30) The conclusions of the theory of contestable markets include all of the foll
ID: 1164554 • Letter: 3
Question
30)
The conclusions of the theory of contestable markets include all of the following EXCEPT
(2pts)
Contestable markets are more likely to be characterized by the existence of stable cartels.
Profits can be zero in an industry even if the number of sellers in the industry is small.
A contestable market encourages firms to produce at their lowest possible average total cost and where P=MC.
If a market is contestable, inefficient producers cannot survive due to the entry of lower-cost firms.
Even if an industry is comprised of a small number of firms, or simply one firm, this is not sufficient evidence that the firms perform in a noncompetitive way.
31)
A key feature of the game theory known as the “Prisoner’s Dilemma” is that
(2pts)
decisions that are individually rational may lead to outcomes that are jointly inefficient.
cartels are more stable than most economists believe.
demand curves are more elastic than most economists believe.
prisoner's don't confess, even when it is in their own best interest to do so.
decisions that are best for the individual are also best for the group.
32)
A monopolistic competitor and a monopolist are alike in which of the following ways?
(2pts)
They are the only firms in their markets.
They both produce an output level where MR=MC.
They can both earn economic profits in the long-run.
All the above.
None of the above.
33)
The demand curve facing the individual monopolistic competitor is downward-sloping due to
(2pts)
price discrimination.
high fixed costs.
product differentiation.
legal restrictions.
barriers to entry.
34)
According to the PowerPoint Lecture Slides, the key feature that distinguishes oligopoly from all the other market structures is the existence of
(2pts)
price discrimination
positive economic profits in the long run
mutual interdependence
economies of scale
product differentiation
35)
The two models that the PowerPoint slides use to represent the two possible extreme outcomes in oligopoly (zero profits or monopoly profits) are
(2pts)
price leadership and kinked demand curve
contestable market and prisoner’s dilemma
Bertrand duopoly and cartel
“per se” and Robinson-Patman
tacit collusion and Herfindahl
36)
Which antitrust law declares price discrimination, exclusive dealing, tying contracts, and acquisition of competing companies’ stock to be illegal if these actions would substantially lessen competition.
(2pts)
Robinson-Patman Act
Sherman Act
Wheeler-Lea Act
Clayton Act
Celler-Kefauver Act
37)
Which antitrust law prohibits suppliers from offering discounts to large chain stores unless they also offer the discounts to everyone else?
(2pts)
Wheeler-Lea Act
Clayton Act
Robinson-Patman Act
Sherman Act
Celler-Kefauver Act
38)
Which antitrust law bans anticompetitive mergers that occur as a result of one company acquiring the physical assets of another company.
(2pts)
Sherman Act
Celler-Kefauver Act
Robinson-Patman Act
Clayton Act
Wheeler-Lea Act
39)
Which antitrust law empowers the Federal Trade Commission to deal with false or deceptive acts or practices?
(2pts)
Robinson-Patman Act
Wheeler-Lea Act
Clayton Act
Sherman Act
Celler-Kefauver Act
Explanation / Answer
(30) Option (A)
A contestable market is not characterized by presence of cartels, stable or unstable.
(31) Option (A)
In a prisoners' dilemma game, each player selects a strategy that maximizes their individual payoff but it does not maximize joint payoff. So this outcome is inefficient.
(32) Option (B)
In both market structures, firms face downward sloping demand and MR curve, and maximize profit by equating MR and MC. But while monopolist may earn long run profits, monopolistic competitor will not.
(33) Option (C)
Existence of product differentiation makes the demand relatively inelastic, leading to a downward sloping demand curve.
NOTE: As per Chegg Answering Policy, first 4 questions are answered.
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