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Unformatted text preview: Name: ECO 3033 Quiz 2 Sample Obj active Questions PART I. TruefFalse l. A cartel is a group of ﬁrms that havejoined together to make agreements on pricing and market strategy. 2. There is a great difference between the profit maximization condtion for a centralized cartel and that for a
multiple-plant ﬁrm. 3. Price leadership occurs when specific ﬁrms in an oligopolistic group (perhaps even one firm) sets a price that
subsequently determines what other members of the grOup will charge. 4. In oligopoly, a ﬁrm facing a kinked demand curve will seldom wish to change prices.
5. A duopoly is a market characterized by just two sellers of a speciﬁc product. 6. In ajoint product problem with products (A and B) produced in ﬁxed proportions, proﬁt would be
maximized where MRA + MR3 = MC, provided that MR3 is negative. 7. Product differentiation refers to a wide variety of activities, such as design changes and advertising, that rival
firms employ to attract consumers to their products. PART 11. Multiple Choice 1. In a market characterized by dominant ﬁrm price leadership, a. the dominant ﬁrm accepts the price determined by the larger number of smaller ﬁrms. b. the smaller ﬁrms charge a lower price than that of the dominant ﬁrm. c. speciﬁc ﬁrms in an oligopolistic group (perhaps even one ﬁrm) set a price that
subsequently influences but does not determine what other members of the group will
charge. d. the market power ofthe price leading ﬁrm is almost never an issue. e. the large ﬁrm estimates the supply of the small ﬁrms. 2. An oligopoly ﬁrm is producing where price is greater than marginal cost. Which of the following should it
do to maximize proﬁt?
a. increase Output and raise price. contract output and lower price. leave output unchanged and lower price. increase output and lower price. not necessarily do any ofthe above, since it may already be maximizing proﬁt. cartel's marginal cost curve is the
highest of all the individual ﬁrms‘ marginal cost curves
lowest of all the individual ﬁrms' marginal cost curves
horizontal sum of all the individual ﬁrms‘ marginal cost curves
average of all the individual ﬁrms‘ marginal cost curves
average of the MC curves of the two members with highest cost (asuming there are
numerous other ﬁrms). oasga>cs=9§r Name: ID: A 4. The decision rule for maximizing proﬁts forjoint products is:
a. produce where the sum of marginal revenues for both products is equal to the total
marginal costs. b. produce where the sum of marginal revenues for both products is greater than the total
marginal costs. c. produce where the sum of marginal revenues for both products is less than the total
marginal costs. d. produce where the sum of marginal revenues for both products is equal to the total
marginal costs provided that the marginal revenue of neitherjoint product is negative. e. produce where the sum of marginal revenues for both products is equal to the total
marginal costs provided that the marginal revenue of only one of them is negative. 5. The pricing technique whereby a certain percentage of cost of goods sold or of price is added to the cost of
goods sold in order to obtain the market price is called: price discrimination.
retail pricing. 999.69 6. Collusion occurs when a ﬁrm chooses a level of output to maximize its own proﬁt
ﬁrms get together to enhance joint proﬁts ﬁrms refuse to follow their price leaders a firm entertains customers at golf resorts. two ﬁrms' price and output decisions come into conﬂict 7. If an oligopoly ﬁrm has multiple plants, it can maximize proﬁt by:
a. selling off all but one ofthern.
aliocating each plant the same quantity of output.
allocating the largest output to the plant with the highest ﬁxed cost. allocating the largest output to the plant with the highest variable cost.
allocating Output so that marginal cost is the same in all plants. seesaw» 951.057 Answer Section TRUE/FALSE MULTIPLE CHOICE
1. T 1. E
2. F 2. E
3. T 3. C
4. T 4. D
5. T 5. B
6. F 6. B
'z'. T 7. E ...
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- Spring '12