Deck 14: Oligopoly: Firms in Less Competitive Markets

Question 1

Economies of scale will create a barrier to entry in an oligopoly industry when

A)a firm's minimum efficient scale occurs where long-run average total costs are constant.
B)the typical firm's long-run average total cost curve reaches a minimum at a level of output that is a large fraction of total industry sales.
C)the typical firm's long-run average total cost curve reaches a minimum at a level of output that is a small fraction of total industry sales.
D)the industry's four-firm concentration ratio is less than 40 percent.

Answer 1

the typical firm's long-run average total cost curve reaches a minimum at a level of output that is a large fraction of total industry sales.

Question 2

Hewlett-Packard will not raise the prices of its personal computers without first considering how Dell might respond.This is evidence of

A)interdependence.
B)collusion.
C)cutthroat competition.
D)price fixing.

Answer 2

interdependence.

Question 3

A patent is an example of

A)how ownership of a key input creates a barrier to entry.
B)a government-imposed barrier to entry.
C)occupational licensing.
D)how market failure can lead to oligopoly.

Answer 3

a government-imposed barrier to entry.

Question 4

If economies of scale are relatively unimportant in an industry,the typical firm's long-run average total cost curve will reach a minimum at a level of output that is a ________ fraction of total industry sales.The industry will be ________.

A)large; competitive
B)large; an oligopoly
C)small; competitive
D)small; an oligopoly

Question 5

A four-firm concentration ratio measures

A)the extent to which industry sales are concentrated among the four largest firms in the industry.
B)the price elasticity of demand among the four largest firms in an industry.
C)the number of firms in an industry.
D)the price elasticity of demand in an industry.

Question 6

When large firms in oligopoly markets cut their prices,

A)rival firms will also cut their prices to avoid losing sales.
B)rival firms will not change their prices because most of their customers have signed contracts that commit them to doing business with the same firms for the life of their contracts.
C)we don't know for sure how rival firms will respond.
D)rival firms will not cut their prices because they fear that the federal government will accuse them of collusion.

Question 7

A patent is a government-imposed entry barrier because

A)it allows a firm to achieve economies of scale.
B)it is a key input owned by the firm that is granted the patent.
C)it limits the quantity of a good that can be imported into a country.
D)it gives a firm the exclusive right to a new product for a period of 20 years from the date the product is invented.

Question 8

Consider a U-shaped long-run average cost curve that has a minimum efficient scale at 6,000 units of output.In this case,this industry would be

A)perfectly competitive if the market quantity demanded is 20,000 units.
B)monopolistically competitive if the market quantity demanded is 12,000 units.
C)an oligopoly if the market quantity demanded is 18,000 units.
D)an oligopoly if the four-firm concentration ratio is more than 10 percent.

Question 9

Oligopoly differs from perfect competition and monopolistic competition in that

A)barriers to entry are lower in oligopoly industries than they are in perfectly competitive and monopolistically competitive industries.
B)demand and marginal revenue curves are more useful for analyzing oligopoly than they are for analyzing perfect competition and monopolistic competition.
C)because oligopoly firms often react when other firms in their industry change their prices,it is difficult to know what the oligopolist's demand curve looks like.
D)the concentration ratios of oligopoly industries are lower than they are for perfectly competitive and monopolistically competitive firms.

Question 10

Which of the following is not a barrier to entry?

A)an inelastic demand curve
B)economies of scale
C)ownership of a key input
D)a patent

Question 11

What do Wal-Mart,the Microsoft Corporation,and the Dell computer company have in common?

A)Each achieved a dominant position in its industry because it owned a key input in the production of its product.
B)The industry in which each firm competes is an oligopoly because of government-imposed barriers to entry.
C)Each company was founded in the same state.
D)The profitability of each firm depends on its interactions with other firms.

