Liberty University ECON 213 quiz 12 solutions answers right

Liberty University ECON 213 quiz 12 solutions answers right

How many versions: 7 different versions

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Question 1

There are four ice cream shops on a small tourist island. The accompanying table shows the quantity of ice cream cones that each firm produces in a typical year and the price that each firm currently charges for each ice cream cone it sells. An economist might suspect __________ collusion occurring in this market where __________ is the price leader and all other firms set price to match the price leader.

Question 2

The practice of setting prices deliberately below __________ costs in an effort to drive a competitor out of the market is known as predatory pricing.

Question 3

Firm A prices its products so low that it drives competitors out of the market. After all of its competitors have been driven out of the market, Firm A raises prices significantly. Which statement best explains how regulation applies to this situation?

Question 4

Like a pure monopoly, an oligopoly is characterized by:

Question 5

A monopolistically competitive market consists of many sellers, an oligopoly consists of __________ seller(s), and a monopoly consists of __________ seller(s).

Question 6

The practice of setting prices deliberately below average variable costs in order to put a rival out of business is known as:

Question 7

KitNSit, Inc. and Kittysitters, Inc. are two catsitting services in Kent, Ohio. There are no other catsitting services so the market is considered to be a duopoly. According to the kinked demand prices, Kittysitters, Inc. will __________.

Question 8

According to Section 2 of the Sherman Antitrust Act, a person who attempts to monopolize commerce among the several states is guilty of a(n):

Question 9

According to the kinked demand curve theory, the behavior of firms in an oligopoly creates a demand curve that is __________ at prices above the cartel price and __________ at prices below the cartel price.

Question 10

When a market is characterized by mutual interdependence:

Question 11

Assume all markets are in longrun equilibrium. The market quantity supplied in an oligopoly would be __________ the market quantity supplied in a monopoly and __________ the market quantity supplied in a competitive market.

Question 12

In a repeated prisoner’s dilemma, a player that is playing titfortat will:

Question 13

Player A and Player B are playing a game involving several rounds of a prisoner’s dilemma where their choices are to “cooperate” or “defect.” After each round ends, one player roles a sixsided die. If the die lands on 6, the game ends; however, if the die lands on any other number, the game continues and players play another round. Prior to the game starting, the players formulate a strategy that specifies what they will do in every possible round they might find themselves in. If Player A is playing the titfortat strategy, in the:

Question 14

In 2011, three firms (Firm A, Firm B, and Firm C) were selling cellular phone service for a price of $40 per month in Hershey, Pennsylvania. Each firm serviced 100 cellphone customers; thus, all firms together serviced a total of 300 customers. Assume marginal cost is 0 (zero) for all firms and thus total revenue is equal to total profit. In 2012, Firms A and B continued to service 100 customers, but Firm C now serviced 150 customers; thus, all firms together serviced a total of 350 customers. All firms now charge $30 per month. Due only to the price effect, profits for each firm decline by $1,000. Due only to the output effect, profits for both Firm A and Firm B did not change, and profits for Firm C increased by $1,500. It was in Firm C’s interest to increase output because:

Question 15

The presence of significant positive __________ externalities can drive small firms out of business or force them to merge with larger competitors.

Question 16

The branch of economics that studies strategic decision making is called:

Question 17

If network externalities exist in an industry, the __________ firm to enter the market is often the one that succeeds in dominating the industry.

Question 18

Legislative efforts to curtail the adverse consequences of oligopolistic cooperation began with the __________.

Question 19

The Nash equilibrium in an oligopolistic market is generally __________ for society than the outcome under collusion because the price is __________ marginal cost.

Question 20

Refer to the accompanying table. If Keisha keeps quiet, Larry will spend __________ years in jail if he confesses and __________ years in jail if he also keeps quiet.

Question 1 A firm operating in an oligopolistic market has __________ market power compared to a __________.

Question 2 The accompanying table shows two firms in a single stage game. Each firm makes its decision without knowledge of the other firm’s decision. The payoffs for each firm represent economic profits, and each firm strictly prefers more economic profit than less. In the Nash equilibrium of this game, Pepsi earns a profit of __________ and Coca­Cola earns a profit of __________.

