Ngân hàng đề thi câu hỏi trắc nghiệm kinh tế vi mô chương 17 (principle of economics mankiw 2018)

Toàn bộ những gì bạn cần để qua môn kinh tế học, tài liệu này tập hợp những câu hỏi trắc nghiệm mới nhất của kinh tế vi mô năm 2018. Về nội dung tài liệu, với các khái niệm phổ biến và khái quát nhất về kinh tế vi mô cũng như những giải thích về các cơ chế hoạt động của nền kinh tế, bộ giáo trình bao gồm 23 phần cung cấp cho người đọc các kiến thức khá toàn diện và chuyên sâu về các nguyên lý kinh tế học như các lý thuyết cổ điển, các lý thuyết về phát triển: nền kinh tế trong dài hạn, các lý thuyết về vòng tròn kinh tế: nền kinh tế trong ngắn hạn, các yếu tố vi mô ẩn sau kinh tế vĩ mô, các tranh luận về chính sách vĩ mô… Tất cả đều được giải thích và đánh giá bởi một vị giáo sư kinh tế hàng đầu trên thế giới. Các khái niệm trong sách được định nghĩa rất rõ ràng, dễ nắm bắt, dễ hiểu, có tóm tắt các chương tạo điều kiện tốt nhất cho việc ôn tập

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TRUE/FALSE

1 The essence of an oligopolistic market is that there are only a few sellers

NAT: Analytic LOC: Oligopoly TOP: Oligopoly MSC: Definitional

2 Game theory is just as necessary for understanding competitive or monopoly markets as it is for understandingoligopolistic markets

NAT: Analytic LOC: Oligopoly TOP: Oligopoly | Game theory

MSC: Interpretive

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

NAT: Analytic LOC: Oligopoly TOP: Game theory | Competitive markets

MSC: Interpretive

4 For a firm, strategic interactions with other firms in the market become more important as the number of firms

in the market becomes larger

NAT: Analytic LOC: Oligopoly TOP: Oligopoly | Game theory

MSC: Interpretive

5 Suppose three firms form a cartel and agree to charge a specific price for their output Each individual firm has an incentive to maintain the agreement because the firm’s individual profits will be the greatest under the cartel arrangement

NAT: Analytic LOC: Oligopoly TOP: Collusion MSC: Interpretive

6 If firms in an oligopoly agree to produce according to the monopoly outcome, they will produce the same level

of output as they would produce in a Nash equilibrium

NAT: Analytic LOC: Oligopoly TOP: Oligopoly | Cooperation

MSC: Interpretive

7 Whether an oligopoly consists of 3 firms or 10 firms, the level of output likely will be the same

NAT: Analytic LOC: Oligopoly TOP: Oligopoly MSC: Interpretive

8 Cartels with a small number of firms have a greater probability of reaching the monopoly outcome than do cartels with a larger number of firms

NAT: Analytic LOC: Oligopoly TOP: Cartels MSC: Interpretive

9 As the number of firms in an oligopoly becomes very large, the price effect disappears

10 If all of the firms in an oligopoly successfully collude and form a cartel, then total profit for the cartel is equal

to what it would be if the market were a monopoly

11 As the number of firms in an oligopoly increases, the magnitude of the price effect increases

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12 All examples of the prisoner’s dilemma game are characterized by one and only one Nash equilibrium.

NAT: Analytic LOC: Oligopoly TOP: Nash equilibrium | Prisoners' dilemma

MSC: Interpretive

13 If two players engaged in a prisoner’s dilemma game are likely to repeat the game, they are more likely to cooperate than if they play the game only once

NAT: Analytic LOC: Oligopoly TOP: Prisoners' dilemma

MSC: Interpretive

14 The story of the prisoners' dilemma contains a general lesson that applies to any group trying to maintain cooperation among its members

MSC: Interpretive

15 In the prisoners' dilemma game, one prisoner is always better off confessing, no matter what the other prisonerdoes

MSC: Interpretive

16 In the prisoners' dilemma game, confessing is a dominant strategy for each of the two prisoners

NAT: Analytic LOC: Oligopoly TOP: Prisoners' dilemma | Dominant strategy

MSC: Interpretive

17 The game that oligopolists play in trying to reach the oligopoly outcome is similar to the game that the two prisoners play in the prisoners' dilemma

NAT: Analytic LOC: Oligopoly TOP: Game theory MSC: Interpretive

18 In the case of oligopolistic markets, self-interest makes cooperation difficult and it often leads to an

undesirable outcome for the firms that are involved

19 When prisoners' dilemma games are repeated over and over, sometimes the threat of penalty causes both parties to cooperate

MSC: Interpretive

20 A tit-for-tat strategy, in a repeated game, is one in which a player starts by cooperating and then does whatever

the other player did last time

NAT: Analytic LOC: Oligopoly TOP: Game theory MSC: Definitional

21 One way that public policy encourages cooperation among oligopolists is through antitrust law

NAT: Analytic LOC: Oligopoly TOP: Antitrust MSC: Interpretive

22 The Sherman Antitrust Act prohibits competing firms from even talking about fixing prices

NAT: Analytic LOC: Oligopoly TOP: Sherman Antitrust Act of 1890

MSC: Interpretive

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23 Resale price maintenance prevents retailers from competing on price.

NAT: Analytic LOC: Oligopoly TOP: Resale price maintenance

MSC: Interpretive

24 Some business practices that appear to reduce competition, such as resale price maintenance, may have legitimate economic purposes

MSC: Interpretive

25 In 2007 the U.S Supreme Court ruled that it was not necessary illegal for manufacturers and distributors to agree on minimum retail prices

MSC: Definitional

26 Tying can be thought of as a form of price discrimination

27 Policymakers should be aggressive in using their powers to place limits on firm behavior, because business practices that appear to reduce competition never have any legitimate purposes

NAT: Analytic LOC: The role of government TOP: Antitrust

LOC: Oligopoly TOP: Cartels MSC: Interpretive

2 What effect does the number of firms in an oligopoly have on the characteristics of the market?

ANS:

As the number of firms increases, the equilibrium quantity of goods provided increases and price falls; the market begins to resemble a competitive one

LOC: Oligopoly TOP: Oligopoly MSC: Analytical

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3 Assume that demand for a product that is produced at zero marginal cost is reflected in the table below.

