11 May IF THE PLAYERS CHOOSE INDEPENDENTLY, WHAT WILL BE THE OUTCOME?
Consider Figure 8.9. If the players choose independently, what will be the
outcome?
A)
Becky chooses a low price and David chooses a low price.
B)
Becky chooses a high price and David chooses a low price.
C)
Becky chooses a low price and David chooses a high price.
D)
Becky chooses a high price and David chooses a high price.
56)
Price fixing tends to fail in an oligopoly because
A)
firms like to have flexibility in setting prices.
B)
each firm has an incentive to underprice the other firms.
C)
it increases the quantity demanded.
D)
consumers don’t like fixed prices.
57)
A dominant strategy is one that
A)
maximizes profits.
B)
is optimal under some conditions.
C)
never yields a negative payoff.
D)
is the best choice under all conditions.
58)
An action that is the best choice under all conditions is known as a
A)
profit-maximizing strategy.
B)
dilemma.
C)
trigger strategy.
D)
dominant strategy.
59)
The duopolists’ dilemma refers to the situation in which
A)
duopolists would be better off maintaining high prices but face an incentive to
choose a low price.
B)
duopolists can only earn high profits by breaking the law.
C)
duopolists who are engaged in price fixing have an incentive to report the
behavior to the government.
D)
duopolists do not have a dominant strategy.
60)
A Nash Equilibrium in a game is that outcome in which
A)
each player is doing the best he or she can given the other player’s action.
B)
the players’ profits are equal.
C)
the players’ earn the highest profits possible.
D)
neither player plays his or her dominant strategy.
61)
The concept of Nash Equilibrium
A)
has wide applicability.
B)
is limited in its applicability to economic behavior because firms do not
follow their dominant strategies.
C)
is limited in its applicability to economic behavior because firms generally
follow their dominant strategies.
D)
has been disproven by modern economists.
Recall
the Application about the attempt to form a salt cartel in the 19th century to
answer the following question(s).
62)
Recall the Application. One reason cited for the failure of the salt cartel was
A)
the demand for salt sharply declined in the late 19th century.
B)
new firms entering the market and underpricing the cartel.
C)
foreign competition taking over the salt market.
D)
the federal government’s banning of price fixing in the salt market.
63)
Recall the Application. One of the primary goals of the salt producers who
tried to form a cartel was to
A)
establish a uniform price for salt.
B)
boost the demand for salt.
C)
establish an export market for salt.
D)
increase competition in the market for salt.
64)
An oligopoly is an industry with just one firm. 55)
Consider Figure 8.9. If the players choose independently, what will be the
outcome?A)
Becky chooses a low price and David chooses a low price.B)
Becky chooses a high price and David chooses a low price.C)
Becky chooses a low price and David chooses a high price.D)
Becky chooses a high price and David chooses a high price. 56)
Price fixing tends to fail in an oligopoly becauseA)
firms like to have flexibility in setting prices.B)
each firm has an incentive to underprice the other firms.C)
it increases the quantity demanded.D)
consumers don’t like fixed prices. 57)
A dominant strategy is one thatA)
maximizes profits.B)
is optimal under some conditions.C)
never yields a negative payoff.D)
is the best choice under all conditions. 58)
An action that is the best choice under all conditions is known as aA)
profit-maximizing strategy.B)
dilemma.C)
trigger strategy.D)
dominant strategy. 59)
The duopolists’ dilemma refers to the situation in which A)
duopolists would be better off maintaining high prices but face an incentive to
choose a low price.B)
duopolists can only earn high profits by breaking the law. C)
duopolists who are engaged in price fixing have an incentive to report the
behavior to the government. D)
duopolists do not have a dominant strategy. 60)
A Nash Equilibrium in a game is that outcome in whichA)
each player is doing the best he or she can given the other player’s action.B)
the players’ profits are equal. C)
the players’ earn the highest profits possible.D)
neither player plays his or her dominant strategy. 61)
The concept of Nash EquilibriumA)
has wide applicability.B)
is limited in its applicability to economic behavior because firms do not
follow their dominant strategies. C)
is limited in its applicability to economic behavior because firms generally
follow their dominant strategies. D)
has been disproven by modern economists. Recall
the Application about the attempt to form a salt cartel in the 19th century to
answer the following question(s).62)
Recall the Application. One reason cited for the failure of the salt cartel was
A)
the demand for salt sharply declined in the late 19th century.B)
new firms entering the market and underpricing the cartel.C)
foreign competition taking over the salt market.D)
the federal government’s banning of price fixing in the salt market. 63)
Recall the Application. One of the primary goals of the salt producers who
tried to form a cartel was toA)
establish a uniform price for salt.B)
boost the demand for salt.C)
establish an export market for salt.D)
increase competition in the market for salt. 64)
An oligopoly is an industry with just one firm.
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