, economists assume that

Correct AnswerverifiedShow Answer

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

A dominant strategy is one that

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedC

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Outline the purpose of competition laws. What do they accomplish?

Correct AnswerverifiedThe purpose of competition law...View AnswerShow Answer

The greater the number of firms in the oligopoly, the more the outcome of the market looks like that generated by a monopoly.

Correct AnswerverifiedFalse

As a group, oligopolists would always earn the highest profit if they would

Correct AnswerverifiedShow Answer

Laws that make it illegal for firms to conspire to raise prices or reduce production are known as

Correct AnswerverifiedE

As the number of sellers in an oligopoly increases,

Correct AnswerverifiedShow Answer

Suppose an oligopolist individually maximises 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

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Resale price maintenance may be justified if

Correct AnswerverifiedShow Answer

What effect does the number of firms in an oligopoly have on the characteristics of the market?

Correct AnswerverifiedAs the number of firms increas...View AnswerShow 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

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

Correct AnswerverifiedTension exists because total profits are...View AnswerShow Answer

Correct Answer
verified
Output effect: Price > Marginal cost F1S...
View Answer

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

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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C

Correct Answer
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Correct Answer
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Correct Answer
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The purpose of competition law...
View Answer

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False

Correct Answer
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Correct Answer
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E

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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As the number of firms increas...
View Answer

Correct Answer
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Correct Answer
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Tension exists because total profits are...
View Answer