LOC: Oligopoly TOP: Cartels MSC: Applicative

4 Describe the source of tension between cooperation and self-interest in a market characterized by oligopoly Use an example of an actual cartel arrangement to demonstrate why this tension creates instability in cartels.ANS:

The source of the tension exists because total profits are maximized when oligopolists cooperate on price and quantity by operating as a monopolist However, individual profits can be gained by individuals cheating on their cooperative agreement This is why cooperative agreements among members of a cartel are inherently unstable This

is evident in the problem OPEC experiences in enforcing the cooperative agreement on production and price of crude oil

LOC: Oligopoly TOP: Cartels MSC: Interpretive

5 Describe the output and price effects that influence the profit-maximizing decision faced by a firm in an oligopoly market How does this differ from output and price effects in a monopoly market?

ANS:

Output effect: Price > Marginal cost => increased output will add to profit

Price effect: increased quantity is sold at a lower price => lower revenue (profit?)

An oligopolist must take into account how the output and price effects will be influenced by competitors' productiondecisions, or it must assume competitors' production will not change in response to its own actions

LOC: Oligopoly TOP: Profit maximization | Oligopoly MSC: Interpretive

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6 Explain how the output effect and the price effect influence the production decision of the individual

oligopolist

ANS:

Since the individual oligopolist faces a downward-sloping demand curve, she realizes that if she increases output, alloutput must be sold at a lower market price As such, the revenue from selling the additional units at the lower market price must exceed the loss in revenue from selling all previous units at the new lower price Otherwise, profits will fall as output (production) is increased

LOC: Oligopoly TOP: Profit maximization | Oligopoly MSC: Interpretive

7 Ford and General Motors are considering expanding into the Vietnamese automobile market Devise a simple prisoners' dilemma game to demonstrate the strategic considerations that are relevant to this decision

ANS:

The answer should present two strategies for each company, such as “Expand” and “Don’t Expand.” To be a prisoner’s dilemma, each firm needs a dominant strategy, but each firm choosing its dominant strategy results in an outcome that is jointly worse than if they both chose their other strategy A possible payoff table with payoffs (Ford,GM) is

GM

8 Nike and Reebok (athletic shoe companies) are considering whether or not to advertise during the Super Bowl.Devise a simple prisoners' dilemma game to demonstrate the strategic considerations that are relevant to this decision Does the repeated game scenario differ from a single period game? Is it possible that a repeated game (without collusive agreements) could lead to an outcome that is better than a single-period game? Explain the circumstances in which this may be true

ANS:

The answer should show that if both shoe companies decide to advertise they will both be worse off than if they did not It should also show that each company has the individual incentive to advertise The dominant strategy of both companies will be to advertise, regardless of what the other is doing If the game is repeated more than once it is possible that the shoe companies will decide not to advertise in the hopes that the other company adequately understands the mutually beneficial gains that come from not advertising

9 Outline the purpose of antitrust laws What do they accomplish?

ANS:

The purpose of antitrust laws is to move markets toward a competitive equilibrium outcome These laws are used to prevent behavior that would lead to excessive market power by any single firm

LOC: Oligopoly TOP: Antitrust MSC: Interpretive

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

ANS:

Resale price maintenance is a requirement by producers that retailers sell their product for a price specified by the manufacturer It is controversial because on the surface it appears to limit the ability of retailers to compete on the basis of price However, if the manufacturer does not exercise resale price maintenance a free-rider problem may become evident among the retailers and ultimately lead to lower profits for the manufacturer

LOC: The role of government TOP: Resale price maintenance

MSC: Interpretive

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11 Explain the practice of tying and discuss why it is controversial.

ANS:

Tying is the practice of bundling goods for sale It is controversial because it is perceived as a tool for expanding themarket power of firms by forcing consumers to purchase additional products However, economists are skeptical that a buyer's willingness to pay increases just because two products are bundled together In other words, simply bundling two products together doesn't necessarily add any value It is more accurately believed to be a form of price discrimination

LOC: Oligopoly TOP: Tying MSC: Interpretive

2 In general, game theory is the study of

a how people behave in strategic situations

b how people behave when the possible actions of other people are irrelevant

c oligopolistic markets

d all types of markets, including competitive markets, monopolistic markets, and oligopolistic

markets

3 Which of the following statements is correct?

a Strategic situations are more likely to arise when the number of decision-makers is very large ratherthan very small

b Strategic situations are more likely to arise in monopolistically competitive markets than in

oligopolistic markets

c Game theory is useful in understanding certain business decisions, but it is not really applicable to ordinary games such as chess or tic-tac-toe

d Game theory is not necessary for understanding competitive or monopoly markets

4 In which of the following markets are strategic interactions among firms most likely to occur?

a markets to which patent and copyright laws apply

b the market for piano lessons

c the market for tennis balls

d the market for corn

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Sec01 - Oligopoly - Markets with Only a Few Sellers

MULTIPLE CHOICE

1 A distinguishing feature of an oligopolistic industry is the tension between

a profit maximization and cost minimization

b cooperation and self interest

c producing a small amount of output and charging a price above marginal cost

d short-run decisions and long-run decisions

2 In studying oligopolistic markets, economists assume that

a there is no conflict or tension between cooperation and self-interest

b it is easy for a group of firms to cooperate and thereby establish and maintain a monopoly outcome

c each oligopolist cares only about its own profit

d strategic decisions do not play a role in such markets

NAT: Analytic LOC: Oligopoly TOP: Oligopoly | Cooperation

NAT: Analytic LOC: Oligopoly TOP: Duopoly MSC: Interpretive

4 A special kind of imperfectly competitive market that has only two firms is called

a a two-tier competitive structure

b an incidental monopoly

c a doublet

d a duopoly

5 An agreement between two duopolists to function as a monopolist usually breaks down because

a they cannot agree on the price that a monopolist would charge

b they cannot agree on the output that a monopolist would produce

c each duopolist wants a larger share of the market in order to capture more profit

d each duopolist wants to charge a higher price than the monopoly price

a If duopolists successfully collude, then their combined output will be equal to the output that would

be observed if the market were a monopoly

b Although the logic of self-interest decreases a duopoly’s price below the monopoly price, it does

not push the duopolists to reach the competitive price

c Although the logic of self-interest increases a duopoly’s level of output above the monopoly level,

it does not push the duopolists to reach the competitive level

d All of the above are correct

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7 Suppose that Sonny and Cher are duopolists in the music industry In January, they agree to work together as a monopolist, charging the monopoly price for their music and producing the monopoly quantity of songs By February, each singer is considering breaking the agreement What would you expect to happen next?

