Question 1

In a competitive market, each firm earns ________ economic profits, whereas firms in a successful cartel will earn ________.

Accepted Answer

A)   positive; zero economic profits
B)   negative; positive economic profits
C)   positive; monopoly profits
D)   zero; positive economic profits

Question 2

Which of the following statements is TRUE?
I. It is easier to form a cartel for a product with few substitutes.
II. Cartels that are backed and supported by the government tend to have less power.
III. Cartels are more likely to collapse the more firms there are in an industry.

Accepted Answer

A)   I only
B)   II only
C)   I and III only
D)   II and III only

Question 3

Without government support, cartels tend to break down over time.

Accepted Answer

A) True 
 B)False

Question 4

If every member of OPEC produces beyond quota, then cartel members:

Accepted Answer

A)   earn monopoly profits.
B)   fail to earn monopoly profits.
C)   cannot profit.
D)   may or may not earn monopoly profits.

Question 5

The basic tendency of cartels is to increase output and reduce prices.

Accepted Answer

A) True 
 B)False

Question 6

Cartels may tend to collapse and lose their power because of new entrants.

Accepted Answer

A) True 
 B)False

Question 7

It is easier to maintain a cartel for ________ than for ________.

Accepted Answer

A)   services; natural resources
B)   natural resources; manufactured goods
C)   products with lots of substitutes; products without substitutes
D)   copper; nutmeg

Question 8

Tactic collusion occurs when firms:

Accepted Answer

A)   meet and decide on their collusion tactics.
B)   limit competition with one another but they do so without explicit agreement or communication.
C)   meet and play the prisoner's dilemma just once.
D)   cheat rather than cooperate.

Question 9

OPEC is a(n)  ________ of oil-exporting countries.

Accepted Answer

A)   cartel
B)   group
C)   monopoly
D)   oligopoly

Question 10

The high prices charged by cartels:

Accepted Answer

A)   serve as a barrier to entry, allowing the cartel to earn above-normal profits.
B)   give an incentive for new firms to enter the industry, causing an expansion of industry output and lower prices.
C)   reduce the incentive for increased conservation.
D)   All of the answers are correct.

Question 11

Which United States President said, "Our neck is stretched over the fence and OPEC has a knife."?

Accepted Answer

A)   Bill Clinton
B)   Ronald Reagan
C)   Gerald Ford
D)   Jimmy Carter

Question 12

Governments create barriers to entry with licenses or other regulations that limit entry.

Accepted Answer

A) True 
 B)False

Question 13

Use the following to answer questions:
Figure: Competitive Market 1 and Q1. B)  P1 and Q2. C)  P2 and Q1. D)  P2 and Q2." class="answers-bank-image d-inline" rel="preload" >
-(Figure: Competitive Market)  Refer to the figure. If the market is competitive, price and output in the market would be:

Accepted Answer

A)   P1 and Q1.
B)   P1 and Q2.
C)   P2 and Q1.
D)   P2 and Q2.

Question 14

Use the following to answer questions:
Figure: Competitive Market 1 and Q1. B)  P1 and Q2. C)  P2 and Q1. D)  P2 and Q2." class="answers-bank-image d-inline" rel="preload" >
-(Figure: Competitive Market)  Refer to the figure. If all firms in the market form a successful cartel, price and output in the market would be:

Accepted Answer

A)   P1 and Q1.
B)   P1 and Q2.
C)   P2 and Q1.
D)   P2 and Q2.

Question 15

What does it mean when an OPEC member cheats?

Accepted Answer

A)   The country produces less oil than it agreed to.
B)   The country produces lower-quality oil rather than higher-quality oil.
C)   The country produces more oil than it agreed to.
D)   The country closes down oil wells for routine maintenance during peak holiday seasons.

Question 16

Cartel member strategy can be like a prisoner's ______ game.

Accepted Answer

A)   release
B)   call
C)   cooperation
D)   dilemma

Question 17

A dominant strategy is a strategy that a player should take only if the other player cheats.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following statements is TRUE?

Accepted Answer

A)   It is easier to establish a cartel for a manufactured good than for a natural resource.
B)   Cartels are more successful when there are many substitutes for the cartel's good.
C)   The high prices charged by a cartel might lead to new firms entering the industry, reducing the cartel's market power.
D)   OPEC's high oil prices encourage countries like Mexico, Great Britain, and the Netherlands to cut back on oil production.

