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Table 17-10 The table shows the town of Driveaway's demand schedule for gasoline. Assume the town's gasoline seller(s) incurs a cost of $2 for each gallon sold, with no fixed cost. Table 17-10 The table shows the town of Driveaway's demand schedule for gasoline. Assume the town's gasoline seller(s) incurs a cost of $2 for each gallon sold, with no fixed cost. -Refer to Table 17-10.If the market for gasoline in Driveaway is a monopoly,then the monopolist's maximum profit is A) $350. B) $400. C) $450. D) $500. -Refer to Table 17-10.If the market for gasoline in Driveaway is a monopoly,then the monopolist's maximum profit is


A) $350.
B) $400.
C) $450.
D) $500.

E) A) and C)
F) B) and D)

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Table 17-5. Imagine a small town in which only two residents, Kunal and Naj, own wells that produce safe drinking water. Each week Kunal and Naj 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 Kunal and Naj 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. Table 17-5. Imagine a small town in which only two residents, Kunal and Naj, own wells that produce safe drinking water. Each week Kunal and Naj 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 Kunal and Naj 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. -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) 25 B) 100 C) 200 D) 300 -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) 25
B) 100
C) 200
D) 300

E) B) and D)
F) C) and D)

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In which of the following games is it clearly the case that the cooperative outcome of the game is good for the two players and good for society?


A) Two guilty criminals have been captured by the police, and each prisoner decides whether to confess or to remain silent.
B) Two airlines dominate air travel between City A and City B, and each airline decides whether to charge a "high" airfare or a "low" airfare.
C) Two duopoly firms account for all of the production in a market, and each firm decides whether to produce a "high" amount of output or a "low" amount of output.
D) Two oil companies own adjacent oil fields over a common pool of oil, and each company decides whether to drill one well or two wells.

E) A) and B)
F) A) and C)

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Table 17-11 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 by cigarette 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. Table 17-11 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 by cigarette 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. -Refer to Table 17-11.When this game reaches a Nash equilibrium,profits for Firm A and Firm B will be A) $-5 and $-50, respectively. B) $-10 and $-10, respectively. C) $-20 and $-15, respectively. D) $-50 and $-5, respectively. -Refer to Table 17-11.When this game reaches a Nash equilibrium,profits for Firm A and Firm B will be


A) $-5 and $-50, respectively.
B) $-10 and $-10, respectively.
C) $-20 and $-15, respectively.
D) $-50 and $-5, respectively.

E) B) and C)
F) B) and D)

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Table 17-20 Nadia and Maddie are two college roommates who both prefer a clean common space in their dorm room, but neither enjoys cleaning. The roommates must each make a decision to either clean or not clean the dorm room's common space. The payoff table for this situation is provided below, where the higher a player's payoff number, the better off that player is. The payoffs in each cell are shown as (payoff for Nadia, payoff for Maddie) . Table 17-20 Nadia and Maddie are two college roommates who both prefer a clean common space in their dorm room, but neither enjoys cleaning. The roommates must each make a decision to either clean or not clean the dorm room's common space. The payoff table for this situation is provided below, where the higher a player's payoff number, the better off that player is. The payoffs in each cell are shown as (payoff for Nadia, payoff for Maddie) . -Refer to Table 17-20.What is Nadia's dominant strategy? A) Nadia has no dominant strategy. B) Nadia should always choose Clean. C) Nadia should always choose Don't Clean. D) Nadia has two dominant strategies, Clean and Don't Clean, depending on the choice Maddie makes. -Refer to Table 17-20.What is Nadia's dominant strategy?


A) Nadia has no dominant strategy.
B) Nadia should always choose Clean.
C) Nadia should always choose Don't Clean.
D) Nadia has two dominant strategies, Clean and Don't Clean, depending on the choice Maddie makes.

E) A) and B)
F) All of the above

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When the prisoners' dilemma game is generalized to describe situations other than those that literally involve two prisoners,we see that cooperation between the players of the game


A) can be difficult to maintain, but only when cooperation would make at least one of the players of the game worse off.
B) can be difficult to maintain, even when cooperation would make both players of the game better off.
C) always works to the benefit of society as a whole.
D) always works to the detriment of society as a whole.

E) A) and C)
F) B) and C)

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

A) True
B) False

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The practice of tying is used to


A) enhance the enforcement of antitrust laws.
B) encourage the enforcement of collusive agreements.
C) control the retail price of a collection of related products.
D) package products to sell at a combined price closer to a buyer's total willingness to pay.