a Sonny and Cher will determine that it is in each singer’s best self interest to maintain the

agreement

b Sonny and Cher will each break the agreement The new equilibrium quantity of songs will

increase, and the new equilibrium price will decrease

c Sonny and Cher will each break the agreement The new equilibrium quantity of songs will

decrease, and the new equilibrium price will increase

d Sonny and Cher will each break the agreement The new equilibrium quantity of songs will

increase, and the new equilibrium price also will increase

8 As the number of firms in an oligopoly increases, the

a price approaches marginal cost, and the quantity approaches the socially efficient level

b price and quantity approach the monopoly levels

c price effect exceeds the output effect

d individual firms’ profits increase

9 If a certain market were a monopoly, then the monopolist would maximize its profit by producing 1,000 units of output If, instead, that market were a duopoly, then which of the following outcomeswould be most likely if the duopolists successfully collude?

a Each duopolist produces 1,000 units of output

b Each duopolist produces 600 units of output

c One duopolist produces 400 units of output and the other produces 600 units of output

d One duopolist produces 800 units of output and the other produces 400 units of output

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Table 17-1

Imagine a small town in which only two residents, Lisa and Mark, own wells that produce safe drinking water Eachweek Lisa and Mark work together to decide how many gallons of water to pump They bring the water to town andsell it at whatever price the market will bear To keep things simple, suppose that Lisa and Mark can pump as much water as they want without cost so that the marginal cost of water equals zero The weekly town demand schedule and total revenue schedule for water is shown in the table below:

10 Refer to Table 17-1 If Lisa and Mark operate as a profit-maximizing monopoly in the market for

water, what price will they charge?

a $20

b $40

c $60

d $70

NAT: Analytic LOC: Oligopoly TOP: Oligopoly | Monopoly

MSC: Applicative

water, how many gallons of water will be produced and sold?

a 0

b 500

c 600

d 1,200

MSC: Applicative

water, how much profit will each of them earn?

a $0

b $18,000

c $32,000

d $36,000

MSC: Applicative

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13 Refer to Table 17-1 If the market for water were perfectly competitive instead of monopolistic,

how many gallons of water would be produced and sold?

a 0

b 600

c 900

d 1,200

NAT: Analytic LOC: Oligopoly TOP: Competitive markets

MSC: Applicative

15 Refer to Table 17-1 If this market for water were perfectly competitive instead of monopolistic,

what price would be charged?

a $0

b $50

c $60

d $120

MSC: Applicative

16 Refer to Table 17-1 Suppose the town enacts new antitrust laws that prohibit Lisa and Mark from

operating as a monopoly What will be the price of water once Lisa and Mark reach a Nash

NAT: Analytic LOC: Oligopoly TOP: Nash equilibrium

MSC: Analytical

17 Refer to Table 17-1 Suppose the town enacts new antitrust laws that prohibit Lisa and Mark from

operating as a monopoly How many gallons of water will be produced and sold once Lisa and Mark reach a Nash equilibrium?

a 600

b 700

c 800

d 900

MSC: Analytical

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Table 17-2 The table shows the town of Pittsville’s demand schedule for gasoline For simplicity, assume the

town’s gasoline seller(s) incur no costs in selling gasoline

Quantity

Total Revenue(and total profit)

18 Refer to Table 17-2 If the market for gasoline in Pittsville is perfectly competitive, then the

equilibrium price of gasoline is

a $8 and the equilibrium quantity is 200 gallons

b $5 and the equilibrium quantity is 500 gallons

c $2 and the equilibrium quantity is 800 gallons

d $0 and the equilibrium quantity is 1,000 gallons

MSC: Applicative

19 Refer to Table 17-2 If the market for gasoline in Pittsville is a monopoly, then the

profit-maximizing monopolist will charge a price of

a $8 and sell 200 gallons

b $5 and sell 500 gallons

c $2 and sell 800 gallons

d $0 and sell 1,000 gallons

20 Refer to Table 17-2 If there are exactly two sellers of gasoline in Pittsville and if they collude,

then which of the following outcomes is most likely?

a Each seller will sell 500 gallons and charge a price of $5

b Each seller will sell 500 gallons and charge a price of $2.50

c Each seller will sell 350 gallons and charge a price of $3

d Each seller will sell 250 gallons and charge a price of $5

21 Refer to Table 17-2 If there are exactly three sellers of gasoline in Pittsville and if they collude,

then which of the following outcomes is most likely?

a Each seller will sell 166.67 gallons and charge a price of $1.33

b Each seller will sell 166.67 gallons and charge a price of $5

c Each seller will sell 200 gallons and charge a price of $4

d Each seller will sell 233.33 gallons and charge a price of $5

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22 Refer to Table 17-2 Suppose there are exactly two sellers of gasoline in Pittsville: Exxoff and

BQ If Exxoff sells 300 gallons and BQ sells 400 gallons, then

a Exxoff’s profit is $900 and BQ’s profit is $1,200

b Exxoff’s profit is $2,100 and BQ’s profit is $2,400

c there is an excess demand for gasoline in Pittsville

d there is an excess supply of gasoline in Pittsville

23 Refer to Table 17-2 Suppose there are exactly two sellers of gasoline in Pittsville: Exxoff and

BQ Currently, Exxoff sells 300 gallons and BQ sells 400 gallons Which of the following statements is correct? (Hint: Perform simple interpolation between rows of the chart where necessary.)

a The current situation is a Nash equilibrium

b The current situation is not a Nash equilibrium, as indicated by the fact that Exxoff’s profit would increase if it increased its output to 400 gallons and BQ kept its output at 400 gallons

c The current situation is not a Nash equilibrium, as indicated by the fact that BQ’s profit would increase if it decreased its output to 350 gallons and Exxoff kept its output at 300 gallons

d The current situation is not a Nash equilibrium, as indicated by the fact that both sellers’ profits would increase if they colluded, decided on a total level of output, and agreed to each produce one-half of that amount