Question 12

An example of a government-imposed barrier to entry gives a firm the exclusive right to a new product for a period of 20 years from the date the product is invented.This entry barrier is known as

A)a copyright.
B)a patent.
C)an exclusive marketing agreement.
D)a tariff.

Question 13

If economies of scale are relatively important in an industry,the typical firm's

A)marginal cost curve will decline continuously until it reaches minimum efficient scale.
B)long-run average cost curve will begin rising before it reaches minimum efficient scale.
C)long-run average cost curve will reach a minimum at a level of output that leaves room for a large number of firms to enter the industry.
D)long-run average cost curve will reach a minimum at a level of output that is a relatively large fraction of total industry sales.

Question 14

Which of the following is not an example of a government-imposed entry barrier?

A)patents
B)occupational licensing
C)barriers to international trade
D)antitrust legislation

Question 15

We can draw demand curves for firms in perfectly competitive and monopolistically competitive industries,but not for oligopoly firms.The reason for this is

A)there are no barriers to entry in perfectly competitive and monopolistically competitive industries.There are high barriers to entry in oligopoly industries.
B)we can assume that the prices charged by perfectly competitive and monopolistically competitive firms have no impact on rival firms.For oligopoly this assumption is unrealistic.
C)that perfectly competitive and monopolistically competitive firms are price takers.Oligopoly firms are price makers.
D)perfectly competitive and monopolistically competitive firms sell standardized products.Oligopoly firms sell differentiated products.

Question 16

Which of the following is not a characteristic of oligopoly?

A)the ability to influence price
B)a small number of firms
C)low barriers to entry
D)interdependent firms

Question 17

Which of the following is not part of an oligopolist's business strategy?

A)deciding on how to manage relations with suppliers
B)choosing what new technologies to adopt
C)selecting which new markets to enter
D)independently setting a product's price without consideration of its rivals' pricing policies

Question 18

For many years the Aluminum Company of America (Alcoa)controlled most of the world's supply of high quality bauxite,the ore needed to produce aluminum.What type of entry barrier was responsible for Alcoa's position in the aluminum industry?

A)ownership of a key input
B)a government-imposed barrier
C)a patent on the manufacture of aluminum
D)economies of scale

Question 19

As a measure of competition in an industry,concentration ratios have several flaws.One of these flaws is that concentration ratios

A)assume that all industries have low barriers to entry.
B)assume that a ratio less than 40 percent means an industry is perfectly competitive.
C)assume there are only four firms in an industry.
D)are calculated for the national market,even though competition in some industries is mainly local.

Question 20

The fraction of an industry's sales that are accounted for by the largest firms is called

A)the four-firm competition ratio.
B)the four-firm concentration ratio.
C)the four-firm industry ratio.
D)the four-firm oligopoly ratio.

Question 21

The people firms hire to attempt to convince state legislators and members of Congress to pass laws that are favorable to the economic interests of the firms are called

A)economic advisors.
B)legislative assistants.
C)government bureaucrats.
D)lobbyists.

Question 22

The breakfast cereal industry has a four-firm concentration ratio of 78 percent.Is this enough information to classify the industry as an oligopoly? Is a high concentration ratio evidence that an industry is not competitive?

Question 23

Ocean Spray is considered to be an oligopoly firm because,until the 1990s,it faced little competition in the market for fresh and frozen cranberries.Why?

A)Ocean Spray had a patent on the production of cranberries that gave the company the exclusive right to market its product for 20 years.The 20-year period ended in the 1990s.
B)Until the 1990s,Ocean Spray controlled almost the entire supply of cranberries.
C)Ocean Spray was able to achieve significant economies of scale in the production of cranberries.Beginning in the 1990s,other firms finally achieved economies of scale as well,but Ocean Spray still controls about 80 percent of the cranberry market.
D)The federal government imposed a high tariff on cranberry imports.During the 1990s the tariff was eliminated,but Ocean Spray still controls about 80 percent of the cranberry market.