E) None of the above
F) C) and D)

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Barb and Sue are competitors in a local market.Each is trying to decide if it is better to advertise on TV,on radio,or not at all.If they both advertise on TV,each will earn a profit of $5,000.If they both advertise on radio,each will earn a profit of $7,000.If neither advertises at all,each will earn a profit of $10,000.If one advertises on TV and other advertises on radio,then the one advertising on TV will earn $8,000 and the other will earn $3,000.If one advertises on TV and the other does not advertise,then the one advertising on TV will earn $15,000 and the other will earn $2,000.If one advertises on radio and the other does not advertise,then the one advertising on radio will earn $12,000 and the other will earn $4,000.If both follow their dominant strategy,then Barb will


A) advertise on TV and earn $5,000.
B) advertise on radio and earn $7,000.
C) not advertise at all and earn $10,000.
D) None of the above is correct. Barb and Sue do not have dominant strategies.

E) A) and B)
F) All of the above

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Scenario 17-2. Imagine that two oil companies, Mobile and Cargo, own adjacent oil fields. Under the fields is a common pool of oil worth $96 million. Drilling a well to recover oil costs $3 million per well. If each company drills one well, each will get half of the oil and earn a $45 million profit ($48 million in revenue - $3 million in costs) . Assume that having X percent of the total wells means that a company will collect X percent of the total revenue. -Refer to Scenario 17-2.If Mobile and Cargo are able to successfully collude to maximize their joint profits,Mobile will


A) drill one well and Cargo will drill one well.
B) drill one well and Cargo will drill two wells.
C) drill two wells and Cargo will drill one well.
D) drill two wells and Cargo will drill two wells.

E) None of the above
F) A) and B)

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Table 17-17 This table shows a game played between two firms, Firm A and Firm B. In this game each firm must decide how much output (Q) to produce: 2 units or 3 units. The profit for each firm is given in the table as (Profit for Firm A, Profit for Firm B) . Table 17-17 This table shows a game played between two firms, Firm A and Firm B. In this game each firm must decide how much output (Q) to produce: 2 units or 3 units. The profit for each firm is given in the table as (Profit for Firm A, Profit for Firm B) . -Refer to Table 17-17.Which of the following outcomes represent the Nash equilibrium in this game? A) Q=2 for Firm A and Q=3 for Firm B. B) Q=3 for Firm A and Q=2 for Firm B. C) There is no Nash equilibrium in this game since neither player has a dominant strategy. D) Both a and b are correct. -Refer to Table 17-17.Which of the following outcomes represent the Nash equilibrium in this game?


A) Q=2 for Firm A and Q=3 for Firm B.
B) Q=3 for Firm A and Q=2 for Firm B.
C) There is no Nash equilibrium in this game since neither player has a dominant strategy.
D) Both a and b are correct.

E) B) and C)
F) None of the above

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The Sherman Act made cooperative agreements


A) unenforceable outside of established judicial review processes.
B) enforceable with proper judicial review.
C) a criminal conspiracy.
D) a crime, but did not give direction on possible penalties.

E) None of the above
F) C) and D)

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The problems faced by oligopolies with three or more members are entirely different from the problems faced by duopolies.

A) True
B) False

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Table 17-19 Consider a small town that has two grocery stores from which residents can choose to buy a gallon of milk. The store owners each must make a decision to set a high milk price or a low milk price. The payoff table, showing profit per week, is provided below. The profit in each cell is shown as (Store 1, Store 2) . Table 17-19 Consider a small town that has two grocery stores from which residents can choose to buy a gallon of milk. The store owners each must make a decision to set a high milk price or a low milk price. The payoff table, showing profit per week, is provided below. The profit in each cell is shown as (Store 1, Store 2) . -Refer to Table 17-19.What is the Nash Equilibrium of this price-setting game? A) Grocery store 1: Low price Grocery store 2: Low price B) Grocery store 1: Low price Grocery store 2: High price C) Grocery store 1: High price Grocery store 2: How price D) Grocery store 1: High price Grocery store 2: High price -Refer to Table 17-19.What is the Nash Equilibrium of this price-setting game?


A) Grocery store 1: Low price
Grocery store 2: Low price
B) Grocery store 1: Low price
Grocery store 2: High price
C) Grocery store 1: High price
Grocery store 2: How price
D) Grocery store 1: High price
Grocery store 2: High price

E) A) and D)
F) C) and D)

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Table 17-1 Imagine a small town in which only two residents, Rochelle and Alec, own wells that produce safe drinking water. Each week Rochelle and Alec work together to decide how many gallons of water to pump. They bring the water to town and sell it at whatever price the market will bear. To keep things simple, suppose that Rochelle and Alec 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: Table 17-1 Imagine a small town in which only two residents, Rochelle and Alec, own wells that produce safe drinking water. Each week Rochelle and Alec work together to decide how many gallons of water to pump. They bring the water to town and sell it at whatever price the market will bear. To keep things simple, suppose that Rochelle and Alec 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: -Refer to Table 17-1.If Rochelle and Alec operate as a profit-maximizing monopoly in the market for water,how much profit will each of them earn? A) $8,750 B) $9,000 C) $12,000 D) $18,000 -Refer to Table 17-1.If Rochelle and Alec operate as a profit-maximizing monopoly in the market for water,how much profit will each of them earn?