Question 3 Kit­N­Sit, Inc. and Kittysitters, Inc. are two cat­sitting services in Kent, Ohio. There are no other cat­sitting services so the market is considered to be a duopoly. According to the kinked demand curve theory, if Kit­N­Sit, Inc. cuts prices, Kittysitters will __________; if Kit­N­Sit, Inc raises prices, Kittysitters, Inc. will __________.

Question 4 Three firms are currently producing and selling in a market. When one of the three firms exits the market, economists expect that the equilibrium price:

Question 5 The __________ effect occurs when a buyer’s preference for a product increases as the number of people buying it increases.

Question 6 When customers face significant __________, the demand for the existing product becomes more inelastic.

Question 7 Legislative efforts to curtail the adverse consequences of oligopolistic cooperation began with the __________.

Question 8 One way to improve the social welfare of a society is to __________ competition and __________ monopoly practices through policy legislation.

Question 9 The __________ Act was passed in 1890, and the __________ Act was passed in 1914.

Question 10 An example of a tying arrangement is:

Question 11 The accompanying table shows two firms in a single­ stage duopoly game. Each firm makes its decision without knowledge of the other firm’s decision. The payoffs for each firm represent economic profits, and each firm strictly prefers more economic profit than less. This game would be considered a prisoner’s dilemma if X is between __________.

Question 12 Which of the following is an example of collusion?

Question 13 The accompanying payoff matrix depicts the possible outcomes for two players involved in a game of Ping Pong. At this point in the game, the ball has just been hit to Dagny Taggart, and she chooses whether to hit right or hit left. At the same time, John Galt chooses whether to defend right (Dagny’s right) or defend left (Dagny’s left). If a player receives a payoff of 1, the player wins the point; if the player receives a payoff of–1, the player loses the point. Use this information to answer the questions that follow. If John Defends left, Dagny’s payoff is __________ if she hits right and __________ if she hits left.

Question 14 The accompanying table shows Cassie’s preference ranking for different brands of boots in both 2011 and 2012. Her preferences are ranked from 1 to 4, where 4 is her most­preferred brand and 1 is her least­preferred brand. In 2011, one of Cassie’s ten close friends owned a pair of Ugg boots. In 2012, six of Cassie’s eleven close friends owned a pair of Ugg boots. Based on this information, which effect would likely explain the change in Cassie’s preference ranking for Ugg boots from 2011 to 2012?

Question 15 Assume that two firms (Firm A and Firm B) operate in the U.S. steel industry. The owner of Firm A writes the following letter to the owner of Firm B: Dear Owner of Firm B, I have concluded that if we both restrict output such that we each produce only 3 million tons of steel per year, we can both charge a price that will allow us to effectively monopolize the steel market and to maximize our joint profits. If you would like to enter into this agreement with me, please draft a contract that specifies this agreement, and I will be more than willing to meet with you and sign it. Sincerely, Owner of Firm A If this letter were sent in the year 1850, the:

Question 16 In 2011, three firms were selling cellular phone service for a price of $40 per month in Pittsburgh, Pennsylvania. In 2012, five firms were selling cellular phone service for a price of $30 per month. Which effect best describes the likely decrease in profits experienced by each of the three original firms due only to the lower market price?

Question 17 The accompanying payoff matrix depicts the possible outcomes for two players involved in a game of Rock, Paper, Scissors. If a player receives a payoff of 1, the player wins; if the player receives a payoff of –1, the player loses; if both players receive 0 (zero), the players tie. If Sideshow Bob chooses scissors and Crusty the Clown chooses paper, Sideshow Bob’s payoff is __________ and Crusty the Clown’s payoff is __________.

Question 18 In general, antitrust laws are __________ to enforce.

Question 19 The accompanying table shows a small community’s demand for monthly subscriptions to a streaming movie service. Assume that only two firms (Nextflix and Flixbuster) sell in this market, that each firm offers the same quality of service and movie selection, and that each firm’s marginal cost is constant and equal to 0 (zero) due to excess capacity. Use this information to answer the questions that follow. If the two firms operating in this market agreed to each supply one­half of the quantity a monopolist would supply, the contract would specify that:

Question 20 The accompanying payoff matrix depicts the possible outcomes for two players involved in a game of volleyball. At this point in the game, the ball has just been hit to Deidra, and she chooses whether to hit right or hit left. At the same time, Ashley chooses whether to jump right (Deidra’s right) or jump left (Deidra’s left). If a player receives a payoff of 1, the player wins the point; if the player receives a payoff of –1, the player loses the point. Use this information to answer the questions that follow. Deidra ________ a dominant strategy, and this game ________ a Nash equilibrium.