Question 24

A consequence of the quota that has been imposed on the importation of sugar into the United States is

A)consumers are protected from eating unsafe products made from cheap imported sugar.
B)competition in the U.S.sugar market is reduced.
C)the cost of producing cereal,chocolate and candy products in the United States is reduced.
D)the market for sugar in the United States has become monopolistically competitive rather than oligopolistic.

Question 25

Game theory was developed in the 1940s by John von Neuman,a mathematician,and an economist named

A)John Nash.
B)John Maynard Keynes.
C)Oskar Morgenstern.
D)Milton Friedman.

Question 26

The justification for occupational licensing laws is that they protect the public from incompetent practitioners (for example,lawyers and medical doctors),but the laws also result in

A)higher prices and restrictions on the number of people who can enter the professions affected by the laws.
B)economies of scale.
C)ownership of a key input.
D)an increase in the amount of output required to achieve minimum efficient scale.

Question 27

Which government agency publishes four-firm concentration ratios?

A)the Economic Council
B)the Federal Reserve System
C)the U.S.Bureau of the Census
D)the Treasury Department

Question 28

The four-firm concentration ratio of the aircraft industry is over 80 percent.Most economists would consider this industry an oligopoly.

Question 29

Firms in an oligopoly are said to be interdependent.What does this mean?

Question 30

Because of the shortcomings of concentration ratios,some economists prefer another measure of competition called

A)the Competition Index.
B)the Marginal Revenue-Marginal Cost Index.
C)the Economic Profit Index.
D)the Herfindahl-Hirschman Index.

Question 31

In an oligopoly,minimum efficient scale is likely to occur at a level of output that is a large fraction of industry sales.

Question 32

Because of the flaws of the concentration ratio as a measure of the extent of competition in an industry,some economists prefer another measure of competition,the Herfindahl-Hirschman Index.

Question 33

The De Beers Company blocked competition

A)in the diamond market by controlling the output of most of the world's diamond mines.
B)by controlling the supply of most of the world's high-quality bauxite,the mineral used to produce aluminum.
C)in the market for fresh and frozen cranberries because it controls about 80 percent of the cranberry crop.
D)because it has lower costs of producing than other department stores due to economies of scale.

Question 34

If firms are protected by substantial barriers to entry,short-run profits can turn into long-run profits.

Question 35

Doctors and lawyers in every state need a license to practice.This is an example of

A)consumer protection laws.
B)consumer advocacy.
C)occupational licensing.
D)ownership of a key input.

Question 36

The most important barrier to entry is economies of scale.

Question 37

The profit-maximizing level of output and the profit-maximizing price for an oligopolist cannot be calculated when we don't know

A)what the concentration ratio for the oligopolist's industry is.
B)what the minimum efficient scale in the oligopolist's industry is.
C)the demand curve and the marginal revenue curve of the oligopolist.
D)the type of barrier to entry that exists in the oligopolist's industry.

Question 38

Which industry has the highest four-firm concentration ratio?

A)discount department stores
B)college bookstores
C)retail gasoline stations
D)cigarettes

Question 39

Of all barriers to entry,the most important are those that are due to

A)ownership of a key input.
B)economies of scale.
C)government-imposed barriers.
D)the Herfindahl-Hirschman Index.

Question 40

Most economists are concerned about entry barriers.Why is this so important to them?

Question 41

A situation in which each firm chooses the best strategy given the strategies chosen by other firms is called a

A)Nash equilibrium.
B)dominant strategy.
C)collusion.
D)pay-off matrix.

Question 42

The study of how people make decisions in situations in which attaining their goals depends on their interactions with others is called

A)game theory.
B)oligopoly.
C)competitive analysis.
D)strategic analysis.

Question 43

A table that shows the possible payoffs each firm earns from every combination of strategies by all firms is called

A)an earnings table.
B)a payoff table.
C)a payoff matrix.
D)a strategic matrix.

