27. ECO1050 u07q1 Question 27 (Points: 2) How is a firm in an oligopoly similar

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27. ECO1050 u07q1 Question 27 (Points: 2)
How is a firm in an oligopoly similar to a monopoly? (2 points).



1. Both types of firms operate behind natural or legal barriers to entry.

2. The behavior of both types of firms can be analyzed using game theory.

3. Both types of firms produce a standardized product.

4. Both types of firms are price takers.

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28. ECO1050 u07q1 Question 28 (Points: 3)
When firms in an oligopoly successfully collude and do not cheat on a cartel agreement, they achieve long-run economic profit similar to what? (3 points).



1. Non-colluding oligopolies.

2. Perfect competition.

3. Monopolistic competition.

4. Monopoly.

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29. ECO1050 u07q1 Question 29 (Points: 3)


Which of the following is true regarding the above figure? (3 points).





1. If the market is perfect competition, output will be Q1 and price will be P1.

2. If the market is perfect competition, output will be Q2 and price will be P2.

3. If the market is a monopoly, output will be Q3 and price will be P3.

4. If the market is a monopoly, output will be Q1 and price will be P3.

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30. ECO1050 u07q1 Question 30 (Points: 3)


In the above figure, what will the output of an oligopoly range between? (3 points).





1. Q1 and Q2.

2. Q1 and Q3.

3. 0 and Q1.

4. Q2 and Q3.

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31. ECO1050 u07q1 Question 31 (Points: 2)
Boeing and Airbus have entered into a cartel agreement that will enable them to boost their profits. What occurs if Boeing decides to cheat on the agreement? (2 points).



1. The total industry output increases.

2. The total profits in the airplane industry will decrease.

3. Boeing lowers the price of its airplanes.

4. All of the above answers are correct.

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32. ECO1050 u07q1 Question 32 (Points: 3)
Economists uses game theory to analyze strategic behavior, which takes which of the following into account? (3 points).



1. Non-price competition.

2. Monopoly situations.

3. The price-taking behavior of oligopolies.

4. The expected behavior of others and the recognition of mutual interdependence.

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33. ECO1050 u07q1 Question 33 (Points: 3)
Which of the following is true about a Nash equilibrium? (3 points).



1. It occurs when each player chooses the best strategy given the strategy of the other player.

2. It might not give the best outcome.

3. It is named after the Nobel prize winning economist John Nash.

4. All of the above answers are correct.

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34. ECO1050 u07q1 Question 34 (Points: 2)
In a prisoners' dilemma game, this would happen in the Nash equilibrium. (2 points).



1. Collusion would not alter the outcome.

2. One player has another outcome that does not occur and is more favorable.

3. Neither player has another outcome that does not occur and is more favorable.

4. Both players have another outcome that does not occur but is more favorable.

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35. ECO1050 u07q1 Question 35 (Points: 3)
The prisoners' dilemma is similar to the problem faced by firms in an oligopoly in the United States because of this. (3 points).



1. Mutual interdependence exists, and collusion is illegal in the United States, so the firms cannot legally communicate.

2. Collusion is legal in the United States, and firms can communicate their pricing decisions to each other.

3. Failure to cooperate leads to better outcomes than cooperation.

4. Private prisons are run by oligopolies.

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36. ECO1050 u07q1 Question 36 (Points: 3)


The only two firms in a market are trying to decide what price to charge. The payoff matrix for this duopoly game is shown above. The payoffs are thousands of dollars of economic profit. In the Nash equilibrium, which of the following is correct? (3 points).





1. Firm A will set a price of $20, and Firm B will set a price of $10.

2. Firm A will set a price of $10, and Firm B will set a price of $20.

3. Firm A will set a price of $20, and Firm B will set a price of $20.

4. Firm A will set a price of $10, and Firm B will set a price of $10.

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37. ECO1050 u07q1 Question 37 (Points: 3)


The only two firms in a market are trying to decide what price to charge. The payoff matrix for this duopoly game is shown above. The payoffs are thousands of dollars of economic profit. Which of the following statements is correct? (3 points).





1. If the firms cooperate, they could both earn $55,000 in economic profit.

2. The Nash equilibrium in this game gives both firms less than the maximum economic profit.

3. If the firms play this game repeatedly, they could both end up charging $20.

4. All of the above answers are correct.

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38. ECO1050 u07q1 Question 38 (Points: 2)
What is the conclusion in the prisoners' dilemma? (2 points).



1. There is no Nash equilibrium available to the prisoners.

2. Firms should not enter a legal duopoly.

3. Prisoners do not act interdependently.

4. Two prisoners acting in their own best interest harm their joint interest.

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39. ECO1050 u07q1 Question 39 (Points: 2)
Which of the following is true if a few oil producing countries in the Middle East decide to jointly limit the production of oil? (2 points).



1. Game theory does not apply to their actions because they are nations, not firms.

2. They would like the price of oil to be the same as if the market were perfectly competitive.

3. They are forming a cartel.

4. All of the above answers are correct.

Explanation / Answer

27. 4. Both types of firms are price takers. 28. 2. Perfect competition. 29. 2. If the market is perfect competition, output will be Q2 and price will be P2. 30. 2. Q1 and Q3. 31. 3. Boeing lowers the price of its airplanes. 32. 3. The price-taking behavior of oligopolies. 33. 4. All of the above answers are correct. 34. 3. Neither player has another outcome that does not occur and is more favorable. 35. 1. Mutual interdependence exists, and collusion is illegal in the United States, so the firms cannot legally communicate. 36. 2. Firm A will set a price of $10, and Firm B will set a price of $20. 37. 4. All of the above answers are correct. 38. 1. There is no Nash equilibrium available to the prisoners. 39. 3. They are forming a cartel.

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