Question 1 The accompanying payoff matrix depicts the possible outcomes for two players involved in a game of Rock, Paper, Scissors. If a player receives a payoff of 1, the player wins; if the player receives a payoff of –1, the player loses; if both players receive 0 (zero), the players tie. If Madonna chooses rock and Kid Cudi chooses paper, Madonna’s payoff is __________ and Kid Cudi’s payoff is __________.

Question 2 Oligopolistic markets are __________ because price is __________ marginal cost.

Question 3 Wal­Mart and Target are the only stores in a remote town that currently stock and sell the PlayStation 5 video game console. Managers at both stores are simultaneously deciding whether to charge a price of $1,000 or $1,500 for each console. If both stores charge $1,000, they earn a profit of $100,000 each. If both stores charge $1,500, they earn a profit of $200,000 each. If one store charges $1,000 and the other store charges $1,500, the store that charges $1,000 earns a profit of $250,000 and the firm that charges $1,500 earns a profit of $50,000. If Wal­Mart and Target __________, they can both charge $1,500 and earn the highest combined profit available.

Question 4 The accompanying table shows a small community’s demand for monthly subscriptions to a streaming movie service. Assume that only two firms (Nextflix and Flixbuster) sell in this market, that each firm offers the same quality of service and movie selection, and that each firm’s marginal cost is constant and equal to 0 (zero) due to excess capacity. Use this information to answer the questions that follow. If the two firms operating in this market agreed to each supply one­half of the quantity a monopolist would supply, the contract would specify that:

Question 5 The accompanying payoff matrix depicts the possible outcomes for two players involved in a game of Rock, Paper, Scissors. If a player receives a payoff of 1, the player wins; if the player receives a payoff of ­1, the player loses; if both players receive 0 (zero), the players tie. Brian’s optimal strategy is to:

Question 6 Airline A and Airline B are the two largest airlines in the country. The chief executive officer of Airline A calls the chief executive officer of Airline B and says, “Why don’t we both raise prices 25% across the board next week?” This is an example of:

Question 7 In 2011, three firms (Firm A, Firm B, and Firm C) were selling cellular phone service for a price of $40 per month in Playa del Carmen, Mexico. Each firm serviced 100 cellphone customers; thus, all firms together serviced a total of 300 customers. Assume marginal cost is 0 (zero) for all firms and thus total revenue is equal to total profit. In 2012, Firms A and B each continued to service 100 customers, but Firm C now serviced 150 customers; thus, all firms together serviced a total of 350 customers. All firms now charge $30 per month. Firm C’s monthly profit increased by __________ due only to the output effect and decreased by __________ due only to the price effect, for a net increase of $500.

Question 8 The accompanying table shows a small community’s demand for monthly subscriptions to a streaming movie service. Assume that only two firms (Nextflix and Flixbuster) sell in this market, that each firm offers the same quality of service and movie selection, and that each firm’s marginal cost is constant and equal to 0 (zero) due to excess capacity. Use this information to answer the questions that follow. Listed below are four different collusive agreements that Nextflix and Flixbuster are considering. Assuming both firms will abide by the terms, which collusive agreement(s) would maximize total profit in the market? I. Nextflix supplies 400 subscriptions and Flixbuster supplies 500 subscriptions. II. Nextflix supplies 500 subscriptions and Flixbuster supplies 300 subscriptions. III. Nextflix supplies 250 subscriptions and Flixbuster supplies 250 subscriptions. IV. Nextflix supplies 100 subscriptions and Flixbuster supplies 400 subscriptions.

Question 9 Because Wal­Mart has never systematically raised prices, there is no evidence that WalMart is engaged in:

Question 10 Why does the Department of Justice not investigate and block the many mergers of large firms that have occurred recently in oligopolistic industries such as the cellular phone industry and the airline industry that obviously lessen competition?