Question 44

A dominant strategy is

A)an equilibrium where each firm chooses the best strategy,given the strategies of other firms.
B)a strategy chosen by two firms that decide to charge the same price or otherwise not to compete.
C)a strategy that is obviously the best for each firm that is a party to a business decision.
D)a strategy that is the best for a firm no matter what strategies other firms use.

Question 45

Economists use game theory to analyze oligopolies because

A)real markets are too complicated to analyze without using games.
B)it is more enjoyable for economists and students to learn by playing games.
C)game theory helps us to understand why interactions among firms are crucial in determining profitable business strategies.
D)game theory is useful in understanding the actions of firms that are price takers.

Question 46

In game theory,the three key characteristics of a game are

A)rules,strategies,and payoffs.
B)rules,regulations,and payoffs.
C)winners,losers,and rules.
D)risks,rewards,and penalties.

Question 47

Table 14-1 Alistair Luggage and Baine Baggage are the only firms selling luggage in the upscale town of Montecito.Each firm must decide on whether to increase its advertising spending to compete for customers.If one firm increases its advertising budget but the other does not,then the firm with the higher advertising budget will increase its profit.Table 14-1 shows the payoff matrix for this advertising game.
Refer to Table 14-1.What is the Nash equilibrium in this game?

A)There is no Nash equilibrium.
B)Baine increases its advertising budget,but Alistair does not.
C)Alistair increases its advertising budget,but Baine does not.
D)Both Alistair and Baine increase their advertising budgets.

Question 48

Table 14-1 Alistair Luggage and Baine Baggage are the only firms selling luggage in the upscale town of Montecito.Each firm must decide on whether to increase its advertising spending to compete for customers.If one firm increases its advertising budget but the other does not,then the firm with the higher advertising budget will increase its profit.Table 14-1 shows the payoff matrix for this advertising game.
Refer to Table 14-1.Does Alistair have a dominant strategy and if so,what is it?

A)Yes,Alistair should increase its advertising budget.
B)Yes,Alistair should keep its advertising budget as is.
C)There are two dominant strategies: if Baine increases its advertising budget,then Alistair's best bet is to keep its budget the same but if Baine does not increase its spending then Alistair should raise its advertising budget
D)No,there is no dominant strategy.

Question 49

A set of actions that a firm takes to achieve a goal is the definition of a

A)business plan.
B)business strategy.
C)business prospectus.
D)business goal.

Question 50

Who won a Nobel Prize in economics for his work in the development of game theory?

A)John von Neuman
B)Oskar Morgenstern
C)John Nash
D)Howard Schultz

Question 51

An oligopoly between two firms is called

A)a biopoly.
B)an oligopoly; there are no special terms used for oligopolies with different numbers of firms.
C)a dual-firm oligopoly.
D)a duopoly.

Question 52

An agreement among firms to charge the same price or otherwise not to compete is called

A)a pay-off matrix.
B)a subgame-perfect equilibrium.
C)a Nash equilibrium.
D)collusion.

Question 53

Table 14-1 Alistair Luggage and Baine Baggage are the only firms selling luggage in the upscale town of Montecito.Each firm must decide on whether to increase its advertising spending to compete for customers.If one firm increases its advertising budget but the other does not,then the firm with the higher advertising budget will increase its profit.Table 14-1 shows the payoff matrix for this advertising game.
Refer to Table 14-1.Does Baine have a dominant strategy and if so,what is it?

A)Yes,Baine should increase its advertising budget.
B)Yes,Baine should keep its advertising budget as is.
C)There are two dominant strategies: if Alistair increases its advertising budget,then Baine's best bet is to keep its budget the same but if Alistair does not increase its spending then Baine should raise its advertising budget
D)No,there is no dominant strategy.

