Question 21) In a prisoners’ dilemma game, in the Nash equilibrium

21) In a prisoners’ dilemma game, in the Nash equilibrium

A) neither player gets his or her best outcome.

B) both players get their best outcome.

C) one player gets his or her best outcome and the other player does not.

D) collusion would not alter the outcome.

E) Either answer A or C might be correct depending on whether the players communicate

with each other or do not communicate with each other.

21)

22) In the prisoners’ dilemma, each player is ________ regardless of the other player’s actions.

A) better off confessing

B) forced to confess

C) better off denying

D) forced to deny

E) going to go free

22)

23) In an oligopoly, output is

A) greater than the output in perfect competition.

B) somewhere between the output in monopoly and that in perfect competition outcomes.

C) in all circumstances the same as the output in perfect competition.

D) less than the output in monopoly.

E) in all circumstances the same as the output in monopoly.

23)

24) Which of the following is true? In the above figure, if the market is

A) a monopoly, output will beQ3 and price will beP3.

B) perfect competition, output will beQ3 and price will beP3.

C) perfect competition, output will beQ1 and price will beP1.

D) a monopoly, output will beQ1 and price will beP3.

E) perfect competition, output will beQ2 and price will beP2.

24)

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25) In the above figure, the output of an oligopoly will range between

A)Q2 andQ3.

B) 0 andQ1.

C)Q1 andQ2.

D)Q1 andQ3.

E) 0 andQ2.

25)

26) A Nash equilibrium in the duopoly game

A) means that one player has greater market power.

B) will always lead to equilibrium in which the firms’ total profit is the largest.

C) can occur only if firms cooperate with each other.

D) means that a firm must be able to determine its actionsandthe actions of its competitor.

E) occurs when each player takes the best possible action regardless of the strategy chosen by

other firms.

26)

27) The major dilemma facing Boeing and Airbus is the

A) fact that neither will respond to the behavior of the other.

B) fact that if each firm separately tries to maximize its profit, it might wind up with less

profit that otherwise.

C) fact that when they collude to maximize their profit, the other firm’s profit might be larger

than its profit.

D) certainty surrounding the reaction of each firm to the behavior of the other firm.

E) competition from other firms that drives their economic profit to zero.

27)

6

28) The above figure shows the market demand curve for long-distance telephone calls. Suppose

the marginal cost of a long-distance telephone call is 2¢ a minute for a call no matter how many

minutes of calls are made and there are 3 firms in the industry. If the firms in the industry

operate as perfect competitors, there are ________ minutes of calls made per hour.

A) between 0 and 3 million

B) more than 3 million and less than or equal to 5 million

C) more than 5 million and less than or equal to 7 million

D) more than 9 million

E) more than 7 million and less than or equal to 9 million

28)

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29) The figure above shows the market demand curve and theATCcurve for a firm. If all firms in

the market have the sameATCcurve, the lowest price at which a firm could stay in business in

the long run is ________ per unit and the quantity demanded in the market at that price is

________ units per hour.

A) $20; 2,000

B) $10; 4,000

C) $20; 8,000

D) $10; 8,000

E) $20; 4,000

29)

30) The figure above shows the market demand curve and theATCcurve for a firm. If all firms in

the market have the sameATCcurve, the efficient scale for one firm is ________ units per hour.

A) 2,000

B) 4,000

C) 8,000

D) 10,000

E) more than 10,000

30)

31) Which of the following is correct?

A) In the long run, a firm in monopolistic competition earns zero economic profit and its

price is equal to the minimum average total cost.

B) In the long run, a firm in monopolistic competition can earn an economic profit because of

product differentiation.

C) A firm in perfect competition operates at maximum average total cost in the long run.

D) In the long run, a firm in monopolistic competition maximizes its profit at a point where

price is equal to average total cost but the average total cost is not minimized.

E) A firm in monopolistic competition does not have excess capacity in the long run.

31)

8

32) A cartel is most likely to occur in

A) perfect competition as firms compete by reducing cost.

B) oligopoly as firms compete to lower price and increase their own profits.

C) monopolistic competition where firms collude to increase profits.

D) monopoly because it faces no competition.

E) oligopoly as firms act together to raise prices and increase profits.

32)

33) When firms in monopolistic competition are making an economic profit, firms will

A) enter the industry, and demand will decrease for the original firms.

B) exit the industry, and demand will increase for the firms that remain.

C) enter the industry and then will exit the industry.

D) enter the industry, and demand will increase for the original firms.

E) exit the industry, and demand will decrease for the firms that remain.

33)

34) Herb’s Inc. has a large share of its market and is tempted to collude with the few firms that are in

its market. Herb’s operates in

A) a perfectly competitive market.

B) collusively protected market.

C) a monopoly market.

D) a monopolistically competitive market.

E) an oligopoly.

34)

35) A cartel is

A) a market structure with a large number of small firms.

B) a market with only two firms.

C) a group of firms acting together to raise price, decrease output, and increase economic

profit.

D) a market structure with a small number of large firms.

E) another name for an oligopoly.

35)

36) For a firm in monopolistic competition, the efficient scale is the amount of output at which

________ is a minimum.

A) marginal cost

B) fixed cost

C) average total cost

D) average variable cost

E) average fixed cost

36)

37) A firm in monopolistic competition ________ influence its price and ________ influence the

market average price.

A) cannot; cannot

B) can; only in the short run can

C) can; cannot

D) cannot; can

E) can; can

37)

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38) At a long-run equilibrium in monopolistic competition, price equals

A) marginal cost but not marginal revenue.

B) average total cost.

C) marginal revenue and marginal cost.

D) marginal revenue but not marginal cost.

E) zero.

38)

39) In monopolistic competition there are ________ barriers to entry, so therefore in the long run,

economic profit ________.

A) no; is substantial

B) many; equals zero

C) no; equals zero

D) many; is substantial

E) many; might be earned depending on the degree of product differentiation

39)

40) The major difference between monopolistic competition and monopoly is

A) monopoly is a price setter and a firm in monopolistic competition is a price taker.

B) how the quantity of output is determined.

C) only a monopoly can earn an economic profit in the long run.

D) only a firm in monopolistic competition can earn an economic profit in the short run.

E) only firms in monopolistic competition are protected by barriers to entry.

40)

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