62. 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. How many subscriptions
will be sold altogether when this market reaches a Nash equilibrium?
a.
2,000
b.
3,000
c.
4,000
d.
5,000
63. 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
64. 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.
b.
c.
d.
65. 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 and there are no other costs.
Price
Quantity
(bottles)
$9
200
$8
400
$7
600
$6
800
$5
1000
$4
1200
$3
1400
$2
1600
66. 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.
67. 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.
68. 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.
69. 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
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.
70. 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.
71. 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.
72. 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.
Figure 17-1
73. 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.
74. 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.
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 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.
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
76. 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
77. 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
78. 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
79. 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
80. 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 each firm incurs a fixed cost of $6, the combined profit of the cartel will be
a.
$6
b.
$12
c.
$24
d.
$32
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
81. 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
82. 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
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 and there is no fixed cost, then what will the combined profit of the cartel be?
a.
b.
c.
d.
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
84. 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
85. 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
86. 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
87. 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
88. 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, compared to the profit at to the cartel
output?
a.
$5
b.
$20
c.
$60
d.
$90
89. 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
90. 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
91. Refer to Table 17–11. What is the socially efficient quantity of the product?
a.
25
b.
35
c.
50
d.
70
92. 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
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
93. 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.
94. 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.
95. 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.
96. 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.
97. Refer to Table 17–12. Suppose we observe that the price of a gallon of gasoline in Driveaway is $5; we observe as
well that a particular seller’s profit is $150. Given this observation, which of the following scenarios is most likely?
a.
The market for gasoline in Driveaway is a monopoly.
b.
There are two identical sellers of gasoline in Driveaway, and the sellers collude.
c.
There are two identical sellers of gasoline in Driveaway, and the sellers do not collude.
d.
There are three identical sellers of gasoline in Driveaway, and the sellers collude.
98. Refer to Table 17–12. If there are exactly two sellers of gasoline in Driveaway and if they collude, then which of the
following outcomes is most likely?
a.
Each seller will sell 50 gallons and charge a price of $7.
b.
Each seller will sell 75 gallons and charge a price of $2.50.
c.
Each seller will sell 75 gallons and charge a price of $5.
d.
Each seller will sell 100 gallons and charge a price of $4.
99. Refer to Table 17–12. If there are exactly five sellers of gasoline in Driveaway and if they collude, then which of the
following outcomes is most likely?
a.
Each seller will sell 50 gallons and charge a price of $3.
b.
Each seller will sell 40 gallons and charge a price of $4.
c.
Each seller will sell 30 gallons and charge a price of $4.
d.
Each seller will sell 30 gallons and charge a price of $5.
100. Refer to Table 17-12. If there are exactly five sellers of gasoline in Driveaway and if they collude, then which of the
following outcomes is most likely?
a.
Each seller will sell 20 gallons, charge a price of $6, and earn a profit of $80.
b.
Each seller will sell 30 gallons, charge a price of $5, and earn a profit of $90.
c.
Each seller will sell 40 gallons, charge a price of $4, and earn a profit of $120.
d.
Each seller will sell 50 gallons, charge a price of $3, and earn a profit of $50.
101. Refer to Table 17-12. Suppose there are exactly two sellers of gasoline in Driveaway: Amogo and Spilmerica. If
Amogo sells 150 gallons and Spilmerica sells 100 gallons, then
a.
Amogo’s profit is $150 and Spilmerica’s profit is $100.
b.
Amogo’s profit is $100 and Spilmerica’s profit is $66.67.
c.
Amogo’s profit is $75 and Spilmerica’s profit is $50.
d.
there is an excess supply of gasoline in Driveaway.
102. Assuming that oligopolists do not have the opportunity to collude, once they have reached the Nash equilibrium, it
a.
is always in their best interest to supply more to the market.
b.
is always in their best interest to supply less to the market.
c.
is always in their best interest to leave their quantities supplied unchanged.
d.
may be in their best interest to do any of the above, depending on market conditions.
103. A situation in which firms choose their best strategy given the strategies chosen by the other firms in the market is
called
a.
a competitive equilibrium.
b.
an open-market solution.
c.
a socially-optimal solution.
d.
a Nash equilibrium.
104. When an oligopoly market reaches a Nash equilibrium,
a.
the market price will be different for each firm.
b.
the firms will not have behaved as profit maximizers.
c.
a firm will have chosen its best strategy, given the strategies chosen by other firms in the market.
d.
a firm will not take into account the strategies of competing firms.
105. In a duopoly situation, the logic of self-interest results in a total output level that
a.
equals the output level that would prevail in a competitive market.
b.
equals the output level that would prevail in a monopoly.
c.
exceeds the monopoly level of output, but falls short of the competitive level of output.
d.
falls short of the monopoly level of output.
106. As a group, oligopolists earn the highest profit when they
a.
achieve a Nash equilibrium.
b.
produce a total quantity of output that falls short of the Nash-equilibrium total quantity.
c.
produce a total quantity of output that exceeds the Nash-equilibrium total quantity.
d.
charge a price that falls short of the Nash-equilibrium price.
107. To be successful, a cartel must
a.
find a way to encourage members to produce more than they would otherwise produce.
b.
agree on the total level of production for the cartel, but they need not agree on the amount produced by each
member.
c.
agree on the total level of production and on the amount produced by each member.
d.
agree on the prices charged by each member, but they need not agree on amounts produced.
108. In a particular town, Comvision and Veriview are the only two providers of cable TV service. Comvision and
Veriview constitute a
a.
duopoly, whether they collude or not.
b.
cartel, whether they collude or not.
c.
Nash industry, whether they collude or not.
d.
monopolistically competitive market if they charge the same price.
109. Which of these situations produces the largest profits for oligopolists?
a.
The firms reach a Nash equilibrium.
b.
The firms reach the monopoly outcome.
c.
The firms reach the competitive outcome.
d.
The firms produce a quantity of output that lies between the competitive outcome and the monopoly outcome.
110. When firms have agreements among themselves on the quantity to produce and the price at which to sell output, we
refer to their form of organization as a
a.
Nash arrangement.
b.
cartel.
c.
monopolistically competitive oligopoly.
d.
perfectly competitive oligopoly.
111. The equilibrium quantity in markets characterized by oligopoly is
a.
higher than in monopoly markets and higher than in perfectly competitive markets.
b.
higher than in monopoly markets and lower than in perfectly competitive markets.
c.
lower than in monopoly markets and higher than in perfectly competitive markets.
d.
lower than in monopoly markets and lower than in perfectly competitive markets.
112. The equilibrium price in a market characterized by oligopoly is
a.
higher than in monopoly markets and higher than in perfectly competitive markets.
b.
higher than in monopoly markets and lower than in perfectly competitive markets.
c.
lower than in monopoly markets and higher than in perfectly competitive markets.
d.
lower than in monopoly markets and lower than in perfectly competitive markets.
113. When oligopolistic firms interacting with one another each choose their best strategy given the strategies chosen by
other firms in the market, we have
a.
a cartel.
b.
a group of oligopolists behaving as a monopoly.
c.
a Nash equilibrium.
d.
the perfectly competitive outcome.
114. As the number of firms in an oligopoly market
a.
decreases, the price charged by firms likely decreases.
b.
decreases, the market approaches the competitive market outcome.