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14-81
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 does this extensive
form game indicate
about the decision to open a new coffee shop?
A.
The outcome of the game is a prisoner’s dilemma.
139.
14-82
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?
D.
Neither firm will open a new coffee shop in this town.
140.
14-83
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. Assuming the two firms
have perfect
information about this game, what can we conclude about the existence of a Nash equilibrium?
A.
There is a Nash equilibrium, but it occurs at a different outcome than the solution to the
game.
141.
14-84
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?
A.
There is no Nash equilibrium for this game.
142.
14-85
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?
D.
It would be a Stackelberg duopoly if the two firms moved simultaneously.
143.
The terminal nodes in an extensive form representation
A.
are used solely to show payoffs that represent a Nash equilibrium.
14-86
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
D. indicate the possible outcomes of a game.
144.
Backward induction in an extensive form game
A. allows the players to alter their strategies as the game is being played.
145.
In a Stackelberg duopoly,
A.
leader firms are always dominant.
146. 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’
14-87
decisions. The payoffs represent, in thousands per month, the profit (or loss) the firm will
realize
from its decision. What does this extensive form game indicate about the decision to
enter the South Podunk market?
A. Accommodating Airlines has a first-mover advantage in this game.
147. 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. What is the solution to this extensive form game?
14-88
A.
AA will enter the market; FF will not.
148. 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. Assuming the two firms have perfect information about this game,
what can we conclude about the existence of a Nash equilibrium?
14-89
D.
There is a Nash equilibrium for this game, but it does not coincide with the solution to the
game.
149.
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?
A.
The market represented is a collusive duopoly.
150.
(Consider This) The story about three sellers of Native American arts and crafts best
illustrates the idea of
14-91
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
B.
excess capacity.
C.
the role of advertising.
D.
product differentiation.
151.
(Consider This) The Native American arts and crafts story illustrates the twin ideas of
A.
product differentiation and monopolistic competition.
152.
(Consider This) The prisoner's dilemma is generally demonstrated through
A. the kinked-demand model.
153.
(Consider This) The prisoner's dilemma reveals that
A.
collusive agreements will always fail.
154.
(Last Word) Which of the following statements best describes the Internet market
structure?
A.
It is highly competitive, with many providers and no firms in a dominant position.
155.
(Last Word) In the Internet search market,
A.
Yahoo, Bing, and Google have roughly equal market shares.
14-93
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Blooms: Understand
Di f f i cu l t y :
02 Medium
Learning Objective: 14-01 Describe the characteristics of oligopoly.
Test Bank: I
Topic:
Oligopoly
156.
(Last Word) Major Internet-related firms such as Google, Apple, Amazon, Microsoft, and
Facebook each have an area of the market that they dominate. Which of the following is true
about their interaction in the market?
A.
They tend to act independently, paying little attention to what the other firms do.
157.
(Last Word) Microsoft
A. dominates the primary Internet markets.
158.
(Last Word) Which market structure best characterizes the various Internet markets?
14-94
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
A. differentiated oligopoly
B.
homogeneous oligopoly
C.
monopolistic competition
D.
pure monopoly
True / False Questions
159.
The oligopolist's kinked-demand curve is highly elastic below and highly inelastic above
the going product price.
160.
Mutual interdependence means that oligopolistic producers rely primarily on price
competition in determining their shares of the total market for their product.
161.
If an oligopolist's several rivals exactly match any price changes it initiates, the demand
curve will be less elastic than if its price changes are ignored by its rivals.
14-95
162.
If three or four homogeneous oligopolists collude, the resulting price and production
outcomes will be similar to those of pure monopoly.
163.
All other things equal, the larger the number of firms in an oligopolistic industry, the more
difficult it is for those firms to collude.
164.
Generally speaking, oligopolistic industries producing raw materials and semifinished
goods usually offer differentiated products, while oligopolists producing consumer goods
usually offer standardized products.
14-96
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
AACSB: Knowledge Application
Ac c e s s i b i l i ty :
Keyboard Navigation
Blooms: Understand
Di f f i cu l t y :
02 Medium
Learning Objective: 14-01 Describe the characteristics of oligopoly.
Test Bank: I
Topic:
Oligopoly
165.
Two industries that have the same four-firm concentration ratio can have significantly
different Herfindahl indexes.
166.
As it relates to oligopoly, game theory focuses on the strategic behavior of rival firms.
167.
The highest possible value of the Herfindahl index is 1,000.
168.
The U.S. breakfast cereal industry is an example of differentiated oligopoly.
169.
The U.S. steel industry is an example of homogeneous oligopoly.
170.
Homogeneous oligopolists tend to advertise more than do differentiated oligopolists.
171.
Oligopolists use limit pricing to maximize short-run profits.
14-98
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Blooms: Understand
Di f f i cu l t y :
02 Medium
Learning Objective: 14-03 Explain the three main models of oligopoly pricing and output:
kinked-demand theory, collusive pricing, and price leadership.
Test Bank: I
Topic:
Three Oligopoly Models
172.
Both collusive and noncollusive oligopoly models suggest that price changes will be
relatively infrequent in these types of industries.
173.
Collusion among firms always involves formal agreements.
174.
Firms are more likely to collude when the economy is in a recession.
14-99
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Test Bank: I
Topic:
Three Oligopoly Models
175.
If one player in a game has a dominant strategy, the other player must also have a
dominant strategy.
176.
A player is said to have a dominant strategy when one of the options available is superior,
regardless of what strategy the other player chooses.
177.
If neither player has an incentive to deviate from the outcome of a game, the outcome is a
Nash equilibrium.
178.
A Nash equilibrium can only occur in repeated games.
179.
One characteristic of sequential games is that they all have first-mover advantages.
180.
Repeated games may involve either simultaneous or sequential decision making.
181.
Negative-sum games do not exist, because neither player has an incentive to play the
game.
