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Government regulators might suspect a firm of engaging in predatory pricing if it charges prices that seem to be too __________.

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Because oligopoly markets have only a few sellers,the actions of any one seller


A) do not affect other sellers in the market.
B) can have a large impact on the profits of other sellers in the market.
C) will affect how other firms behave in the market.
D) Both b and c are correct.

E) All of the above
F) A) and D)

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Table 17-10 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. Table 17-10 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. -Refer to Table 17-10.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. -Refer to Table 17-10.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.

E) All of the above
F) C) and D)

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An oligopoly would tend to restrict output and drive up price if


A) barriers to entering the industry are negligible.
B) firms engage in informative advertising.
C) firms produce a standardized product.
D) firms collude and behave like a monopoly.

E) C) and D)
F) All of the above

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As a group,oligopolists would always earn the highest profit if they would


A) produce the perfectly competitive quantity of output.
B) produce more than the perfectly competitive quantity of output.
C) charge the same price that a monopolist would charge if the market were a monopoly.
D) operate according to their own individual self-interests.

E) B) and D)
F) All of the above

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Table 17-1 Imagine a small town in which only two residents,Rochelle and Alec,own wells that produce safe drinking water.Each week Rochelle and Alec work together to decide how many gallons of water to pump.They bring the water to town and sell it at whatever price the market will bear.To keep things simple,suppose that Rochelle and Alec can pump as much water as they want without cost so that the marginal cost of water equals zero.The weekly town demand schedule and total revenue schedule for water is shown in the table below: Table 17-1 Imagine a small town in which only two residents,Rochelle and Alec,own wells that produce safe drinking water.Each week Rochelle and Alec work together to decide how many gallons of water to pump.They bring the water to town and sell it at whatever price the market will bear.To keep things simple,suppose that Rochelle and Alec can pump as much water as they want without cost so that the marginal cost of water equals zero.The weekly town demand schedule and total revenue schedule for water is shown in the table below: -Refer to Table 17-1.If this market for water were perfectly competitive instead of monopolistic,what price would be charged? A) $0 B) $30 C) $40 D) $60 -Refer to Table 17-1.If this market for water were perfectly competitive instead of monopolistic,what price would be charged?


A) $0
B) $30
C) $40
D) $60

E) None of the above
F) B) and C)

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Individual profit earned by Dave,the oligopolist,depends on which of the following? (i) The quantity of output that Dave produces (ii) The quantities of output that the other firms in the market produce (iii) The extent of collusion between Dave and the other firms in the market


A) (i) and (ii)
B) (ii) and (iii)
C) (iii) only
D) (i) , (ii) ,and (iii)

E) A) and C)
F) A) and B)

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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. 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. -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. -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.

E) B) and C)
F) A) and C)

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Table 17-7.The table shows the demand schedule for a particular product. Table 17-7.The table shows the demand schedule for a particular product. -Refer to Table 17-7.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 $2 per unit,then what price will the cartel set in this market? A) $4 B) $5 C) $6 D) $7 -Refer to Table 17-7.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 $2 per unit,then what price will the cartel set in this market?


A) $4
B) $5
C) $6
D) $7

E) B) and C)
F) A) and B)

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When individuals are damaged by an illegal arrangement to restrain trade,which law allows them to pursue civil action and recover up to three times the damages sustained?


A) Trade Damage Act
B) Clayton Act
C) Sherman Act
D) No law allows individuals to pursue civil action and recover up to three times the damages sustained.

E) B) and C)
F) A) and D)

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Table 17-18 This table shows a game played between two firms,Firm A and Firm B.In this game each firm must decide how much output (Q) to produce: 10 units or 12 units.The profit for each firm is given in the table as (Profit for Firm A,Profit for Firm B) . Table 17-18 This table shows a game played between two firms,Firm A and Firm B.In this game each firm must decide how much output (Q) to produce: 10 units or 12 units.The profit for each firm is given in the table as (Profit for Firm A,Profit for Firm B) . -Refer to Table 17-18.The dominant strategy For Firm A is to produce A) 10 units and the dominant strategy for Firm B is to produce 10 units. B) 10 units and the dominant strategy for Firm B is to produce 12 units. C) 12 units and the dominant strategy for Firm B is to produce 10 units. D) 12 units and the dominant strategy for Firm B is to produce 12 units. -Refer to Table 17-18.The dominant strategy For Firm A is to produce


A) 10 units and the dominant strategy for Firm B is to produce 10 units.
B) 10 units and the dominant strategy for Firm B is to produce 12 units.
C) 12 units and the dominant strategy for Firm B is to produce 10 units.
D) 12 units and the dominant strategy for Firm B is to produce 12 units.