MSC: Applicative

a When duopoly firms reach a Nash equilibrium, their combined level of output is the monopoly level of output

b When oligopoly firms collude, they are behaving as a cartel

c In an oligopoly, self-interest drives the market to the competitive outcome

d An oligopoly is an example of monopolistic competition

NAT: Analytic LOC: Oligopoly TOP: Oligopoly | Cartels

MSC: Interpretive

25 As the number of firms in an oligopoly increases, the magnitude of the

a output effect increases

b output effect decreases

c price effect increases

d price effect decreases

26 As the number of sellers in an oligopoly becomes very large,

a the quantity of output approaches the socially efficient quantity

b the price approaches marginal cost

c the price effect is diminished

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27 In markets characterized by oligopoly,

a the oligopolists earn the highest profit when they cooperate and behave like a monopolist

b collusive agreements will always prevail

c collective profits are always lower with cartel arrangements than they are without cartel

arrangements

d pursuit of self-interest by profit-maximizing firms always maximizes collective profits in the

market

28 As a group, oligopolists would always be better off if they would act collectively

a as if they were each seeking to maximize their own individual profits

b in a manner that would prohibit collusive agreements

c as a single monopolist

d as a single perfectly competitive firm

29 As a group, oligopolists would always earn the highest profit if they would

a produce the perfectly competitive quantity of output

b produce more than the perfectly competitive quantity of output

c charge the same price that a monopolist would charge if the market were a monopoly

d operate according to their own individual self-interests

30 Because each oligopolist cares about its own profit rather than the collective profit of all the

oligopolists together,

a they are unable to maintain the same degree of monopoly power enjoyed by a monopolist

b each firm's profit always ends up being zero

c society is worse off as a result

d Both a and c are correct

Table 17-3 The information in the table below shows the total demand for premium-channel digital cable TV

subscriptions in a small urban market Assume that each digital cable TV operator pays a fixed cost of $200,000 (peryear) to provide premium digital channels in the market area and that the marginal cost of providing the premium channel service to a household is zero

Quantity Price (per year)

31 Refer to Table 17-3 If there is only one digital cable TV company in this market, what price would

it charge for a premium digital channel subscription to maximize its profit?

a $30

b $60

c $90

d $150

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32 Refer to Table 17-3 Assume there are two digital cable TV companies operating in this market If

they are able to collude on the quantity of subscriptions that will be sold and on the price that will becharged for subscriptions, then their agreement will stipulate that

a each firm will charge a price of $90 and each firm will sell 4,500 subscriptions

b each firm will charge a price of $90 and each firm will sell 9,000 subscriptions

c each firm will charge a price of $120 and each firm will sell 3,000 subscriptions

d each firm will charge a price of $150 and each firm will sell 1,500 subscriptions

NAT: Analytic LOC: Oligopoly TOP: Duopoly | Collusion

MSC: Applicative

33 Refer to Table 17-3 Assume there are two profit-maximizing digital cable TV companies operating

in this market Further assume that they are able to collude on the quantity of subscriptions that will

be sold and on the price that will be charged for subscriptions How much profit will each company earn?

a $610,000

b $550,000

c $410,000

d $205,000

MSC: Applicative

in this market Further assume that they are not able to collude on the price and quantity of premiumdigital channel subscriptions to sell How many premium digital channel cable TV subscriptions will

be sold altogether when this market reaches a Nash equilibrium?

a 6,000

b 9,000

c 12,000

d 15,000

MSC: Applicative

in this market Further assume that they are not able to collude on the price and quantity of premiumdigital channel subscriptions to sell What price will premium digital channel cable TV subscriptions

be sold at when this market reaches a Nash equilibrium?

a $30

b $60

c $90

d $120

MSC: Applicative

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36 Refer to Table 17-3 Assume that there are two profit-maximizing digital cable TV companies

operating in this market Further assume that they are not able to collude on the price and quantity ofpremium digital channel subscriptions to sell How much profit will each firm earn when this marketreaches a Nash equilibrium?

a $25,000

b $90,000

c $160,000

d $215,000

MSC: Applicative

Table 17-4 The information in the table below shows the total demand for high-speed Internet subscriptions in a

small urban market Assume that each company that provides these subscriptions incurs an annual fixed cost of

$200,000 (per year) and that the marginal cost of providing an additional subscription is always $80

Quantity Price (per year)

37 Refer to Table 17-4 Suppose there is only one high-speed Internet service provider in this market

and it seeks to maximize its profit The company will

a sell 6,000 subscriptions and charge a price of $200 for each subscription

b sell 8,000 subscriptions and charge a price of $160 for each subscription

c sell 10,000 subscriptions and charge a price of $120 for each subscription

d sell 12,000 subscriptions and charge a price of $80 for each subscription

38 Refer to Table 17-4 Assume there are two high-speed Internet service providers that operate in this

market If they are able to collude on the quantity of subscriptions that will be sold and on the price that will be charged for subscriptions, then their agreement will stipulate that

a each firm will charge a price of $120 and each firm will sell 5,000 subscriptions

b each firm will charge a price of $160 and each firm will sell 4,000 subscriptions

c each firm will charge a price of $100 and each firm will sell 3,000 subscriptions

d each firm will charge a price of $200 and each firm will sell 3,000 subscriptions

MSC: Applicative

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39 Refer to Table 17-4 Assume there are two profit-maximizing high-speed Internet service providers

operating in this market Further assume that they are able to collude on the quantity of

subscriptions that will be sold and on the price that will be charged for subscriptions How much profit will each company earn?

a $80,000

b $120,000

c $160,000

d $210,000

MSC: Applicative

40 Refer to Table 17-4 Assume there are two profit-maximizing high-speed Internet service providers

operating in this market Further assume that they are not able to collude on the price and quantity ofsubscriptions to sell How many subscriptions will be sold altogether when this market reaches a Nash equilibrium?

a 6,000

b 8,000

c 10,000

d 12,000

MSC: Applicative

41 Refer to Table 17-4 Assume there are two high-speed Internet service providers operating in this

market Further assume that they are not able to collude on the price and quantity of subscriptions to sell What price will they charge for a subscription when this market reaches a Nash equilibrium?

a $120

b $160

c $200

d $240

MSC: Applicative

42 Refer to Table 17-4 Assume that there are two profit-maximizing high-speed Internet service

providers operating in this market Further assume that they are not able to collude on the price and quantity of subscriptions to sell How much profit will each firm earn when this market reaches a Nash equilibrium?

a $120,000

b $150,000

c $200,000

d $225,000

MSC: Applicative

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Table 17-5 Imagine a small town in which only two residents, Bill and Ben, own wells that produce safe drinking

water Each week Bill and Ben work together to decide how many gallons of water to pump, to bring the water to town, and to sell it at whatever price the market will bear Assume Bill and Ben can pump as much water as they want without cost so that the marginal cost of water equals zero

The weekly town demand schedule and total revenue schedule for water are shown in the table below