Question 11 The accompanying payoff matrix depicts the possible outcomes for two players involved in a game of volleyball. At this point in the game, the ball has just been hit to Deidra, and she chooses whether to hit right or hit left. At the same time, Ashley chooses whether to jump right (Deidra’s right) or jump left (Deidra’s left). If a player receives a payoff of 1, the player wins the point; if the player receives a payoff of–1, the player loses the point. Use this information to answer the questions that follow. How many Nash equilibrium(ia) exist in this game?

Question 12 In 2011, three firms (Firm A, Firm B, and Firm C) were selling cellular phone service for a price of $40 per month in Hershey, Pennsylvania. Each firm serviced 100 cellphone customers; thus, all firms together serviced a total of 300 customers. Assume marginal cost is 0 (zero) for all firms and thus total revenue is equal to total profit. In 2012, Firms A and B continued to service 100 customers, but Firm C now serviced 150 customers; thus, all firms together serviced a total of 350 customers. All firms now charge $30 per month. Due only to the price effect, profits for each firm decline by $1,000. Due only to the output effect, profits for both Firm A and Firm B did not change, and profits for Firm C increased by $1,500. It was in Firm C’s interest to increase output because:

Question 13 In January, Wal­Mart offered a 10% off coupon and Target did not. In February, Target offered a 10% off coupon and Wal­Mart did not. In March, Wal­ Mart offered a 10% off coupon and Target did not. It is likely that Wal­Mart and Target are both playing the __________ strategy.

Question 14 Assume that two firms (Firm A and Firm B) operate in the U.S. steel industry. The owner of Firm A writes the following letter to the owner of Firm B: Dear Owner of Firm B, I have concluded that if we both restrict output such that we each produce only 3 million tons of steel per year, we can both charge a price that will allow us to effectively monopolize the steel market and to maximize our joint profits. If you would like to enter into this agreement with me, please draft a contract that specifies this agreement and I will be more than willing to meet with you and sign it. Sincerely, Owner of Firm A If this letter were sent in the year 1944, the:

Question 15 The accompanying payoff matrix depicts the possible outcomes for two players involved in a game of Rock, Paper, Scissors. If a player receives a payoff of 1, the player wins; if the player receives a payoff of –1, the player loses; if both players receive 0 (zero), the players tie. Which of the following statements is true?

Question 16 The __________ Act was the first antitrust bill created in response to the increase in concentration ratios in many leading U.S. industries, including steel, railroads, mining, textiles, and oil.

Question 17 When a third firm enters a market that was previously categorized as a duopoly, the equilibrium price:

Question 18 __________ have a greater incentive to collude and to form cartels in an effort to achieve monopoly­like profits.

Question 19 Assume that there is an oligopoly consisting of firms of different sizes. If a small firm increases output by 25%, the price effect realized by the small firm will be only __________. If a large firm increases output by 25%, the price effect realized by the large firm will be __________.

Question 20 An example of a tying arrangement is:

Question 1 In 1974, the U.S. Attorney General filed suit against which telecom company for violating antitrust laws?

Question 2 Three firms are currently producing and selling in a market. When one of the three firms exits the market, economists expect that the equilibrium price:

Question 3 According to the kinked demand curve theory, the behavior of firms in an oligopoly creates a demand curve that is __________ at prices above the cartel price and __________ at prices below the cartel price.

Question 4 The accompanying table shows the dollar amount of sales in 2012 for the four largest firms in the above­ground pool industry. Total industry sales in 2012 were $467,000. Use this table to answer the questions that follow. If Blue Water Island, Inc. acquired Backyard Paradise, Inc., the concentration ratio would __________ and the market price of pools would likely __________.

Question 5 The accompanying table shows a small community’s demand for monthly subscriptions to a streaming movie service. Assume that only two firms (Nextflix and Flixbuster) sell in this market, that each firm offers the same quality of service and movie selection, and that each firm’s marginal cost is constant and equal to 0 (zero) due to excess capacity. Use this information to answer the questions that follow. If this market were a monopoly instead of a duopoly, the market price would be __________ and the quantity of streaming movie subscriptions purchased each month would be __________.

Question 6 The accompanying table shows two firms in a duopoly. Each firm makes its decision without knowledge of the other firm’s decision. The payoffs for each firm represent economic profits, and each firm strictly prefers more economic profit than less. If both firms were able to collude and make their supply decisions collectively, Flixbuster would sell __________ subscriptions per month and Nextflix would sell __________ subscriptions per month.