E) None of the above
F) B) and C)

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Antitrust laws tend to target restraint of trade as characterized by __________.

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agreements among com...

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Table 17-2 Suppose that two firms determine that each could lower its costs and increase its profits if both reduced their advertising budgets.But in order for the plan to work,each firm must agree to refrain from advertising.Each firm believes that advertising works by increasing the demand for the firm's product,but each firm also believes that if neither firm advertises,the cost savings will outweigh the lost sales.The table below lists each firm's individual profits: Firm A Breaks agreement Maintains agreement and advertises and does not advertise Table 17-2 Suppose that two firms determine that each could lower its costs and increase its profits if both reduced their advertising budgets.But in order for the plan to work,each firm must agree to refrain from advertising.Each firm believes that advertising works by increasing the demand for the firm's product,but each firm also believes that if neither firm advertises,the cost savings will outweigh the lost sales.The table below lists each firm's individual profits: Firm A Breaks agreement Maintains agreement and advertises and does not advertise -Refer to Table 17-2.Does either Firm A or Firm B have a dominant strategy? A) Firm A has a dominant strategy,but Firm B does not. B) Firm A does not have a dominant strategy,but Firm B does. C) Neither Firm A nor Firm B has a dominant strategy. D) Both Firm A and Firm B have a dominant strategy. -Refer to Table 17-2.Does either Firm A or Firm B have a dominant strategy?


A) Firm A has a dominant strategy,but Firm B does not.
B) Firm A does not have a dominant strategy,but Firm B does.
C) Neither Firm A nor Firm B has a dominant strategy.
D) Both Firm A and Firm B have a dominant strategy.

E) A) and D)
F) A) and B)

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A firm that practices resale price maintenance


A) has incentive to reduce competition between its retailers.Resale price maintenance can lead to more service.
B) has incentive to reduce competition between its retailers.Resale price maintenance cannot lead to more service.
C) has no incentive to reduce competition between its retailers.Resale price maintenance can lead to more service.
D) has no incentive to reduce competition between its retailers.Resale price maintenance cannot lead to more service.

E) All of the above
F) C) and D)

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When an oligopoly grows very large,the


A) output effect disappears.
B) price effect disappears.
C) output effect equals the price effect.
D) price of the product greatly exceeds marginal cost.

E) None of the above
F) C) and D)

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Table 17-21 The Chicken Game is named for a contest in which drivers test their courage by driving straight at each other.John and Paul have a common interest to avoid crashing into each other,but they also have a personal,competing interest to not turn first to demonstrate their courage to those observing the contest.The payoff table for this situation is provided below.The payoffs are shown as (John,Paul) . Table 17-21 The Chicken Game is named for a contest in which drivers test their courage by driving straight at each other.John and Paul have a common interest to avoid crashing into each other,but they also have a personal,competing interest to not turn first to demonstrate their courage to those observing the contest.The payoff table for this situation is provided below.The payoffs are shown as (John,Paul) . -Refer to Table 17-21.If Paul chooses Drive Straight,what will John choose to do and what will John's payoff equal? A) Turn,5 B) Drive Straight,0 C) Turn,20 D) Drive Straight,5 -Refer to Table 17-21.If Paul chooses Drive Straight,what will John choose to do and what will John's payoff equal?


