In an advertising prisoners’ dilemma game, ________.

A. both firms will advertise and end up with lower profits than if neither advertises

B. only one firm will advertise because the other firm sees the advertising expenditure as a waste

C. the two firms agree on the total advertising budget and split it equally

D. neither firm will advertise because both realize that it lowers profit

In the prisoners’ dilemma game, each player ________.

A. consults the other player to determine his best action B. chooses the best outcome for the other player C. chooses the best outcome for himself D. chooses the best outcome for both players together

If firms in oligopoly form a cartel, it will likely break down because ________.

A. firms cannot agree on how to share the economic profit

B. the price set by the cartel is too low

C. with price exceeding marginal cost, a firm might expand production to increase its profit

D. firms realize that their allocation of resources is inefficient

If firms in oligopoly form a cartel, it will likely break down because ________. A. firms cannot agree on how to share the economic profit B. the price set by the cartel is too low C. with price exceeding marginal cost, a firm might expand production to increase its profit D. firms realize that their allocation of resources is inefficient

Each of the following practices violates U.S. antitrust law except ________.

A. an agreement to sell one good only if the buyer purchases another good

B. an agreement between the manufacturer and the seller to charge a given price for the good

C. starting a price war with other sellers of a similar good

D. cutting the price to increase market share to 100 percent, then raising the price

The four largest firms in a market have the following market shares of total revenue: 20 percent, 15 percent, 10 percent, and 5 percent. The ________ in this industry is ________.

A. four­firm concentration ratio; 50 percent

B. four­firm concentration ratio; 750 percent

C. Herfindahl­Hirschman Index; 50

D. Herfindahl­Hirschman Index; 2,500

In the long run, each firm in monopolistic competition ________. A. makes zero economic profit B. makes as much economic profit as it would if it was a monopoly C. has the same markup and excess capacity as it would if the market was perfectly competitive D. creates the same deadweight loss as it would if it was a monopoly

Which of the following statements is incorrect. In oligopoly, ________.

A. barriers to entry prevent new firms entering

B. each firm’s profit is influenced by each other firms’ advertising

C. each firm’s action is influenced by the actions and reactions of each other firm

D. each firm is a price taker and the price is the monopoly profit-maximizing price

Each firm in monopolistic competition uses a brand name and advertising to achieve all of the following except to ________.

A. differentiate its good from its competitors’ goods B. signal quality and reliability of its good C. signal its market share D. influence the demand for its good

To maximize profit, a firm ________.

A. uses the quantity of land at which the rental rate equals the value of marginal product of land

B. balances the rental rate of capital against the wage rate of labor

C. uses the quantity of capital at which the marginal revenue equals the value of marginal product of capital

D. uses the quantity of capital at which the suppliers’ expected profit equals the value of marginal product of capital

A union will ________ if it can ________.

A. raise the wage rate of its members; decrease the marginal product of its union members

B. raise the wage rate of its members; introduce minimum qualifications, which will restrict membership of the union

C. increase the number of union jobs; restrict membership of the union

D. increase the number of union jobs; increase the union wage rate

Economic inequality arises from all of the following except ________. A. inequality of human capital B. inequality of education attainment C. a shortage of high-skilled labor D. discrimination

At the shutdown point, the firm ________.

A. incurs an economic loss equal to total variable cost

B. makes zero economic profit

C. incurs a loss equal to total fixed cost

D. stops production to decrease its economic loss

Governments regulate natural monopoly by capping the price at ________.

A. marginal revenue and allowing the monopoly to maximize profit

B. marginal cost so that the monopoly is efficient and makes zero economic profit

C. average total cost, which allows the monopoly to be inefficient but make zero economic profit

D. the buyers’ willingness to pay, which makes the monopoly operate efficiently