Question 7 It might be rational for a firm to price its products below __________ costs in order to drive potential entrants from entering a market.

Question 8 The accompanying payoff matrix depicts the possible outcomes for two players involved in a game of Rock, Paper, Scissors. If a player receives a payoff of 1, the player wins; if the player receives a payoff of –1, the player loses; if both players receive 0 (zero), the players tie. If Stan chooses paper and Eric chooses paper, Stan’s payoff is __________ and Eric’s payoff is __________.

Question 9 Five firms are currently producing and selling in a market. When two more firms enter the market, economists expect that the equilibrium price:

Question 10 The accompanying table shows the four­firm concentration ratios for five separate industries. Use this table to answer the questions that follow. In which industry do the four largest firms collectively have the least market power?

Question 11 The __________ Act was the first antitrust bill created in response to the increase in concentration ratios in many leading U.S. industries, including steel, railroads, mining, textiles, and oil.

Question 12 The __________ effect occurs when a buyer’s preference for a product increases as the number of people buying it increases.

Question 13 When two or more firms set prices or quantities in unison, economists refer to them as a:

Question 14 Together, Coca­Cola and Pepsi account for approximately __________% of the soft­drink market.

Question 15 The two major pieces of antitrust legislation in the United States are the:

Question 16 Assume that two firms (Firm A and Firm B) operate in the U.S. steel industry. The owner of Firm A writes the following letter to the owner of Firm B: Dear Owner of Firm B, I have concluded that if we both restrict output such that we each produce only 3 million tons of steel per year, we can both charge a price that will allow us to effectively monopolize the steel market and to maximize our joint profits. If you would like to enter into this agreement with me, please draft a contract that specifies this agreement and I will be more than willing to meet with you and sign it. Sincerely, Owner of Firm A If this letter were sent in the year 1944, the:

Question 17 Assume that there is an oligopoly consisting of firms of different sizes. If a small firm increases output by 25%, the price effect realized by the small firm will be only __________. If a large firm increases output by 25%, the price effect realized by the large firm will be __________.

Question 18 When more firms enter into a market that was previously characterized as a duopoly, it will:

Question 19 Airline A and Airline B are the two largest airlines in the country. The chief executive officer of Airline A calls the chief executive officer of Airline B and says, “Why don’t we both raise prices 25% across the board next week?” This is an example of:

Question 20 When decision­makers face incentives that make it difficult to achieve mutually beneficial outcomes, we say they are in a(n):

1.      The accompanying table shows two firms in a single stage game.  Each firm makes its decision without the knowledge of the other firm’s decision.  The payoffs for each firm represents economic profits, and each firm strictly prefers more economic profit than less.  In the Nash Equilibrium of this game.  Pepsi earns a profit of ___________and Coca-Cola earns a profit of ______________.

2.      The _______________ effect occurs when a buyer’s preference for a product increases as the number of people buying it increases.

3.      Evidence of the intent to _________ is necessary to prove that a firm is engaged in predatory pricing. 

4.      When customers face significant _______ the demand for the existing product becomes more inelastic.

5.      An agreement between Netflix and Flixbuster to each supply 250 subscription is an example of:

6.      ____________ have a greater incentive to collude and to form cartels in an effort to achieve monopoly-like profits.

7.      Player A and Player B are playing a game involving several rounds of a prisoner’s dilemma where their choices are to “cooperate” or “defect.”  After each round ends, one player roles a six-sided die.  If the die lands on 6, the game ends; however, if the die lands on any other number, the game continues and players play another round.  Prior to the game starting, the players formulate a strategy that specifies what they will do in every possible round they might find themselves in.  If Player A is playing the tit-for-tat strategy, in the:

8.      Jarrod and Katie are playing a game involving repeated iterations of a simultaneous move prisoner’s dilemma.  In each round, both Jarrod and Katie choose either “cooperate” or “defect.”  Neither Jarrod nor Katie knows when the game will end.  If Jarrod believes that Katie will be playing tit-for-tat:

9.      It might be rationale for a firm to price its products below __________ costs in order to drive potential entrants from entering a market.

10.  A ___________ agreement among rival firms will most likely specify the price each firm will charge and the quantity each firm will produce/sell.