Weekly

Quantity

Weekly Total Revenue (and Total Profit)

43 Refer to Table 17-5 Since Bill and Ben operate as a profit-maximizing monopoly in the market for

water, what price will they charge for water?

a $2

b $4

c $6

d $7

44 Refer to Table 17-5 If the market for water were perfectly competitive instead of monopolistic,

how many gallons of water would be produced and sold?

a 70

b 90

c 110

d 120

MSC: Applicative

45 Refer to Table 17-5 As long as Bill and Ben operate as a profit-maximizing monopoly, what will

their combined weekly revenue amount to?

a $200

b $270

c $350

d $360

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46 Refer to Table 17-5 The socially efficient level of water supplied to the market would be

a 60 gallons

b 80 gallons

c 100 gallons

d 120 gallons

MSC: Applicative

47 Refer to Table 17-5 Suppose the town enacts new antitrust laws that prohibit Bill and Ben from

operating as a monopolist What will the new price of water be once the Nash equilibrium is

NAT: Analytic LOC: The role of government TOP: Nash equilibrium

MSC: Applicative

Scenario 17-1 Assume that the countries of Irun and Urun are the only two producers of crude oil Further assume

that both countries have entered into an agreement to maintain certain production levels in order to maximize profits In the world market for oil, the demand curve is downward sloping

48 Refer to Scenario 17-1 The fact that both countries have colluded to earn higher profit shows their

desire to keep their combined level of output

a above the monopoly level

b below the Nash equilibrium level

c equal to the Nash equilibrium level

d above the Nash equilibrium level

49 Refer to Scenario 17-1 As long as the combined level of output is less than the Nash equilibrium

level, both Irun and Urun have the individual incentive to

a hold production constant

b decrease production

c increase production

d increase price

50 Refer to Scenario 17-1 The agreed-upon production level between the two countries will

invariably be

a lower than the Nash equilibrium level

b equal to the Nash equilibrium level

c equal to the duopoly market equilibrium level

d higher than the duopoly market equilibrium level

MSC: Analytical

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51 Refer to Scenario 17-1 If Irun fails to live up to the production agreement and overproduces, which

of the following statements will be true of Urun's condition?

a Urun will invariably be worse off than before the agreement was broken

b Urun will counter by decreasing its production in order to maintain price stability

c Urun's profit will be maximized by holding its production constant

d Urun’s profit will decrease if it follows suit and increases production

52 Assuming that oligopolists do not have the opportunity to collude, once they have reached the Nash equilibrium, it

a is always in their best interest to supply more to the market

b is always in their best interest to supply less to the market

c is always in their best interest to leave their quantities supplied unchanged

d may be in their best interest to do any of the above, depending on market conditions

MSC: Interpretive

53 When an oligopoly market reaches a Nash equilibrium,

a the market price will be different for each firm

b the firms will not have behaved as profit maximizers

c a firm will have chosen its best strategy, given the strategies chosen by other firms in the market

d a firm will not take into account the strategies of competing firms

MSC: Interpretive

54 In a duopoly situation, the logic of self-interest results in a total output level that

a equals the output level that would prevail in a competitive market

b equals the output level that would prevail in a monopoly

c exceeds the monopoly level of output, but falls short of the competitive level of output

d falls short of the monopoly level of output

55 As a group, oligopolists earn the highest profit when they

a achieve a Nash equilibrium

b produce a total quantity of output that falls short of the Nash-equilibrium total quantity

c produce a total quantity of output that exceeds the Nash-equilibrium total quantity

d charge a price that falls short of the Nash-equilibrium price

NAT: Analytic LOC: Oligopoly TOP: Oligopoly | Nash equilibrium

MSC: Analytical

56 In order to be successful, a cartel must

a find a way to encourage members to produce more than they would otherwise produce

b agree on the total level of production for the cartel, but they need not agree on the amount produced

by each member

c agree on the total level of production and on the amount produced by each member

d agree on the prices charged by each member, but they need not agree on amounts produced

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57 In a particular town, Metrovision and Cableview are the only two providers of cable TV service Metrovision and Cableview constitute a

a duopoly, whether they collude or not

b cartel, whether they collude or not

c Nash industry, whether they collude or not

d monopolistically competitive market if they charge the same price

58 Which of these situations produces the largest profits for oligopolists?

a The firms reach a Nash equilibrium

b The firms reach the monopoly outcome

c The firms reach the competitive outcome

d The firms produce a quantity of output that lies between the competitive outcome and the

monopoly outcome

59 When firms have agreements among themselves on the quantity to produce and the price at which tosell output, we refer to their form of organization as a

a Nash arrangement

b cartel

c monopolistically competitive oligopoly

d perfectly competitive oligopoly

60 The equilibrium quantity in markets characterized by oligopoly is

a higher than in monopoly markets and higher than in perfectly competitive markets

b higher than in monopoly markets and lower than in perfectly competitive markets

c lower than in monopoly markets and higher than in perfectly competitive markets

d lower than in monopoly markets and lower than in perfectly competitive markets

NAT: Analytic LOC: Oligopoly TOP: Oligopoly | Equilibrium quantity

MSC: Analytical

61 The equilibrium price in a market characterized by oligopoly is

a higher than in monopoly markets and higher than in perfectly competitive markets

b higher than in monopoly markets and lower than in perfectly competitive markets

c lower than in monopoly markets and higher than in perfectly competitive markets

d lower than in monopoly markets and lower than in perfectly competitive markets

NAT: Analytic LOC: Oligopoly TOP: Oligopoly | Equilibrium price

d the perfectly competitive outcome

MSC: Definitional

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63 As the number of firms in an oligopoly market

a decreases, the price charged by firms likely decreases

b decreases, the market approaches the competitive market outcome

c increases, the market approaches the competitive market outcome

d increases, the market approaches the monopoly outcome

NAT: Analytic LOC: Oligopoly TOP: Oligopoly MSC: Analytical

64 Assume oligopoly firms are profit maximizers, they do not form a cartel, and they take other firms' production levels as given Then in equilibrium the output effect

a must dominate the price effect

b must be smaller than the price effect

c must balance with the price effect

d can be larger or smaller than the price effect

NAT: Analytic LOC: Oligopoly TOP: Oligopoly | Equilibrium

MSC: Analytical

65 For cartels, as the number of firms (members of the cartel) increases,

a the monopoly outcome becomes more likely

b the magnitude of the price effect decreases

c the more concerned each seller is about its own impact on the market price

d the easier it becomes to observe members violating their agreements

66 Suppose a market is initially perfectly competitive with many firms selling an identical product Over time, however, suppose the merging of firms results in the market being served by only three

