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Oligopoly 4253
64. Refer to Table 17-7. Assume there are two profit-maximizing internet radio providers operating
in this market. Further assume that they are not able to collude on the price and quantity of
subscriptions to sell. What price will they charge for a subscription when this market reaches a
Nash equilibrium?
a. $24
b. $32
c. $40
d. $48
65. Refer to Table 17-7. Assume that there are two profit-maximizing internet radio providers
operating in this market. Further assume that they are not able to collude on the price and quantity
of subscriptions to sell. How much profit will each firm earn when this market reaches a Nash
equilibrium?
a. $12,000
b. $16,000
c. $52,000
d. $64,000
4254 Oligopoly
66. Refer to Table 17-7. The socially efficient level of output supplied to this market is
a. 4,000
b. 5,000
c. 6,000
d. 8,000
Table 17-8
For a certain small town, the table shows the demand schedule for water. Assume the marginal
cost of supplying water is constant at $4 per bottle.
Price
Quantity
(bottles)
$9
200
$8
400
$7
600
$6
800
$5
1000
$4
1200
$3
1400
$2
1600
Oligopoly 4255
67. Refer to Table 17-8. If there were many suppliers of bottled water, what would be the price
and quantity?
a. The price would be $6 per gallon and the quantity would be 800 gallons.
b. The price would be $5 per gallon and the quantity would be 1000 gallons.
c. The price would be $4 per gallon and the quantity would be 1200 gallons.
d. The price would be $3 per gallon and the quantity would be 1400 gallons.
68. Refer to Table 17-8. If there were only one supplier of water, what would be the price and
quantity?
a. The price would be $7 per gallon and the quantity would be 600 gallons.
b. The price would be $6 per gallon and the quantity would be 800 gallons.
c. The price would be $5 per gallon and the quantity would be 1000 gallons.
d. The price would be $4 per gallon and the quantity would be 1200 gallons.
4256 Oligopoly
69. Refer to Table 17-8. If there are two suppliers of water, Victor and Sami, and if they have
successfully formed a cartel, then what would be the price and the market quantity?
a. The price would be $7 per bottle and the market quantity would be 600 bottles.
b. The price would be $6 per bottle and the market quantity would be 800 bottles.
c. The price would be $5 per bottle and the market quantity would be 1000 bottles.
d. The price would be $4 per bottle and the market quantity would be 1200 bottles.
70. Refer to Table 17-8. If there are two suppliers of water, Victor and Sami, and if they have
successfully formed a cartel and split the market evenly, then how many bottles will Sami supply?
a. 100
b. 200
c. 300
d. 400
Oligopoly 4257
Scenario 17-1.
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.
71. Refer to Scenario 17-1. The fact that both countries have colluded to earn higher profit shows
their desire to keep their combined level of output
a. above the monopoly level.
b. below the Nash equilibrium level.
c. equal to the Nash equilibrium level.
d. above the Nash equilibrium level.
72. Refer to Scenario 17-1. As long as the combined level of output is less than the Nash
equilibrium level, both Irun and Urun have the individual incentive to
a. hold production constant.
b. decrease production.
c. increase production.
d. increase price.
4258 Oligopoly
73. Refer to Scenario 17-1. 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’s profit will be unaffected by Irun’s actions.
Oligopoly 4259
Figure 17-1
74. Refer to Figure 17-1. Suppose this market is served by a duopoly in which each firm faces the
marginal cost curve shown in the diagram. The marginal revenue curve that a monopolist would
face in this market is also shown. Which of the following statements is true?
a. The total output in this market will likely be 2 units when the market is served by a duopoly.
b. The price in this market will likely be $6 when the market is served by a duopoly.
c. The total revenue to each firm will likely be more than $16 when the market is served by a
duopoly.
d. The total output in this market will likely be less than 4 units when the market is served by a
duopoly.
4260 Oligopoly
75. Refer to Figure 17-1. Suppose this market is served by two firms who each face the marginal
cost curve shown in the diagram. The marginal revenue curve that a monopolist would face in this
market is also shown. If the firms are able to collude successfully,
a. the total output will be 2 units and the price will be $6.00 per unit.
b. the total output will be 2 units and the price will be $8.00 per unit.
c. the total output will be 4 units and the price will be $6.00 per unit.
d. there will be no deadweight loss.
76. Refer to Figure 17-1. Suppose this market is served by two firms who each face the marginal
cost curve shown in the diagram and have zero fixed cost. The marginal revenue curve that a
monopolist would face in this market is also shown. If the firms are able to collude successfully,
each firm should earn a profit equal to
a. $1.
b. $2.
c. $4.
d. $6.
Oligopoly 4261
Table 17-9
The table shows the demand schedule for a particular product.
Quantity
Price
0
16
1
14
2
12
3
10
4
8
5
6
6
4
7
2
8
0
77. Refer to Table 17-9. Suppose the market for this product is served by two firms that have
formed a cartel. What price will the cartel charge in this market if the marginal cost of production
is $0?
a. $6
b. $8
c. $10
d. $12
4262 Oligopoly
78. Refer to Table 17-9. Suppose the market for this product is served by two firms that have
formed a cartel. If the marginal cost of production is $0 and there is no fixed cost, the combined
profit of the cartel will be
a. $16
b. $24
c. $30
d. $32
79. Refer to Table 17-9. Suppose the market for this product is served by two firms that have
formed a cartel. What price will the cartel charge in this market if the marginal cost of production
is $4?
a. $6
b. $8
c. $10
d. $12
Oligopoly 4263
80. Refer to Table 17-9. If the marginal cost of production in this market is $4, what is the socially
efficient quantity of output?
a. 3 units
b. 4 units
c. 5 units
d. 6 units
81. Refer to Table 17-9. Suppose the market for this product is served by two firms that have
formed a cartel. If the marginal cost of production is $4 and the fixed cost is $6, the combined
profit of the cartel will be
a. $6
b. $12
c. $24
d. $32
4264 Oligopoly
Table 17-10
The table shows the demand schedule for a particular product.
