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Table 17-1 Imagine a small town in which only two residents, Matthew and Anna, own wells that produce water for safe drinking. Each Saturday, Matthew and Anna work together to decide how many litres of water to pump, bring the water to town, and sell it at whatever price the market will bear. To keep things simple, suppose that Matthew and Anna can pump as much water as they want without cost; therefore, the marginal cost of water equals zero. The weekly town demand schedule and total revenue schedule for water is reflected in the table. Table 17-1 Imagine a small town in which only two residents, Matthew and Anna, own wells that produce water for safe drinking. Each Saturday, Matthew and Anna work together to decide how many litres of water to pump, bring the water to town, and sell it at whatever price the market will bear. To keep things simple, suppose that Matthew and Anna can pump as much water as they want without cost; therefore, the marginal cost of water equals zero. The weekly town demand schedule and total revenue schedule for water is reflected in the table. -Refer to Table 17-1.Suppose the town enacts new competition laws that prohibit Matthew and Anna from operating as a monopolist.What will the new price of water end up being once the Nash equilibrium is reached A) $3 B) $4 C) $5 D) $6 -Refer to Table 17-1.Suppose the town enacts new competition laws that prohibit Matthew and Anna from operating as a monopolist.What will the new price of water end up being once the Nash equilibrium is reached


A) $3
B) $4
C) $5
D) $6

E) A) and D)
F) B) and D)

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The typical firm in the economy has which characteristic


A) It has some degree of market power.
B) It sells its product for a price that is equal to the marginal cost of producing the last unit.
C) It is perfectly competitive.
D) It is an oligopoly.

E) B) and D)
F) B) and C)

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Explain the practice of resale price maintenance and discuss why it is controversial.

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Resale price maintenance is a requiremen...

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Table 17-4 Consider trade relations between Canada and Germany. Assume that the leaders of the two countries believe the payoffs to alternative trade policies are as follows: Table 17-4 Consider trade relations between Canada and Germany. Assume that the leaders of the two countries believe the payoffs to alternative trade policies are as follows: -Refer to Table 17-4.If trade negotiators are able to communicate effectively about the consequences of various trade policies (i.e.,enter into an agreement about the policy they should adopt) ,then what would we expect the game outcome to be A) Canada $50 and Germany $290 B) Canada $70 and Germany $80 C) Canada $150 and Germany $30 D) Canada $120 and Germany $280 -Refer to Table 17-4.If trade negotiators are able to communicate effectively about the consequences of various trade policies (i.e.,enter into an agreement about the policy they should adopt) ,then what would we expect the game outcome to be


A) Canada $50 and Germany $290
B) Canada $70 and Germany $80
C) Canada $150 and Germany $30
D) Canada $120 and Germany $280

E) B) and C)
F) All of the above

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An oligopolist will increase production if the output effect is which of the following


A) less than the price effect
B) equal to the price effect
C) greater than the price effect
D) greater than or equal to the price effect

E) None of the above
F) B) and C)

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What is one key difference between an oligopoly market and a competitive market


A) Oligopolistic firms are price takers while competitive firms are not.
B) Oligopolistic firms are interdependent while competitive firms are not.
C) Oligopolistic firms sell completely unrelated products while competitive firms do not.
D) Oligopolistic firms sell their product at a price equal to marginal cost while competitive firms do not.

E) A) and C)
F) C) and D)

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What is a group of firms that are acting in unison to maximize collective profits called


A) a market structure
B) a coalition
C) a cartel
D) a Nash market

E) A) and C)
F) B) and C)

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What is the practice of requiring someone to buy two or more items together,rather than separately,called


A) resale maintenance
B) product fixing
C) tying
D) free-riding

E) All of the above
F) A) and D)

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Assume that oligopoly firms are profit maximizers,do not form a cartel,and take other firms' production levels as given.How does the output effect compare with the price effect


A) The output effect must dominate the price effect.
B) The output effect must be smaller than the price effect.
C) The output effect must balance with the price effect.
D) The output effect can be larger or smaller than the price effect.

E) All of the above
F) A) and C)

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Increasing production will increase quantity sold,which will decrease the price of all units sold.What is this concept known as


A) income effect
B) input effect
C) output effect
D) price effect

E) A) and D)
F) A) and C)

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Firms do not need to be concerned about striking a balance between the price effect and the output effect when making production decisions in which type of markets


A) oligopolies
B) duopolies
C) monopolies
D) competitive markets

E) All of the above
F) A) and C)

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Table 17-1 Imagine a small town in which only two residents, Matthew and Anna, own wells that produce water for safe drinking. Each Saturday, Matthew and Anna work together to decide how many litres of water to pump, bring the water to town, and sell it at whatever price the market will bear. To keep things simple, suppose that Matthew and Anna can pump as much water as they want without cost; therefore, the marginal cost of water equals zero. The weekly town demand schedule and total revenue schedule for water is reflected in the table. Table 17-1 Imagine a small town in which only two residents, Matthew and Anna, own wells that produce water for safe drinking. Each Saturday, Matthew and Anna work together to decide how many litres of water to pump, bring the water to town, and sell it at whatever price the market will bear. To keep things simple, suppose that Matthew and Anna can pump as much water as they want without cost; therefore, the marginal cost of water equals zero. The weekly town demand schedule and total revenue schedule for water is reflected in the table. -Refer to Table 17-1.If the market for water was perfectly competitive instead of monopolistic,how many litres of water would be produced and sold A) 70 B) 80 C) 90 D) 120 -Refer to Table 17-1.If the market for water was perfectly competitive instead of monopolistic,how many litres of water would be produced and sold


A) 70
B) 80
C) 90
D) 120

E) C) and D)
F) B) and C)

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In a typical cartel agreement,when does the cartel maximize profit


A) when it behaves as a monopolist
B) when it behaves as a duopolist
C) when it behaves as a monopolistically competitive firm
D) when it behaves as a perfectly competitive firm

E) A) and D)
F) B) and C)

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In a competitive market,strategic interactions among the firms are not important.

A) True
B) False

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Why are cartels difficult to maintain


A) Competition laws are difficult to enforce.
B) Cartel agreements are conducive to monopoly outcomes.
C) There is inevitable tension between cooperation and self-interest in a cartel.
D) Collusion is an unspoken agreement.

E) C) and D)
F) B) and D)

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What is the general term for market structures that fall somewhere in between monopoly and perfect competition


A) mid-markets
B) imperfectly competitive markets
C) oligopoly markets
D) monopolistically competitive markets

E) A) and D)
F) C) and D)

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If nations such as Germany,Japan,and Canada prohibited international trade in automobiles,what would a likely effect be


A) The price effect would become a more significant consideration for each firm that makes automobiles.
B) The excess of price over marginal cost would become less pronounced in the automobile market.
C) All countries would become better off because all automakers would be earning higher profits.
D) The competition would increase within each country, which would keep prices closer to marginal cost.

E) A) and D)
F) A) and B)

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Firms in industries that have competitors but,at the same time,do not face so much competition that they are price takers,are operating in either of which types of markets


A) oligopoly or perfectly competitive market
B) oligopoly or monopoly market
C) oligopoly or monopolistically competitive market
D) monopoly or monopolistically competitive market

E) None of the above
F) All of the above

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Noncooperative outcomes typically imply what kind of outcome


A) one that is better for both parties to the "game"
B) one that is worse for both parties to the "game"
C) one in which society is generally worse off
D) one in which society is generally better off

E) None of the above
F) A) and B)

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If all the oligopolists in a market collude to form a cartel,total profit for the cartel is less than that of a monopolist.

A) True
B) False

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