A) $8,750
B) $9,000
C) $12,000
D) $18,000

E) A) and B)
F) B) and D)

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Figure 17-1 Figure 17-1 -Refer to Figure 17-1.Suppose this market is served by a duopoly in which each firm faces the marginal cost curve shown in the diagram.The marginal revenue 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. -Refer to Figure 17-1.Suppose this market is served by a duopoly in which each firm faces the marginal cost curve shown in the diagram.The marginal revenue 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.

E) None of the above
F) B) and C)

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Table 17-18 This table shows a game played between two firms, Firm A and Firm B. In this game each firm must decide how much output (Q) to produce: 10 units or 12 units. The profit for each firm is given in the table as (Profit for Firm A, Profit for Firm B) . Table 17-18 This table shows a game played between two firms, Firm A and Firm B. In this game each firm must decide how much output (Q) to produce: 10 units or 12 units. The profit for each firm is given in the table as (Profit for Firm A, Profit for Firm B) . -Refer to Table 17-18.The dominant strategy For Firm A is to produce A) 10 units and the dominant strategy for Firm B is to produce 10 units. B) 10 units and the dominant strategy for Firm B is to produce 12 units. C) 12 units and the dominant strategy for Firm B is to produce 10 units. D) 12 units and the dominant strategy for Firm B is to produce 12 units. -Refer to Table 17-18.The dominant strategy For Firm A is to produce


A) 10 units and the dominant strategy for Firm B is to produce 10 units.
B) 10 units and the dominant strategy for Firm B is to produce 12 units.
C) 12 units and the dominant strategy for Firm B is to produce 10 units.
D) 12 units and the dominant strategy for Firm B is to produce 12 units.

E) C) and D)
F) B) and C)

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Martha and Oleg are competitors in a local market and each is trying to decide if it is worthwhile to advertise.If both of them advertise,each will earn a profit of $5,000.If neither of them advertise,each will earn a profit of $10,000.If one advertises and the other doesn't,then the one who advertises will earn a profit of $15,000 and the other will earn $7,000.To earn the highest profit,Martha


A) should advertise, and she will earn $5,000.
B) should advertise, and she will earn $15,000.
C) should not advertise, and she will earn $10,000.
D) has no dominant strategy.

E) B) and D)
F) All of the above

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Table 17-18 This table shows a game played between two firms, Firm A and Firm B. In this game each firm must decide how much output (Q) to produce: 10 units or 12 units. The profit for each firm is given in the table as (Profit for Firm A, Profit for Firm B) . Table 17-18 This table shows a game played between two firms, Firm A and Firm B. In this game each firm must decide how much output (Q) to produce: 10 units or 12 units. The profit for each firm is given in the table as (Profit for Firm A, Profit for Firm B) . -Refer to Table 17-18.If these two firms play this game repeatedly,the likely outcome will be A) 10 units of output for Firm A and 10 units of output for Firm B. B) 10 units of output for Firm A and 12 units of output for Firm B. C) 12 units of output for Firm A and 10 units of output for Firm B. D) 12 units of output for Firm A and 12 units of output for Firm B. -Refer to Table 17-18.If these two firms play this game repeatedly,the likely outcome will be


A) 10 units of output for Firm A and 10 units of output for Firm B.
B) 10 units of output for Firm A and 12 units of output for Firm B.
C) 12 units of output for Firm A and 10 units of output for Firm B.
D) 12 units of output for Firm A and 12 units of output for Firm B.

E) A) and B)
F) None of the above

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Table 17-21 The Chicken Game is named for a contest in which drivers test their courage by driving straight at each other. John and Paul have a common interest to avoid crashing into each other, but they also have a personal, competing interest to not turn first to demonstrate their courage to those observing the contest. The payoff table for this situation is provided below. The payoffs are shown as (John, Paul) . Table 17-21 The Chicken Game is named for a contest in which drivers test their courage by driving straight at each other. John and Paul have a common interest to avoid crashing into each other, but they also have a personal, competing interest to not turn first to demonstrate their courage to those observing the contest. The payoff table for this situation is provided below. The payoffs are shown as (John, Paul) . -Refer to Table 17-21.What is Paul's dominant strategy? A) Paul has no dominant strategy. B) Paul should always choose Turn. C) Paul should always choose Drive Straight. D) Paul has more than one dominant strategy. -Refer to Table 17-21.What is Paul's dominant strategy?


A) Paul has no dominant strategy.
B) Paul should always choose Turn.
C) Paul should always choose Drive Straight.
D) Paul has more than one dominant strategy.

E) B) and C)
F) A) and C)

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