or four firms selling this same product As a result, we would expect

a an increase in market output and an increase in the price of the product

b an increase in market output and an decrease in the price of the product

c a decrease in market output and an increase in the price of the product

d a decrease in market output and a decrease in the price of the product

67 Cartels are difficult to maintain because

a antitrust laws are difficult to enforce

b cartel agreements are conducive to monopoly outcomes

c there is always tension between cooperation and self-interest in a cartel

d firms pay little attention to the decisions made by other firms

68 There are two types of markets in which firms face some competition yet are still able to have some control over the prices of their products Those two types of market are

a monopolistic competition and oligopoly

b duopoly and triopoly

c perfect competition and monopolistic competition

d duopoly and imperfect competition

NAT: Analytic LOC: Oligopoly | Monopolistic competition

TOP: Markets MSC: Interpretive

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69 A group of firms that act in unison to maximize collective profits is called a

a monopolistically competitive industry

b monopoly

c cartel

d Nash equilibrium market

70 An agreement among firms regarding price and/or production levels is called

a an antitrust market

b a free-trade arrangement

c collusion

d a Nash agreement

NAT: Analytic LOC: Oligopoly TOP: Collusion MSC: Definitional

71 If duopolists individually pursue their own self-interest when deciding how much to produce, the amount they will produce collectively will

a be less than the monopoly quantity

b be equal to the monopoly quantity

c be greater than the monopoly quantity

d Any of the above are possible

72 If duopolists individually pursue their own self-interest when deciding how much to produce, the profit-maximizing price they will charge for their product will be

a less than the monopoly price

b equal to the perfectly competitive market price

c greater than the monopoly price

d possibly less than or greater than the monopoly price

73 To increase their individual profits, members of a cartel have an incentive to

a charge a higher price than the other members of the cartel

b increase production above the level agreed upon

c ignore the choices made by the other firms and act as a monopolist

d charge the same price a monopolist would charge

74 Once a cartel is formed, the market is in effect served by

a a monopoly

b an oligopoly

c imperfect competition

d monopolistic competition

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75 A situation in which firms choose their best strategy given the strategies chosen by the other firms inthe market is called

a a competitive equilibrium

b an open-market solution

c a socially-optimal solution

d a Nash equilibrium

MSC: Definitional

76 If an oligopolist is part of a cartel that is collectively producing the monopoly level of output, then that oligopolist has the incentive to lower production with the aim of

a lowering prices

b increasing profits for the group of firms as a whole

c increasing profits for itself, regardless of the impact on profits for the group of firms as a whole

d None of the above is correct

77 When price is above marginal cost, selling one more unit at the current price will increase profit This concept is known as the

a income effect

b price effect

c output effect

d cartel effect

NAT: Analytic LOC: Oligopoly TOP: Profit maximization

MSC: Definitional

79 In a typical cartel agreement, the cartel maximizes profit when it

a behaves as a monopolist

b behaves as a duopolist

c is flexible in enforcing production targets

d behaves as a perfectly competitive firm

80 An oligopolist will increase production if the output effect is

a less than the price effect

b equal to the price effect

c greater than the price effect

d The oligopolist never has an incentive to increase production

NAT: Analytic LOC: Oligopoly TOP: Oligopoly | Profit maximization

MSC: Interpretive

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81 As the number of firms in an oligopoly increases,

a each seller becomes more concerned about its impact on the market price

b the output effect decreases

c the total quantity of output produced by firms in the market gets closer to the socially efficient quantity

d the oligopoly has more market power and firms earn a greater profit

82 When an oligopoly grows very large, the

a output effect disappears

b price effect disappears

c output effect equals the price effect

d price of the product greatly exceeds marginal cost

83 As the number of firms in an oligopoly increases, the price approaches

a zero

b marginal cost

c infinity

d the monopoly price

84 Like monopolists, oligopolists are aware that an increase in the quantity of output always

a reduces the price of their product

b reduces their profit

c reduces their revenue

d reduces productivity

85 Oligopolies would like to act like a

a duopoly, but self-interest often drives them closer to the perfectly competitive outcome

b competitive firm, but self-interest often drives them closer to the duopoly outcome

c monopoly, but self-interest often drives them to charge a higher price than would be charged by a monopoly

d monopoly, but self-interest often drives them closer to the perfectly competitive outcome

86 Oligopolies can end up looking like competitive markets if the number of firms is

a large and they all cooperate

b large and they do not cooperate

c small and they all cooperate

d small and they do not cooperate

87 The theory of oligopoly provides another reason that free trade can benefit all countries because

a increased competition leads to larger deadweight losses

b as the number of firms within a given market increases, the price of the good decreases

c as the number of firms within a given market increases, the profit of each firm increases

NAT: Analytic LOC: Oligopoly TOP: Oligopoly | International trade

MSC: Interpretive

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88 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 of the following types of markets?

a oligopoly

b duopoly

c monopoly

d competitive markets

89 If nations such as Germany, Japan, and the United States prohibited international trade in

automobiles, a likely effect would be that

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

d automobile producers in the U.S would collude to produce a large number of cars

MSC: Interpretive

90 The theory of oligopoly provides a reason as to why

a perfect competition is not a useful object of study

b price is less than marginal cost for many firms

c all countries can benefit from free trade among nations

d firms do not want to capture larger shares of their markets

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92 Consider the diagram below, which shows the market demand curve for a particular product Suppose this market is served by two duopolists who each face the marginal cost curve shown in the diagram The marginalrevenue curve that a monopolist would face in this market is also shown Which of the following statements is true?

a The total output in this market will likely be 2 units when the market is served by a duopoly

b The price in this market will likely be $6 when the market is served by a duopoly

c The total revenue to each firm will likely be more than $16 when the market is served by a duopoly

d The total output in this market will likely be less than 4 units when the market is served by a

duopoly

93 The more firms an oligopoly has,

a the more market power the oligopoly has This results in higher prices and lower quantities of

output than an oligopoly with fewer firms would have

b the more important the price effect is, resulting in the market price being higher than when there arefewer firms in the oligopoly

c the farther market price will be from marginal cost

d the more likely the firms will charge a price closer to the perfectly competitive price

94 In an oligopoly, the total output produced in the market is

a higher than the total output that would be produced if the market were a monopoly and higher than the total output that would be produced if the market were perfectly competitive

b higher than the total output that would be produced if the market were a monopoly but lower than the total output that would be produced if the market were perfectly competitive

c lower than the total output that would be produced if the market were a monopoly but higher than the total output that would be produced if the market were perfectly competitive

d lower than the total output that would be produced if the market were a monopoly and lower than the total output that would be produced if the market were perfectly competitive

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Table 17-6 The table shows the demand schedule for a particular product.

