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11) Once a cartel determines the profit-maximizing price, A) all

Question : 11) Once a cartel determines the profit-maximizing price, A) all : 1418029

 

 

11) Once a cartel determines the profit-maximizing price,

A) all members of the cartel have a strong incentive to abide by the agreed-upon price.

B) each member will face the temptation to cheat on the cartel price to increase its sales and profit.

C) changes in the output of any member firms will have no impact on the market price.

D) entry into the industry of rival firms will have no impact on the profit of the cartel.

E) entry into the industry of rival firms will raise cartel profit as long as the new firms join the cartel.

 

12) In a cartel, the incentive to cheat is significant because

A) each individual member has the incentive to restrict its own output to maximize profit.

B) the marginal cost is equal to the cartel price at the profit-maximizing output level.

C) each firm has the incentive to lower its price to sell more than the allotted amount.

D) each firm has the incentive to cheat by raising its price to maximize profit.

E) price is less than marginal cost for each member of the cartel.

13) If there is a successful collusive agreement in a duopoly to maximize profit,

A) the market price will equal the marginal cost of production.

B) the market price will equal the average total cost of production.

C) the price will be the same as the price in a perfectly competitive market.

D) the price will be the monopoly price.

E) the market marginal revenue will be the same as the demand curve.

 

14) If a duopoly collusive agreement is made that maximizes joint profit,

A) each of the duopolists has no incentive to cheat on the agreement.

B) each duopolist has the incentive to cheat on the duopoly agreement by lowering the price.

C) each duopolist has the incentive to cheat on the agreement by increasing the price to make monopoly profit.

D) there is no concern over the entrance of potential rivals, since they cannot decrease the duopolists' profit.

E) the dominant strategy is to collude.

 

15) Consider a duopoly with collusion. If the duopoly maximizes profit,

A) each firm will produce the same amount.

B) each firm will produce its maximum output possible.

C) industry marginal revenue will equal industry marginal cost at the level of total output.

D) industry demand will equal industry marginal cost at the level of total output.

E) none of the above.

 

16) The firms Trick and Gear form a cartel to collude to maximize profit. If this game is nonrepeated, the Nash equilibrium is

A) both firms cheat on the agreement.

B) both firms comply with the agreement.

C) Trick cheats, while Gear complies with the agreement.

D) Gear cheats, while Trick complies with the agreement.

E) unknown.

Use the table below to answer the following questions.

 

Table 15.2.2

 

 

 

17) Table 15.2.2 gives the payoff matrix in terms of economic profit for firms A and B when there are two strategies facing each firm:  (1) charge a low price, or (2) charge a high price. The equilibrium in this game (played once) will be a dominant strategy equilibrium because

A) firm B will reduce profit by more than A if both charge a lower price.

B) firm B is the dominant firm.

C) the best strategy for each firm does not depend on the strategy chosen by the other firm.

D) there is no credible threat by either firm to "punish" the other if it breaks the agreement.

E) all of the above.

 

18) Table 15.2.2 gives the payoff matrix in terms of economic profit for firms A and B when there are two strategies facing each firm:  (1) charge a low price, or (2) charge a high price. Refer to the nonrepeated game in the table. In Nash equilibrium, firm A will make an economic profit of

A) -$10.

B) $2.

C) $10.

D) $20.

E) $5.

 

19) Table 15.2.2 gives the payoff matrix in terms of economic profit for firms A and B when there are two strategies facing each firm:  (1) charge a low price, or (2) charge a high price. Refer to the nonrepeated game in the table. If both firms could successfully collude, what would be firm A's economic profit?

A) -$10

B) $2

C) $10

D) $20

E) $5

20) Consider a cartel consisting of several firms that is maximizing total profit. If one firm cheats on the cartel agreement by cutting its price and increasing its output, the best response of the other firms is to

A) cancel the cheating firm's membership in the cartel.

B) continue to sell at the agreed-upon price.

C) raise their price to recapture lost profit.

D) cut their prices as well.

E) cut output to keep total cartel output at its original level.

 

 

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