Question 54

Table 14-1 Alistair Luggage and Baine Baggage are the only firms selling luggage in the upscale town of Montecito.Each firm must decide on whether to increase its advertising spending to compete for customers.If one firm increases its advertising budget but the other does not,then the firm with the higher advertising budget will increase its profit.Table 14-1 shows the payoff matrix for this advertising game.
Refer to Table 14-1.How are the firms in this advertising game caught in a prisoner's dilemma?

A)They are not in a prisoner's dilemma because there is one clear strategy for each.
B)They would be more profitable if they refrained from advertising but each fears that if it does not advertise,it will lose customers.
C)Since each firm is uncertain about the other's behavior,each will adopt a wait-and-see attitude which results in no increase in market share and no new customers.
D)Only the first mover is caught in a prisoner's dilemma because the second has a chance to observe and respond.

Question 55

All games share three characteristics.Two of these characteristics are rule and strategies.What is the third characteristic called?

A)competition
B)collusion
C)results
D)payoffs

Question 56

The approach economists use to analyze competition among oligopolists is called

A)marginal analysis.
B)game theory.
C)oligopoly theory.
D)competition among the few.

Question 57

In economics,the study of the decisions of firms in industries where the profits of each firm depend on its interactions with other firms is called

A)decision theory.
B)game theory.
C)market structure analysis.
D)profit analysis.

Question 58

Two firms would sometimes be better off if they got together and agreed to charge a high price,rather than to compete and risk having to charge a lower,competitive price.What is the greatest deterrent to this strategy?

A)The firms may find that the price they charge is greater than the price that would maximize their profits.
B)An agreement by firms to charge high prices is illegal.The government can fine the firms and send their managers to jail.
C)Consumers may resent having to pay high prices and not buy from either of the firms.
D)One of the firms may decide to lower its price and take business away from the firm that charged the high price.

Question 59

Table 14-1 Alistair Luggage and Baine Baggage are the only firms selling luggage in the upscale town of Montecito.Each firm must decide on whether to increase its advertising spending to compete for customers.If one firm increases its advertising budget but the other does not,then the firm with the higher advertising budget will increase its profit.Table 14-1 shows the payoff matrix for this advertising game.
Refer to Table 14-1.If Alistair assumes that Baine would increase its advertising budget,what should it do?

A)Alistair should keep its own budget the same and allow Baine to incur the higher cost.
B)Alistair should also increase its advertising spending.
C)Alistair should reduce its advertising spending.
D)Being a duopolist,Alistair is not affected by Baine's choices because it has a secure 50 percent market share.

Question 60

Collusion occurs when

A)a firm chooses a level of output to maximize its own profit.
B)two firms' price and output decisions come into conflict.
C)there is an agreement among firms to charge the same price or otherwise not to compete.
D)firms refuse to follow their price leaders.

Question 61

The Brooks Appliance Store and the Lefingwell Appliance Store (both are located in the same city)each sell an identical washer-dryer.The owner of each store considered offering the washer-dryer for $700,but decided on a price of $500.If this is a Nash equilibrium we can conclude that

A)each store owner feared charging the higher price would result in being undercut by the other store charging the lower price.
B)the owners of the stores feared that charging $700 could be used as evidence of collusion.
C)charging $500 was the most profitable strategy for each store,regardless of what price was charged by the other store.
D)the stores were less concerned about making a profit from the washer-dryers than they were with attracting customers who would also buy other appliances.

Question 62

An equilibrium in a game in which players pursue their own self-interests and do not cooperate is called a

A)cartel equilibrium.
B)noncooperative equilibrium.
C)prisoner's dilemma equilibrium.
D)dominant strategy equilibrium.

Question 63

A baseball hat worn by the Boston Red Sox Hall of Fame outfielder Ted Williams was auctioned on eBay.The three highest bidders and their bids were: Roger Bulava $5,000
Tony Millasiti $4,900
Joe Albano $4,200
What price did Roger have to pay for the Ted Williams hat?