Quantity
Price
0
100
300
90
600
80
900
70
1,200
60
1,500
50
1,800
40
2,100
30
2,400
20
2,700
10
3,000
0
82. Refer to Table 17-10. If this market is perfectly competitive and the marginal cost is constant at
$40 per unit, then how much output will be produced?
a. 900
b. 1,200
c. 1,500
d. 1,800
Oligopoly 4265
83. Refer to Table 17-10. Suppose the market for this product is served by two firms who have
formed a cartel and are colluding to set the price and quantity in this market. If the marginal cost
to produce this product is constant at $40 per unit, then what price will the cartel set in this
market?
a. $40
b. $50
c. $60
d. $70
84. Refer to Table 17-10. Suppose the market for this product is served by two firms who have
formed a cartel and are colluding to set the price and quantity in this market. If the marginal cost
to produce this product is constant at $40 per unit and there is no fixed cost, then what will the
combined profit of the cartel be?
a. $15,000
b. $24,000
c. $27,000
d. $63,000
4266 Oligopoly
Table 17-11
Only two firms, ABC and XYZ, sell a particular product. The table below shows the demand
curve for their product. Each firm has the same constant marginal cost of $8 and zero fixed cost.
Price
Quantity
Total
Revenue
28
0
0
26
5
130
24
10
240
22
15
330
20
20
400
18
25
450
16
30
480
14
35
490
12
40
480
10
45
450
8
50
400
6
55
330
4
60
240
2
65
130
0
70
0
85. Refer to Table 17-11. If ABC and XYZ operate to jointly maximize profits, then what is the
price?
a. $14
b. $16
c. $18
d. $20
Oligopoly 4267
86. Refer to Table 17-11. If ABC and XYZ operate to jointly maximize profits, then what quantity
is sold?
a. 25
b. 30
c. 35
d. 40
87. Refer to Table 17-11. If ABC and XYZ operate to jointly maximize profits and agree to share
the profit equally, then how much profit will each of them earn?
a. $105
b. $125
c. $250
d. $450
4268 Oligopoly
88. Refer to Table 17-11. ABC and XYZ agree to maximize joint profits. However, while ABC
produces the agreed upon amount, XYZ breaks the agreement and produces 5 more than agreed.
How much profit does XYZ make?
a. $90
b. $140
c. $240
d. $280
89. Refer to Table 17-11. ABC and XYZ agree to jointly maximize profits. If ABC and XYZ each
break the agreement and each produce 5 more than agreed upon, how much less profit does each
make?
a. $5
b. $20
c. $60
d. $90
Oligopoly 4269
90. Refer to Table 17-11. If this market were perfectly competitive instead of oligopolistic, what
quantity would be produced?
a. 25
b. 35
c. 50
d. 70
91. Refer to Table 17-11. If this market were perfectly competitive instead of oligopolistic, what
would the price be?
a. $18
b. $14
c. $8
d. $0
4270 Oligopoly
92. Refer to Table 17-11. What is the socially efficient quantity of the product?
a. 25
b. 35
c. 50
d. 70
93. Refer to Table 17-11. How much less do each of these firms earn in the Nash equilibrium than
if they jointly maximize profits?
a. $5
b. $10
c. $15
d. $20
Oligopoly 4271
Table 17-12
The table shows the town of Driveaway’s demand schedule for gasoline. Assume the town’s
gasoline seller(s) incurs a cost of $2 for each gallon sold, with no fixed cost.
Quantity (in gallons)
Price
Total Revenue
0
$8
$0
50
7
350
100
6
600
150
5
750
200
4
800
250
3
750
300
2
600
350
1
350
400
0
0
94. Refer to Table 17-12. If the market for gasoline in Driveaway is perfectly competitive, then the
equilibrium price of gasoline is
a. $0 and the equilibrium quantity is 400 gallons.
b. $1 and the equilibrium quantity is 350 gallons.
c. $2 and the equilibrium quantity is 300 gallons.
d. $4 and the equilibrium quantity is 200 gallons.
4272 Oligopoly
95. Refer to Table 17-12. Suppose we observe that the price of a gallon of gasoline in Driveaway is
$2. Given this observation, which of the following scenarios is most likely?
a. There is one seller of gasoline in Driveaway.
b. There are two sellers of gasoline in Driveaway.
c. There are a few sellers of gasoline in Driveaway, but the number of sellers exceeds two.
d. There are many sellers of gasoline in Driveaway.
96. Refer to Table 17-12. If the market for gasoline in Driveaway is a monopoly, then the profit-
maximizing monopolist will charge a price of
a. $6 and sell 100 gallons.
b. $5 and sell 150 gallons.
c. $4 and sell 200 gallons.
d. $3 and sell 250 gallons.
97. Refer to Table 17-12. If the market for gasoline in Driveaway is a monopoly, then the
monopolist’s maximum profit is a. $350. b. $400. c. $450. d. $500.