11.  Tara’s cellphone carrier would charge her $250 to cancel her current contract.  If Tara wants to change cellphone carriers, the $250 she would have to pay is considered a:

12.  In 2011, three firms were selling cellular phone service for a price of $40 per month in Pittsburgh, Pennsylvania.  In 2012, five firms were selling cellular phone service for a price of $30 per month.  Which effect best describes the likely decrease in profits experienced by each of the three original firms due to the lower market price?

13.  Refer to the accompanying table.  If Keisha keeps quiet, Larry will spend ________ years in jail if he confesses and _________ years in jail if he also keeps quiet.

14.  The accompanying table shows two firms in a single-stage duopoly game.  Each firm makes its decision without knowledge of the other firm’s decision.  The payoffs for each firm represent economic profits, and each firm strictly prefers more economic profit than less.  This game would be considered a prisoner’s dilemma if X is between _________.

15.  Firms with many customers that find is easier to attract new customers are most likely selling a good that has a ________ externality.

16.  If this market were a monopoly instead of a duopoly, the market price would be ________ and the quantity of streaming movie subscriptions purchased each month would be __________.

Which of the following conditions will result in the firm making zero economic profits

Marginal revenue is the change in total

Which of the following lists the three main characteristics of a competitive market

At current production levels, the marginal revenue of a competitive firm is $15 and the marginal cost of the firm is $15. The firm should

If firms in a competitive market are making positive economic profits, you would expect firms to

If firms in a competitive market are incurring economic losses, you would expect firms to

When marginal revenue equals marginal cost

A firm’s short-run supply curve is equal to the firm’s

Firms will always make a positive economic profit if the price they charge is

A price-maker

When a particular strategy produces a better outcome for a person regardless of the strategies others choose, we say it is a(n):

If barriers to entry are high and products are somewhat differentiated

In a repeated prisoner’s dilemma, a player that is playing tit-for-tat will

The accompanying payoff matrix depicts the possible outcomes for two players involved in a game of Rock, Paper, Scissors. If a player receives a payoff of 1, the player wins; if the player receives a payoff of –1, the player loses; if both players receive 0 (zero), the players tie. If Stan chooses scissors and Kyle chooses rock, Stan’s payoff is __________ and Kyle’s payoff is __________.

Two government-created barriers to entry are

Entry of new firms will continue in a monopolistically competitive industry until

If monopolistically competitive firms are incurring losses, existing firms would

The accompanying table shows two firms in a single-stage duopoly game. Each firm makes its decision without knowledge of the other firm’s decision. The payoffs for each firm represent economic profits, and each firm strictly prefers more economic profit than less. If both firms were able to write a binding contract, this contract would specify that Bobbles.com agrees to produce __________ bobbleheads and Bobbles R Us agrees to produce __________ bobbleheads

Firms will always make a positive economic profit if the price they charge is

Firms in every market structure

Costs that have been incurred as a result of past decisions are known as

Which of the following conditions will result in the firm making zero economic profits

Marginal revenue is the change in total

If a competitive firm can make enough revenue to cover its variable costs, the firm will

The marginal cost curve is the short-run supply curve

If firms in a competitive market are making positive economic profits, you would expect firms to

At current production levels, the marginal revenue of a competitive firm is $15 and the marginal cost of the firm is $15. The firm should

A firm operating in an oligopolistic market has __________ market power compared to a __________.

The accompanying payoff matrix depicts the possible outcomes for two players involved in a game of Rock, Paper, Scissors. If a player receives a payoff of 1, the player wins; if the player receives a payoff of –1, the player loses; if both players receive 0 (zero), the players tie. If Stan chooses scissors and Kyle chooses rock, Stan’s payoff is __________ and Kyle’s payoff is __________.

Monopolistically competitive firms that are earning zero economic profit would most likely

The accompanying table shows two firms in a single- stage duopoly game. Each firm makes its decision without knowledge of the other firm’s decision. The payoffs for each firm represent economic profits, and each firm strictly prefers more economic profit than less. Assume firms are not able to collude. The Nash equilibrium total quantity of potatoes on the market is

If barriers to entry are high and products are somewhat differentiated

Barriers to entry

Monopolistic competition means

Both monopolies and competitive firms

Two government-created barriers to entry are: