Question : 101) Assume that the world’s largest smart-phone producers (Apple, Nokia, : 1384256

101) Assume that the world’s largest smart-phone producers (Apple, Nokia, Samsung, etc.) operate in an oligopolistic industry. In the long run, which of the following is the most important form of competition between these firms?

A) predatory pricing

B) tacit collusion

C) product innovation

D) brand proliferation

E) advertising

102) Suppose there are only five construction companies in a particular region that are each large enough to take on large public infrastructure projects (roads, bridges, sewers, etc.). Representatives of these companies meet regularly for coffee or on the golf course and agree on which company will submit the lowest bid for a particular project. This type of firm behaviour is an example of

A) cooperative behaviour that results in higher output and lower prices.

B) cooperative behaviour that results in increased consumer welfare.

C) tacit collusion, and is legal as long as output is not restricted.

D) predatory pricing, and is meant to prevent new entrance to the industry.

E) explicit collusion and is illegal.

103) The sugar industry in Canada is effectively a duopoly with two large firms competing with each other for market share. Suppose the two firms collude and successfully restrict joint output to that of a profit-maximizing monopolist. As a result, they each realize an increase in their profits. Why would this collusive agreement be difficult to sustain?

A) Because each firm has an incentive to break the agreement by further restricting output in order to increase the price, thereby increasing their own profits.

B) Because each firm has an incentive to break the agreement by increasing output in order to increase their own profits.

C) Because the firm with the lower long-run average costs will be able to capture all sales, driving the second firm out of the market.

D) Because a non-cooperative outcome is inevitable in which output is further restricted and each firm’s profit is reduced.

104) In what way can an oligopolistic market structure be beneficial to society?

A) Oligopolistic firms compete through advertising, which increases economic efficiency.

B) Oligopolistic firms are able to exploit all existing economies of scale and operate at the minimum of long-run average costs, and thereby reduce the use of society’s resources.

C) An oligopolistic market structure is most conducive to non-competitive behaviour which leads to lower prices for consumers in the long run.

D) An oligopolistic market structure is most adaptive to today’s rapid rate of technological change.

E) Oligopolistic firms compete through innovation, which is a driving force of economic growth and increasing living standards.

105) Consider an example of the prisoner’s dilemma where 2 firms are making sealed bids on a contract and each firm is allowed to bid either $100 or $180. If both firms bid the same price, the job is shared equally and each firm earns half the value of its bid. Otherwise the lowest bidder wins the contract and receives the full value of its bid (and the other bidder earns zero). The non-cooperative outcome in this situation is

A) both firms bid $100.

B) both firms bid $180.

C) one firm bids $100, the other firm bids $180.

D) both firms bid $50.

E) both firms bid $90.

106) Consider an example of the prisoner’s dilemma where 2 firms are making sealed bids on a contract and each firm is allowed to bid either $100 or $180. If both firms bid the same price, the job is shared equally and each firm earns half the value of its bid. Otherwise the lowest bidder wins the contract and receives the full value of its bid (and the other bidder earns zero). The cooperative outcome in this situation is

A) both firms bid $100.

B) both firms bid $180.

C) one firm bids $100, the other firm bids $180.

D) both firms bid $50.

E) both firms bid $90.

107) Consider an example of the prisoner’s dilemma where 2 firms are making sealed bids on a highway-construction contract and each firm is allowed to bid either $100 million or $120 million.  If both firms bid the same price, the job is shared equally and each firm earns half the value of its bid. Otherwise the lowest bidder wins the contract and receives the full value of its bid (and the other bidder earns zero). The non-cooperative outcome in this situation is

A) both firms bid $50 million.

B) both firms bid $60 million.

C) one firm bids $100 million, the other firm bids $120 million.

D) both firms bid $100 million.

E) both firms bid $120 million.

108) Consider an example of the prisoner’s dilemma where 2 firms are making sealed bids on a highway-construction contract and each firm is allowed to bid either $100 million or $120 million.  If both firms bid the same price, the job is shared equally and each firm earns half the value of its bid. Otherwise the lowest bidder wins the contract and receives the full value of its bid (and the other bidder earns zero). The cooperative outcome in this situation is

A) both firms bid $50 million.

B) both firms bid $60 million.

C) one firm bids $100 million, the other firm bids $120 million.

D) both firms bid $100 million.

E) both firms bid $120 million.

109) What is a Nash equilibrium?

A) an example of a cooperative equilibrium

B) a situation where all players are maximizing their payoffs given the current behaviour of the other players

C) a situation where all players are better off than they would be with any other combination of strategies

D) is an unstable equilibrium

E) will in general produce the greatest payoff for the players

110) Which of the following is an incorrect statement about a Nash equilibrium?

A) A Nash equilibrium is an example of a non-cooperative equilibrium.

B) In a Nash equilibrium, all players are maximizing their payoffs given the current behaviour of the other players.

C) In a Nash equilibrium, all players are better off than they would be with any other combination of strategies.

D) A Nash equilibrium is a self-policing equilibrium.

E) Once a Nash equilibrium is established, no individual firm has an incentive to depart from it.