A)$4,200
B)$4,700 (the average of the three highest bids)
C)$4,900
D)$5,000

Question 64

Which of the following is an example of implicit collusion?

A)product differentiation
B)a retaliation strategy
C)a second-price auction
D)price leadership

Question 65

A cooperative equilibrium results when firms

A)choose the best strategy regardless of what other players do.
B)choose the strategy that maximizes the total game payoff.
C)choose the strategy that minimizes the payoff to other players.
D)choose a strategy by random chance.

Question 66

Table 14-3 There are two mobile home manufacturers in Nevada,Sturdy Homes (S)and My Haven (M).Sturdy Homes has been in the market for a long time and must now compete with newcomer,My Haven.Suppose that Sturdy Homes believes that My Haven will match any price it sets.Use Table 14-3 to answer the following question and assume throughout that Sturdy Homes believes that My Haven will match any price it sets.
Refer to Table 14-3.What price will Sturdy Homes charge and what profit does Sturdy Homes expect to make?

A)Price = $8,000; expected profit = $7 million
B)Price = $8,000; expected profit = $4 million
C)Price = $10,000; expected profit = $5 million
D)Price = $12,000; expected profit = $3 million

Question 67

Table 14-4
The payoff matrix shown above assumes that Pepsi and Coca-Cola must decide whether to advertise their products.The matrix shows how much profit each firm will earn if it does or does not advertise.The amount of profit for one firm depends on whether the other firm advertises.
Refer to Table 14-4.Which of the following statements is true?

A)Given that Coca-Cola advertises,Pepsi's best strategy is to not advertise.
B)Given that Pepsi advertises,Coca-Cola's best strategy is to advertise.
C)Pepsi and Coca-Cola will agree to collude in order to maximize their profits.
D)Neither Pepsi nor Coca-Cola will advertise; this decision will decrease their costs and allow each firm to earn more than $1,800 million in profits.

Question 68

When an oligopoly market is in Nash equilibrium,

A)firms have colluded to set their prices.
B)firms will not behave as profit maximizers.
C)a firm will not take into account the strategies of its rivals.
D)a firm will choose its best pricing strategy,given the strategies that it observes other firms have taken.

Question 69

Which of the following explains why two firms,Apex and Bongo,would engage in implicit collusion,rather than explicit collusion?

A)Implicit collusion allows Apex to increase its profits at the expense of Bongo without Bongo knowing that collusion has occurred; if Apex engages in explicit collusion,Bongo will realize collusion has taken place and retaliate against Apex.
B)Implicit collusion is less costly to both firms than explicit collusion; therefore,profits will be greater for both firms if they engage in implicit collusion.
C)explicit collusion is illegal; if the managers of Apex and Bongo engage in implicit collusion they may be within the law.
D)Implicit collusion always has an enforcement mechanism that forces both firms to collude; explicit collusion does not have an enforcement mechanism.

Question 70

A form of implicit collusion where one firm in an oligopoly announces a price change which is matched by other firms in the same industry is

A)"follow the leader" pricing.
B)price leadership.
C)retaliation pricing.
D)"tit-for-tat" pricing.

Question 71

Table 14-2 Ming and Henri each run one of the two dry cleaning facilities in the town of Scaraby.Both consider offering free pickup and delivery services.Table 14-2 shows the payoff matrix containing the expected quarterly profits for each firm.
Refer to Table 14-2.What is the Nash equilibrium in this game?

A)There is no Nash equilibrium.
B)Ming offers free pickup and delivery,but Henri does not.
C)Henri offers free pickup and delivery,but Ming does not.
D)Both Ming and Henri offer free pickup and delivery.

Question 72

Table 14-2 Ming and Henri each run one of the two dry cleaning facilities in the town of Scaraby.Both consider offering free pickup and delivery services.Table 14-2 shows the payoff matrix containing the expected quarterly profits for each firm.
Refer to Table 14-2.Does Henri have a dominant strategy? If yes,what is it?