95 Refer to Table 17-6 Suppose the market for this product is served by two firms that have formed a

cartel What price will the cartel charge in this market if the marginal cost of production is $0?

a $6

b $8

c $10

d $12

NAT: Analytic TOP: Cartels MSC: Applicative

96 Refer to Table 17-6 Suppose the market for this product is served by two firms that have formed a

cartel What price will the cartel charge in this market if the marginal cost of production is $4?

a $6

b $8

c $10

d $12

NAT: Analytic TOP: Cartels MSC: Applicative

Table 17-7 The table shows the demand schedule for a particular product.

97 Refer to Table 17-7 Suppose the market for this product is served by two duopolists who have

formed a cartel and are colluding to set the price and quantity in this market If the marginal cost to produce this product is constant at $2 per unit, then what price will the cartel set in this market?

a $4

b $5

c $6

d $7

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98 Refer to Table 17-7 Suppose the marginal cost to produce this product is constant at $1 per unit

If this market is served by two duopolists who choose their production levels independently, acting

in their own self-interest, what is the Nash equilibrium production level for each firm?

a 5 units

b 10 units

c 15 units

d 20 units

NAT: Analytic LOC: Oligopoly TOP: Duopoly | Nash equilibrium

MSC: Applicative

99 Refer to Table 17-7 Suppose that the marginal cost to produce this product is constant at $1 per

unit and that the fixed cost of producing this product is $10 If the market is served by two

duopolists who each, acting in their own self-interest, choose the Nash equilibrium level of

production, how much profit will each firm earn?

a $10

b $20

c $35

d $50

NAT: Analytic LOC: Oligopoly TOP: Duopoly | Nash equilibrium

MSC: Applicative

Table 17-8 For a certain small town, the table shows the demand schedule for water Assume the marginal cost of

supplying water is constant at $4 per bottle

a The price would be $6 per gallon and the quantity would be 400 gallons

b The price would be $5 per gallon and the quantity would be 500 gallons

c The price would be $4 per gallon and the quantity would be 600 gallons

d The price would be $3 per gallon and the quantity would be 700 gallons

MSC: Applicative

101 Refer to Table 17-8 If there were only one supplier of water, what would be the price and quantity?

a The price would be $7 per gallon and the quantity would be 300 gallons

b The price would be $6 per gallon and the quantity would be 400 gallons

c The price would be $5 per gallon and the quantity would be 500 gallons

d The price would be $4 per gallon and the quantity would be 600 gallons

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102 Refer to Table 17-8 If there are two suppliers of water, Mort and Callie, and if they have

successfully formed a cartel, then what would be the price and the market quantity?

a The price would be $7 per bottle and the market quantity would be 300 bottles

b The price would be $6 per bottle and the market quantity would be 400 bottles

c The price would be $5 per bottle and the market quantity would be 500 bottles

d The price would be $4 per bottle and the market quantity would be 600 bottles

TOP: Cartels MSC: Applicative

103 Refer to Table 17-8 If there are two suppliers of water, Mort and Callie, and if they have

successfully formed a cartel and split the market evenly, then how many bottles will Callie supply?

a 50

b 100

c 150

d 200

104 Refer to Table 17-8 If there are two suppliers of water, Mort and Callie, then what will be their

combined level of output when a Nash equilibrium is reached?

a 200

b 400

c 600

d 800

105 Cartels in the United States are

a legal if price is competitively determined

b legal if all firms in the industry agree to the terms of the cartel

c legal if all conditions of the cartel are made public

d illegal

106 Which of the following would be most likely to contribute to the breakdown of a cartel in a natural resource (e.g., bauxite) market?

a high prices

b low price elasticity of demand

c high compatibility of member interests

d unequal member ownership of the natural resource

107 An equilibrium in which each firm in an oligopoly maximizes profit, given the actions of its rivals,

MSC: Definitional

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108 An oligopoly would tend to restrict output and drive up price if

a barriers to entering the industry are negligible

b firms engage in informative advertising

c firms produce a standardized product

d firms collude and behave like a monopoly

NAT: Analytic LOC: Oligopoly TOP: Collusion MSC: Interpretive

Sec02 - Oligopoly - The Economics of Cooperation

MULTIPLE CHOICE

1 When firms are faced with making strategic choices in order to maximize profit, economists typically use

a the theory of monopoly to model their behavior

b the theory of aggressive competition to model their behavior

c game theory to model their behavior

d cartel theory to model their behavior

2 When strategic interactions are important to pricing and production decisions, a typical firm will

a set the price of its product equal to marginal cost

b consider how competing firms might respond to its actions

c generally operate as if it is a monopolist

d consider exiting the market

3 Game theory is important for the understanding of

a competitive markets

b monopolies

c oligopolies

d all market structures

4 Game theory is necessary for understanding

a all market structures

b competition and oligopoly, but it is not necessary for understanding monopoly

c monopoly and oligopoly, but it is not necessary for understanding competition

d oligopoly, but it is not necessary for understanding monopoly or competition

5 The prisoners' dilemma provides insights into the

a difficulty of maintaining cooperation

b benefits of avoiding cooperation

c benefits of government ownership of monopoly

d ease with which oligopoly firms maintain high prices

MSC: Interpretive

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6 In the prisoners' dilemma game, self-interest leads

a each prisoner to confess

b to a breakdown of any agreement that the prisoners might have made before being questioned

c to an outcome that is not particularly good for either prisoner

MSC: Interpretive

7 The likely outcome of the standard prisoners' dilemma game is that

a neither prisoner confesses

b exactly one prisoner confesses

c both prisoners confess

d Not enough information is given to answer this question

MSC: Interpretive

8 The prisoners' dilemma is an important game to study because

a most games present zero-sum alternatives

b it identifies the fundamental difficulty in maintaining cooperative agreements

c strategic decisions faced by prisoners are identical to those faced by firms engaged in competitive agreements

d all interactions among firms are represented by this game

MSC: Interpretive

9 The prisoners’ dilemma game

a provides insight into why cooperation is individually rational

b provides insight into why cooperation is difficult

c is a game in which neither player has a dominant strategy

d is a game in which exactly one of the two players has a dominant strategy

MSC: Interpretive

10 In the prisoners’ dilemma game with Bonnie and Clyde as the players, the likely outcome is one

a in which neither Bonnie nor Clyde confesses

b in which both Bonnie and Clyde confess

c that involves neither Bonnie nor Clyde pursuing a dominant strategy

d that is ideal in terms of Bonnie’s self-interest and in terms of Clyde’s self-interest

