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Question;76. For cartels, as the;number of firms (members of the cartel) increases;a. the monopoly outcome becomes;more likely.;b. the magnitude of the price;effect decreases.;c. the more concerned each seller;is about its own impact on the market price.;d. the easier it becomes to;observe members violating their agreements.;77. 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.;78. 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.;79. If an oligopolist is;part of a cartel that is collectively producing the monopoly level of output;then that;oligopolist has the incentive to;lower production with the aim of;a. lowering prices.;b. increasing profits for the;group of firms as a whole.;c. increasing profits for itself;regardless of the impact on profits for the group of firms as a;whole.;d. None of the above is correct.;80. 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.;81. The theory of oligopoly;provides a reason as to why;a. perfect competition is not a;useful object of study.;b. price is less than marginal;cost for many firms.;c. all countries can benefit from;free trade among nations.;d. firms do not want to capture;larger shares of their markets.;Name;ID: A;Table;16-6;Quantity Price;0 10;5 9;10 8;15 7;20 6;25 5;30 4;35 3;40 2;45 1;50 0;82.Refer to Table;16-6.This table shows the demand schedule for a particular product.;Suppose that the;marginal cost to produce this;product is constant at $2 per unit and that the fixed cost of producing this;product is $10. If the market is;served by two duopolists who each, acting in their own self-interest, choose;the Nash equilibrium level of;production, how much profit will each firm earn?;a. $10;b. $20;c. $30;d. $40;Name;ID: A;21;Table;16-8;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.;Firm;B;Concede;that;cigarette;smoke;causes;lung cancer;Argue;that there is no evidence;that;smoke causes cancer;Firm;A;Concede;that;cigarette;smoke;causes;lung cancer;Firm A profit;= $?20;Firm B profit;= $?15;Firm A profit;= $?50;Firm B profit;= $?5;Argue;that there;is;no evidence that;smoke;causes cancer;Firm A profit;= $?5;Firm B profit;= $?50;Firm A profit;= $?10;Firm B profit;= $?10;83.Refer to Table;16-8.;Pursuing its own best interests, Firm B will concede that cigarette smoke;causes lung;cancer;a. only if Firm A concedes that;cigarette smoke causes lung cancer.;b. only if Firm A does not;concede that cigarette smoke causes lung cancer.;c. regardless of whether Firm A;concedes that cigarette smoke causes lung cancer.;d. None of the above, in pursuing;its own best interests, Firm B will in no case concede that;cigarette smoke causes lung;cancer.;Name;ID: A;22;Table;16-9;Each year the United States;considers renewal of Most Favored Nation (MFN) trading status with China.;Historically, legislators have;made threats of not renewing MFN status because of human rights abuses in;China. The non renewal of MFN;trading status is likely to involve some retaliatory measures by China. The;payoff table below shows the;potential economic gains associated with a game in which China may impose;trade sanctions against U.S.;firms and the United States may not renew MFN status with China. The table;contains the dollar value of all;trade-flow benefits to the United States and China.;China;Impose;trade sanctions;against;U.S. firms;Do;not impose trade sanctions;against;U.S. firms;United;States;Don't;renew MFN;status;with China;U.S. trade;value = $65 b;China trade;value = $75 b;U.S. trade;value = $140 b;China trade;value = $5 b;Renew;MFN status;with;China;U.S. trade;value = $35 b;China trade;value = $285 b;U.S. trade;value = $130 b;China trade;value = $275 b;84.Refer to Table;16-9.;This particular game;a. features a dominant strategy;for Firm A.;b. features a dominant strategy;for Firm B.;c. is a version of the prisoners;dilemma game.;d. All of the above are correct.;Table;16-10;Two discount superstores;(Ultimate Saver and SuperDuper Saver) in a growing urban area are interested in;expanding their market share. Both are interested in expanding the size of;their store and parking lot to accommodate potential growth in their customer;base. The following game depicts the strategic outcomes that result from the;game. Growth-related profits of the two discount superstores are shown in the;table;below.;SuperDuper;Saver;Increase;the size of store;and;parking lot;Do;not increase the size of;store;and parking lot;Ultimate;Saver;Increase;the size;of;store and;parking;lot;SuperDuper;Saver = $50;Ultimate Saver;= $65;SuperDuper;Saver = $25;Ultimate Saver;= $275;Do;not increase;the;size of store;and;parking lot;SuperDuper;Saver = $250;Ultimate Saver;= $35;SuperDuper;Saver = $85;Ultimate Saver;= $135;85.Refer to Table;16-10.;Suppose the owners of SuperDuper Saver and Ultimate Saver meet for a friendly;game of golf one afternoon and;happen to discuss a strategy to optimize growth related profit. They should;both agree to;a. increase their store and;parking lot sizes.;b. refrain from increasing their;store and parking lot sizes.;c. be more competitive in;capturing market share.;d. share the context of their;conversation with the Federal Trade Commission.;Name;ID: A;23;Scenario;16-1;Assume that the countries of Irun;and Urun are the only two producers of crude oil. Further assume that both;countries have entered into an;agreement to maintain certain production levels in order to maximize profits.;In the world market for oil, the;demand curve is downward sloping.;86.Refer to;Scenario 16-1. As long as production levels are less than the Nash equilibrium;level, both Irun and;Urun have the individual;incentive