Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
True / False
1. The essence of an oligopolistic market is that there are only a few sellers.
a.
True
b.
False
2. Game theory is just as necessary for understanding competitive or monopoly markets as it is for understanding
oligopolistic markets.
a.
True
b.
False
3. In a competitive market, strategic interactions among the firms are not important.
a.
True
b.
False
4. For a firm, strategic interactions with other firms in the market become more important as the number of firms in the
market becomes larger.
a.
True
b.
False
5. Suppose three firms form a cartel and agree to charge a specific price for their output. Each individual firm has an
incentive to maintain the agreement because the firm’s individual profits will be the greatest under the cartel arrangement.
a.
True
b.
False
6. When all firms choose their best strategy given the strategies that all the other firms have chosen, the result is a Nash
equilibrium.
a.
True
b.
False
7. If firms in an oligopoly agree to produce according to the monopoly outcome, they will produce the same level of
output as they would produce in a Nash equilibrium.
a.
True
b.
False
8. Any market that is served by an oligopoly is in effect served by a monopoly.
a.
True
b.
False
9. Whether an oligopoly consists of 3 firms or 10 firms, the level of output likely will be the same.
a.
True
b.
False
10. A group of firms that collude is called a cartel.
a.
True
b.
False
11. Oligopolies produce more when they collude then when they do not.
a.
True
b.
False
12. Cartels with a small number of firms have a greater probability of reaching the monopoly outcome than do cartels with
a larger number of firms.
a.
True
b.
False
13. As the number of firms in an oligopoly becomes very large, the price effect disappears.
a.
True
b.
False
14. The problems faced by oligopolies with three or more members are entirely different from the problems faced by
duopolies.
a.
True
b.
False
15. If all of the firms in an oligopoly successfully collude and form a cartel, then total profit for the cartel is equal to what
it would be if the market were a monopoly.
a.
True
b.
False
16. In a duopoly if the firms have agreed to jointly maximize profits, then each firm can increase its current individual
profits by producing more.
a.
True
b.
False
17. As the number of firms in an oligopoly increases, the magnitude of the price effect increases.
a.
True
b.
False
18. If the output effect from increased production is larger than the price effect, then an oligopolist would increase
production.
a.
True
b.
False
19. All examples of the prisoner’s dilemma game are characterized by one and only one Nash equilibrium.
a.
True
b.
False
20. If two players engaged in a prisoner’s dilemma game are likely to repeat the game, they are more likely to cooperate
than if they play the game only once.
a.
True
b.
False
21. The story of the prisoners' dilemma contains a general lesson that applies to any group trying to maintain cooperation
among its members.
a.
True
b.
False
22. In the prisoners' dilemma game, one prisoner is always better off confessing, no matter what the other prisoner does.
a.
True
b.
False
23. A dominant strategy is a strategy that is best for a player in a game regardless of the strategies chosen by the other
players.
a.
True
b.
False
24. In the prisoners' dilemma game, confessing is a dominant strategy for each of the two prisoners.
a.
True
b.
False
25. The game that oligopolists play in trying to reach the oligopoly outcome is similar to the game that the two prisoners
play in the prisoners' dilemma.
a.
True
b.
False
26. In the case of oligopolistic markets, self-interest makes cooperation difficult and it often leads to an undesirable
outcome for the firms that are involved.
a.
True
b.
False
27. The decisions of the US and Soviet Union to build nuclear weapons is much like the prisoners’ dilemma.
a.
True
b.
False
28. In some games, the noncooperative equilibrium is bad for the players and bad for society.
a.
True
b.
False
29. When prisoners' dilemma games are repeated over and over, sometimes the threat of penalty causes both parties to
cooperate.
a.
True
b.
False
30. A tit-for-tat strategy, in a repeated game, is one in which a player starts by cooperating and then does whatever the
other player did last time.
a.
True
b.
False
31. The notion of a tit-for-tat strategy applies to a prisoners’ dilemma game that is played repeatedly, but it does not apply
if the game is played only once.
a.
True
b.
False
32. One way that public policy encourages cooperation among oligopolists is through antitrust law.
a.
True
b.
False
33. The Sherman Antitrust Act prohibits competing firms from even talking about fixing prices.
a.
True
b.
False
34. The Sherman Antitrust Act states that if a person can prove that he was damaged by an illegal arrangement to restrain
trade, he could sue and recover three times the damages he sustained.
a.
True
b.
False
35. Resale price maintenance prevents retailers from competing on price.
a.
True
b.
False
36. A manufacturer of light bulbs sells its products to retail stores and requires the stores to sell the bulbs to customers for
$2 per bulb. This practice is known as tying.
a.
True
b.
False
37. Some business practices that appear to reduce competition, such as resale price maintenance, may have legitimate
economic purposes.
a.
True
b.
False
38. Tying can be thought of as a form of price discrimination.
a.
True
b.
False
39. Tying is always profitable for a monopoly.
a.
True
b.
False
40. Policymakers should be aggressive in using their powers to place limits on firm behavior, because business practices
that appear to reduce competition never have any legitimate purposes.
a.
True
b.
False
41. As the number of firms in a cartel increases, the easier it is to enforce the cartel agreement.
a.
True
b.
False
42. When firms form a cartel in an oligopoly market, the total output is always the same as if the market were perfectly
competitive.
a.
True
b.
False
43. A Nash Equilibrium always results in the highest total profit for the firms in an oligopoly market.
a.
True
b.
False
44. A Nash Equilibrium is a stable outcome for an oligopoly market situation.
a.
True
b.
False
45. A dominant strategy exists for at least one player in every game.
a.
True
b.
False
46. In a prisoner’s dilemma, the Nash Equilibrium might not have a dominant strategy for either player.
a.
True
b.
False
47. In cartels, the reason that the monopoly output is unstable is due to the factors that are present in a prisoner’s dilemma.
a.
True
b.
False
48. It is always the case that players in a prisoner’s dilemma situation will choose the Nash Equilibrium.
a.
True
b.
False
49. In a prisoner’s dilemma situation where firms are setting prices, the dominant strategy is always to charge the price
that leads to maximum profits for all firms.
a.
True
b.
False
50. In a prisoner’s dilemma, only one firm has a dominant strategy.
a.
True
b.
False