A)Yes,Henri's dominant strategy is to not offer free pickup and delivery.
B)Yes,Henri's dominant strategy is to offer free pickup and delivery.
C)No,Henri does not have a dominant strategy - his best outcome depends on what Ming does.
D)Yes,Henri's dominant strategy is to wait and see what Ming does first.

Question 73

Prisoner's dilemma games imply that cooperative behavior between two people or two firms always breaks down.But reality teaches us that people and firms often cooperate successfully to achieve their goals.Why do the results from prisoner's dilemma games fail to predict real world results?

A)Prisoner's dilemma games do not permit people or firms from reneging on agreements,which often occurs in real word situations.
B)The prisoner's dilemma does not apply to most business situations that are repeated over and over.
C)Prisoner's dilemma games predict the behavior of people and firms that engage in illegal activity; most people and firms do not resort to illegal activity.
D)Most real world situations involve more than two people or firms; the prisoner's dilemma is only applicable to situations that involve two parties.

Question 74

Table 14-4
The payoff matrix shown above assumes that Pepsi and Coca-Cola must decide whether to advertise their products.The matrix shows how much profit each firm will earn if it does or does not advertise.The amount of profit for one firm depends on whether the other firm advertises.
Refer to Table 14-4.Which of the following statements is true?

A)Neither Pepsi nor Coca-Cola have a dominant strategy.
B)Pepsi's dominant strategy is to advertise; Coca-Cola's dominant strategy is to not advertise.
C)Coca-Cola's dominant strategy is to advertise; Pepsi's dominant strategy is to not advertise.
D)The dominant strategy for both firms is to advertise.

Question 75

A game in which pursuing dominant strategies results in noncooperation that leaves all parties worse off is a

A)prisoner's dilemma.
B)cooperative equilibrium.
C)first-price auction.
D)zero-sum game.

Question 76

Table 14-2 Ming and Henri each run one of the two dry cleaning facilities in the town of Scaraby.Both consider offering free pickup and delivery services.Table 14-2 shows the payoff matrix containing the expected quarterly profits for each firm.
Refer to Table 14-2.Does Ming have a dominant strategy? If yes,what is it?

A)Yes,Ming's dominant strategy is to offer free pickup and delivery.
B)No,Ming does not a dominant strategy - his best outcome depends on what Henri does.
C)Yes,Ming's dominant strategy is to not to offer free pickup and delivery.
D)Yes,Ming's dominant strategy is to wait to see what Henri does first.

Question 77

eBay is an online auction site where more than 200 million items are auctioned annually.What type of auctions are run on eBay?

A)noncooperative auctions
B)second-price auctions
C)cooperative auctions
D)double-blind auctions

Question 78

Why does a prisoner's dilemma lead to a noncooperative equilibrium?

A)because each player had agreed before the game started to minimize the harm that he can inflict on the other players
B)because each player is uncertain how other players will play the game
C)because players must choose from a limited number of non-dominant strategies
D)because each rational player has a dominant strategy to play a certain way regardless of what other players do

Question 79

An equilibrium in a game in which players pursue their own self-interest is called

A)a Nash equilibrium.
B)a cooperative equilibrium.
C)a noncooperative equilibrium.
D)a prisoner's dilemma.

Question 80

Which of the following best explains why airlines often cut their ticket prices at the last-minute in order to fill the remaining empty seats on their flights?

A)Fixed costs in the airline industry are very large,but the marginal cost of flying one more passenger is very low.
B)Airlines receive a subsidy from the government for each flight that is fully booked and departs on time.
C)The Federal Aviation Administration ranks each airline based on the percentage of flights that are fully booked.These rankings affect the decisions of firms to use a particular airline to fly their employees to business meetings.
D)Cutting prices makes the airlines more popular with their customers,who may fly with the same airline in the future as the result of buying low-price tickets.