A) Turn,5
B) Drive Straight,0
C) Turn,20
D) Drive Straight,5

E) C) and D)
F) B) and C)

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Figure 17-4.Two companies,Acme and Bilco,are sellers in the same market.Each company decides whether to charge a high price or a low price.In the figure,the dollar amounts are payoffs and they represent annual profits for the two companies. Figure 17-4.Two companies,Acme and Bilco,are sellers in the same market.Each company decides whether to charge a high price or a low price.In the figure,the dollar amounts are payoffs and they represent annual profits for the two companies. -Refer to Figure 17-4.The situation faced by Acme and Bilco is A) one in which the players,pursuing their own interests,are likely to reach an outcome that is not particularly good for either player. B) one in which an agreement between the players to behave in a certain way is not likely to hold up. C) similar to the situation faced by Bonnie and Clyde in the prisoners' dilemma game. D) All of the above are correct. -Refer to Figure 17-4.The situation faced by Acme and Bilco is


A) one in which the players,pursuing their own interests,are likely to reach an outcome that is not particularly good for either player.
B) one in which an agreement between the players to behave in a certain way is not likely to hold up.
C) similar to the situation faced by Bonnie and Clyde in the prisoners' dilemma game.
D) All of the above are correct.

E) A) and D)
F) All of the above

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Table 17-15 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) . Table 17-15 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) . -Refer to Table 17-15.If player B chooses Right,player A should choose A) Up and earn a payoff of 1. B) Middle and earn a payoff of 5. C) Middle and earn a payoff of 7. D) Down and earn a payoff of 4. -Refer to Table 17-15.If player B chooses Right,player A should choose


A) Up and earn a payoff of 1.
B) Middle and earn a payoff of 5.
C) Middle and earn a payoff of 7.
D) Down and earn a payoff of 4.

E) A) and B)
F) None of the above

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Table 17-23 Two bottled beverage manufacturers (Firm A and Firm B) determine that they could lower their costs,and thus increase their profits,if they reduced their advertising budgets.But in order for the plan to work,each firm must agree to refrain from advertising.Each firm believes that advertising works by increasing the demand for the firm's product,but each firm also believes that if neither firm advertises,the costs savings will outweigh the lost sales.Listed in the table below are the individual profits for each firm. Table 17-23 Two bottled beverage manufacturers (Firm A and Firm B) determine that they could lower their costs,and thus increase their profits,if they reduced their advertising budgets.But in order for the plan to work,each firm must agree to refrain from advertising.Each firm believes that advertising works by increasing the demand for the firm's product,but each firm also believes that if neither firm advertises,the costs savings will outweigh the lost sales.Listed in the table below are the individual profits for each firm. -Refer to Table 17-23.At the Nash equilibrium,how much profit will Firm A earn? A) $8,000 because firm A will maintain the agreement not to advertise,but firm B will break the agreement and choose to advertise. B) $9,000 because each firm will break the agreement and choose to advertise. C) $10,000 because each firm will maintain the agreement and choose not to advertise. D) $11,000 because firm B will maintain the agreement not to advertise,but firm A will break the agreement and choose to advertise. -Refer to Table 17-23.At the Nash equilibrium,how much profit will Firm A earn?


A) $8,000 because firm A will maintain the agreement not to advertise,but firm B will break the agreement and choose to advertise.
B) $9,000 because each firm will break the agreement and choose to advertise.
C) $10,000 because each firm will maintain the agreement and choose not to advertise.
D) $11,000 because firm B will maintain the agreement not to advertise,but firm A will break the agreement and choose to advertise.

E) None of the above
F) B) and C)

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Figure 17-1.Two companies,ABC and XYZ,each decide whether to produce a high level of output or a low level of output.In the figure,the dollar amounts are payoffs and they represent annual profits for the two companies. Figure 17-1.Two companies,ABC and XYZ,each decide whether to produce a high level of output or a low level of output.In the figure,the dollar amounts are payoffs and they represent annual profits for the two companies. -Refer to Figure 17-1.If this game is played only once,then the most likely outcome is that A) both firms produce a low level of output. B) ABC produces a low level of output and XYZ produces a high level of output. C) ABC produces a high level of output and XYZ produces a low level of output. D) both firms produce a high level of output. -Refer to Figure 17-1.If this game is played only once,then the most likely outcome is that


A) both firms produce a low level of output.
B) ABC produces a low level of output and XYZ produces a high level of output.
C) ABC produces a high level of output and XYZ produces a low level of output.
D) both firms produce a high level of output.

E) All of the above
F) C) and D)

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