MSC: Interpretive

11 In the prisoners’ dilemma game with Bonnie and Clyde as the players, the likely outcome is

a a very good outcome for both players

b a very good outcome for Bonnie, but a bad outcome for Clyde

c a very good outcome for Clyde, but a bad outcome for Bonnie

d a bad outcome for both players

MSC: Interpretive

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12 In a game, a dominant strategy is

a the best strategy for a player to follow only if other players are cooperative

b the best strategy for a player to follow, regardless of the strategies followed by other players

c a strategy that must appear in every game

d a strategy that leads to one player's interests dominating the interests of the other players

NAT: Analytic LOC: Oligopoly TOP: Dominant strategy

MSC: Definitional

13 A dominant strategy is one that

a makes every player better off

b makes at least one player better off without hurting the competitiveness of any other player

c increases the total payoff for the player

d is best for the player, regardless of what strategies other players follow

NAT: Analytic LOC: Oligopoly TOP: Dominant strategy

MSC: Definitional

Table 17-9

Two cigarette manufacturers (Firm A and Firm B) are faced with lawsuits from states to recover the healthcare related expenses associated with cigarette smoking Both cigarette firms have evidence that indicates that cigarette smoke causes lung cancer (and other related illnesses) State prosecutors do not have access to the same data used bycigarette manufacturers and thus will have difficulty recovering full costs without the help of at least one cigarette firm study Each firm has been presented with an opportunity to lower its liability in the suit if it cooperates with attorneys representing the states

Firm B

Concede that cigarette smoke causes lung cancer

Argue that there is no evidence that smoke causes cancer

Firm A

Concede that cigarette smoke causes lung cancer

Firm A profit = $–20Firm B profit = $–15 Firm A profit = $–50Firm B profit = $–5

Argue that there

is no evidence that smoke causes cancer

Firm A profit = $–5Firm B profit = $–50 Firm A profit = $–10Firm B profit = $–10

14 Refer to Table 17-9 Pursuing its own best interests, Firm A will concede that cigarette smoke

causes lung cancer

a only if Firm B concedes that cigarette smoke causes lung cancer

b only if Firm B does not concede that cigarette smoke causes lung cancer

c regardless of whether Firm B concedes that cigarette smoke causes lung cancer

d None of the above In pursuing its own best interests, Firm A will in no case concede that cigarette smoke causes lung cancer

NAT: Analytic LOC: Oligopoly TOP: Game theory MSC: Applicative

15 Refer to Table 17-9 Pursuing its own best interests, Firm B will concede that cigarette smoke

causes lung cancer

a only if Firm A concedes that cigarette smoke causes lung cancer

b only if Firm A does not concede that cigarette smoke causes lung cancer

c regardless of whether Firm A concedes that cigarette smoke causes lung cancer

d None of the above; in pursuing its own best interests, Firm B will in no case concede that cigarette smoke causes lung cancer

Trang 33

16 Refer to Table 17-9 If both firms follow a dominant strategy, Firm A's profits (losses) will be

a $-50

b $-20

c $-10

d $-5

17 Refer to Table 17-9 If both firms follow a dominant strategy, Firm B's profits (losses) will be

a $-50

b $-15

c $-10

d $-5

18 Refer to Table 17-9 When this game reaches a Nash equilibrium, profits for Firm A and Firm B

MSC: Applicative

Table 17-10

Each year the United States considers renewal of Most Favored Nation (MFN) trading status with Farland (a mythical nation) Historically, legislators have made threats of not renewing MFN status because of human rights abuses in Farland The non-renewal of MFN trading status is likely to involve some retaliatory measures by Farland.The payoff table below shows the potential economic gains associated with a game in which Farland may impose trade sanctions against U.S firms and the United States may not renew MFN status with Farland The table contains the dollar value of all trade-flow benefits to the United States and Farland

with Farland Farland trade value = $285 bU.S trade value = $35 b Farland trade value = $275 bU.S trade value = $130 b

19 Refer to Table 17-10 Pursuing its own best interests, Farland will impose trade sanctions against

U.S firms

a only if the U.S does not renew MFN status with Farland

b only if the U.S renews MFN status with Farland

c regardless of whether the U.S renews MFN status with Farland

d None of the above is correct In pursuing its own best interests, Farland will in no case impose tradesanctions against U.S firms

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20 Refer to Table 17-10 Pursuing its own best interests, the U.S will renew MFN status with Farland

a only if Farland does not impose trade sanctions against U.S firms

b only if Farland imposes trade sanctions against U.S firms

c regardless of whether Farland imposes trade sanctions against U.S firms

d None of the above is correct In pursuing its own best interests, the United States will in no case

renew MFN status with Farland

21 Refer to Table 17-10 This particular game

a features a dominant strategy for the U.S

b features a dominant strategy for Farland

c is a version of the prisoners' dilemma game

NAT: Analytic LOC: Oligopoly TOP: Prisoners' dilemma | Dominant strategy

MSC: Applicative

22 Refer to Table 17-10 If both countries follow a dominant strategy, the value of trade flow benefits

for Farland will be

a $5 b

b $75 b

c $275 b

d $285 b

MSC: Applicative

23 Refer to Table 17-10 If both countries follow a dominant strategy, the value of trade flow benefits

for the United States will be

a $35 b

b $65 b

c $130 b

d $140 b

MSC: Applicative

24 Refer to Table 17-10 When this game reaches a Nash equilibrium, the value of trade flow benefits

will be

a United States $35 b and Farland $285 b

b United States $65 b and Farland $75 b

c United States $140 b and Farland $5 b

d United States $130 b and Farland $275 b

MSC: Applicative

25 Refer to Table 17-10 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 we would expect the countries to agree to which outcome?

a United States $35 b and Farland $285 b

b United States $65 b and Farland $75 b

c United States $140 b and Farland $5 b

d United States $130 b and Farland $275 b

MSC: Applicative

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