1. 13
OLIGOPOLY

2. Q1: In ________, a firm’s output depends ________.
A oligopoly; only on its own marginal revenue and marginal cost
B monopolistic competition; in part on its competitors’ price and quantity decisions
C oligopoly; in part on its competitors’ price and quantity decisions
D monopolistic competition; only on its own marginal revenue
C oligopoly; in part on its competitors’ price and quantity decisions
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3. C perfectly competitive D monopolistically competitive
Q2: Two firms make most of the consumer alkaline batteries in the country: Duracell and Energizer. The market for batteries is most likely _______.
A a monopoly
B an oligopoly
C perfectly competitive
D monopolistically competitive
B an oligopoly
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4. B Only one firm will cheat. C Neither firm will cheat.
Q3: In a duopoly game, we observe the following payouts: If the two firms collude, they will each make $50,000. If one firm cheats, then it makes $60,000 and the other firm makes $10,000. If both firms cheat, then they each make zero economic profit. In this game, what is the Nash equilibrium?
A Both firms cheat.
B Only one firm will cheat.
C Neither firm will cheat.
D It is impossible to say.
A Both firms cheat.
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5. A Both firms will conduct R&D. B Both firms will steal R&D.
Q4: Intel has 80 percent of the market for microprocessors, AMD has the rest. Conducting R&D is very expensive, so suppose that each firm can either undertake R&D or not. If both firms undertake R&D, each firm will make a profit of $50 million. If one firm does not undertake R&D, that firm makes a loss of $10 million while the other firm makes a profit of $100 million. If both neither firm undertakes R&D, each firm breaks even. What is the outcome of this game?
A Both firms will conduct R&D.
B Both firms will steal R&D.
C The outcome will be a dominant strategy equilibrium.
D Only one firm will conduct R&D, but we cannot predict which firm will conduct R&D.
A Both firms will conduct R&D.
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6. Q5: The main purpose of antitrust law is to _______.
A prohibit firms from becoming a monopoly or behaving like a monopoly
B regulate advertising
C encourage the formation of cartels
D regulate the price that firms in oligopoly charge
A prohibit firms from becoming a monopoly or behaving like a monopoly
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