to;a. hold production levels;constant.;b. decrease production.;c. increase production.;d. increase price.;87.Refer to;Scenario 16-1. If Irun fails to live up to the production agreement and;overproduces, which of the;following statements will be true;of Urun's condition?;a. Urun will invariably be worse;off than before the agreement was broken.;b. Urun will counter by;decreasing its production in order to maintain price stability.;c. Urun's profit will be;maximized by holding its production constant.;d. Urun will be hurt worse if it;follows suit and increases production.;88. What happens when the;prisoners' dilemma game is repeated numerous times in an oligopoly market?;(i) The firms may well reach the;monopoly outcome.;(ii) The firms may well reach the;competitive outcome.;(iii) Buyers of the oligopolists;product will likely be worse off as a result.;a. (i) and (ii);b. (ii) and (iii);c. (i) and (iii);d. (i), (ii), and (iii);Table;16-13;B;Left Center;Right;Up(4, 2) (2, 5);(3, 3);AMiddle(3, 1) (5, 3);(5, 2);Down(1, 3) (4, 4);(6, 1);89.Refer to Table;16-13.This table shows a game played between two players, A and B. The;payoffs are given;in the table as (Payoff to A;Payoff to B). Which of the following statements is true regarding this game?;a. Both players have a dominant;strategy.;b. Neither player has a dominant;strategy.;c. A has a dominant strategy, but;B does not have a dominant strategy.;d. B has a dominant strategy, but;A does not have a dominant strategy.;Name;ID: A;24;90.Refer to Table;16-13.This table shows a game played between two players, A and B. The payoffs;in the;table are shown as (Payoff to A;Payoff to B). Which of the following outcomes represents a Nash;equilibrium in the game?;a. Middle-Center;b. Down-Center;c. Up-Left;d. More than one of the above is;a Nash equilibrium in this game.;Table;16-14;B;Q=2 Q=3;A;Q=2(10, 10) (8;12);Q=3(12, 8) (6, 6);91.Refer to Table;16-14.This table shows a game played between two firms, A and B. In this;game each firm;must decide how much output to;produce. The profit for each firm is given in the table as (Profit for A;Profit;for B). In this game;a. neither player has a dominant;strategy.;b. both players have a dominant;strategy.;c. A has a dominant strategy, but;B does not have a dominant strategy.;d. B has a dominant strategy, but;A does not have a dominant strategy.;Table;16-16;Consider a small town that has;two grocery stores from which residents can choose to buy a gallon of milk.;The store owners each must make a;decision to set a high milk price or a low milk price. The payoff table;showing profit per week, is;provided below. The profit in each cell is shown as (Store 1, Store 2).;Store 2;Low Price;High Price;Store 1;Low Price(500, 500);(800, 100);High Price(100, 800);(650, 650);92.Refer to Table;16-16.If grocery store 2 sets a low price, what price should grocery;store 1 set? And what;will grocery store 1's payoff;equal?;a. Low price, $500;b. High price, $800;c. Low price, $100;d. High price, $100;93.Refer to Table;16-16.If grocery store 1 sets a high price, what price should grocery;store 2 set? And what;will grocery store 2's payoff;equal?;a. Low price, $800;b. High price, $100;c. Low price, $500;d. High price, $650;Name;ID: A;25;94. The Sherman Act made;cooperative agreements;a. unenforceable outside of;established judicial review processes.;b. enforceable with proper;judicial review.;c. a criminal conspiracy.;d. a crime, but did not give;direction on possible penalties.;95. The Clayton Act;a. replaced the Sherman Act.;b. strengthened the Sherman Act.;c. was specifically designed to;reduce the ability of cartels to organize.;d. was enforced by the executive;rather than judicial, branch of government.;Scenario;16-5;Assume that a local bank sells;two services, checking accounts and ATM card services. Mr. Donethat is;willing to pay $8 a month for the;bank to service his checking account and $2 a month for unlimited use of his;ATM card. Ms. Beenthere is willing to pay only $5 for a checking account, but;is willing to pay $9 for unlimited use of her ATM card. Assume that the bank;can provide each of these services at zero marginal;cost.;96.Refer to;Scenario 16-5. If the bank is unable to use tying, what is the profit-maximizing;price to charge for a;checking account?;a. $13;b. $9;c. $8;d. $5;97.Refer to;Scenario 16-5. How much additional profit can the bank earn by switching to the;use of a tying;strategy to price checking;accounts and ATM service rather than pricing these services separately?;a. $14;b. $11;c. $7;d. $1;98. Which of the following;statements is true?;a. The proper scope of antitrust;laws is well defined and definite.;b. Antitrust laws focus on;granting certain firms the option to form a cartel.;c. Policymakers have the;difficult task of determining whether some firms' decisions have;legitimate purposes even though;they appear anti-competitive.;d. There is always a need for;policymakers to try to limit a firm's pricing power, regardless;of whether the firm's market is;competitive, a monopoly, or an oligopoly.;99. Consider a market served;by a monopolist, Firm A. A new firm, Firm B, enters the market and, as a;result;Firm A lowers its price to try to;drive Firm B out of the market. This practice is known as;a. resale price maintenance.;b. predatory tying.;c. tying.;d. predatory pricing.;Name;ID: A;26;100. The primary purpose of;antitrust legislation is to;a. protect small businesses.;b. protect the competitiveness of;U.S. markets.;c. protect the prices of;American-made products.;d. ensure firms earn only a fair;profit.;I


Paper#57952 | Written in 18-Jul-2015

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