Exam 15: Oligopoly and Game Theory

Without government support, cartels tend to break down over time.

Correct Answer
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Cartels may tend to collapse and lose their power because of new entrants.

Correct Answer
verified

Tactic collusion occurs when firms:

Correct Answer
verified

A dominant strategy is a strategy that a player should take only if the other player cheats.

Correct Answer
verified

Use the following to answer questions: Figure: Competitive Market -(Figure: Competitive Market) Refer to the figure. If all firms in the market form a successful cartel, price and output in the market would be:

Correct Answer
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Which of the following statements is TRUE?

Correct Answer
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Use the following to answer questions: Figure: Competitive Market -(Figure: Competitive Market) Refer to the figure. If the market is competitive, price and output in the market would be:

Correct Answer
verified

Governments create barriers to entry with licenses or other regulations that limit entry.

Correct Answer
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OPEC is a(n) ________ of oil-exporting countries.

Correct Answer
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The high prices charged by cartels:

Correct Answer
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Which of the following statements is TRUE? I. It is easier to form a cartel for a product with few substitutes. II. Cartels that are backed and supported by the government tend to have less power. III. Cartels are more likely to collapse the more firms there are in an industry.

Correct Answer
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It is easier to maintain a cartel for than for .

Correct Answer
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The basic tendency of cartels is to increase output and reduce prices.

Correct Answer
verified

Which United States President said, "Our neck is stretched over the fence and OPEC has a knife."?

Correct Answer
verified

If every member of OPEC produces beyond quota, then cartel members:

Correct Answer
verified

In a competitive market, each firm earns economic profits, whereas firms in a successful cartel will earn .

Correct Answer
verified

Cartel member strategy can be like a prisoner's ______ game.

Correct Answer
verified

What does it mean when an OPEC member cheats?

Correct Answer
verified

Exam 15: Oligopoly and Game Theory

Without government support, cartels tend to break down over time.

Correct AnswerverifiedShow Answer

Cartels may tend to collapse and lose their power because of new entrants.

Correct AnswerverifiedShow Answer

Tactic collusion occurs when firms:

Correct AnswerverifiedShow Answer

A dominant strategy is a strategy that a player should take only if the other player cheats.

Correct AnswerverifiedShow Answer

Use the following to answer questions: Figure: Competitive Market -(Figure: Competitive Market) Refer to the figure. If all firms in the market form a successful cartel, price and output in the market would be:

Correct AnswerverifiedShow Answer

Which of the following statements is TRUE?

Correct AnswerverifiedShow Answer

Use the following to answer questions: Figure: Competitive Market -(Figure: Competitive Market) Refer to the figure. If the market is competitive, price and output in the market would be:

Correct AnswerverifiedShow Answer

Governments create barriers to entry with licenses or other regulations that limit entry.

Correct AnswerverifiedShow Answer

OPEC is a(n) ________ of oil-exporting countries.

Correct AnswerverifiedShow Answer

The high prices charged by cartels:

Correct AnswerverifiedShow Answer

Which of the following statements is TRUE? I. It is easier to form a cartel for a product with few substitutes. II. Cartels that are backed and supported by the government tend to have less power. III. Cartels are more likely to collapse the more firms there are in an industry.

Correct AnswerverifiedShow Answer

It is easier to maintain a cartel for ________ than for ________.

Correct AnswerverifiedShow Answer

The basic tendency of cartels is to increase output and reduce prices.

Correct AnswerverifiedShow Answer

Which United States President said, "Our neck is stretched over the fence and OPEC has a knife."?

Correct AnswerverifiedShow Answer

If every member of OPEC produces beyond quota, then cartel members:

Correct AnswerverifiedShow Answer

In a competitive market, each firm earns ________ economic profits, whereas firms in a successful cartel will earn ________.

Correct AnswerverifiedShow Answer

Cartel member strategy can be like a prisoner's ______ game.

Correct AnswerverifiedShow Answer

What does it mean when an OPEC member cheats?

Correct AnswerverifiedShow Answer

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It is easier to maintain a cartel for than for .

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In a competitive market, each firm earns economic profits, whereas firms in a successful cartel will earn .

Correct Answer
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Correct Answer
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