ECON 1002 WEEK 5 QUIZ – QUESTION AND ANSWERS

ECON 1002 WEEK 5 QUIZ – QUESTION AND ANSWERS • Question 1 3 out of 3 points An industry in which a small number of large firms sell products that are either close or perfect substitutes is: Selected Answer: an oligopoly. Correct Answer: an oligopoly. • Question 2 3 out of 3 points Which of the following characteristics distinguishes an imperfectly competitive industry from a perfectly competitive industry? Selected Answer: The ability of firms to set their own price. Correct Answer: The ability of firms to set their own price. • Question 3 0 out of 3 points As a result of economies of scale, as output expands: Selected Answer: fixed costs are decreasing. Correct Answer: average total costs are decreasing. • Question 4 3 out of 3 points Suppose when a firm produces 1,000 units their total costs equal $5 million. When they produce 2,000 units their total costs equal $9 million. Which of the following statements is true regarding this firm? Selected Answer: This firm is experiencing economies of scale. Correct Answer: This firm is experiencing economies of scale. • Question 5 3 out of 3 points Price discrimination occurs when: Selected Answer: a firm charges different prices to different consumers for essentially the same good or service. Correct Answer: a firm charges different prices to different consumers for essentially the same good or service. • Question 6 3 out of 3 points As a result of the hurdle method of price discrimination: Selected Answer: economic surplus increases. Correct Answer: economic surplus increases. • Question 7 0 out of 3 points Game theory helps to understand the behavior of firms: Selected Answer: that are strategically independent. Correct Answer: that are strategically interdependent. • Question 8 3 out of 3 points A strategy that yields a higher payoff no matter what the other players in the game choose is known as a: Selected Answer: dominant strategy. Correct Answer: dominant strategy. • Question 9 3 out of 3 points A prisoner's dilemma occurs when: Selected Answer: each player has a dominant strategy, and the payoff to each player is smaller than what it would be if each had chosen a dominated strategy. Correct Answer: each player has a dominant strategy, and the payoff to each player is smaller than what it would be if each had chosen a dominated strategy. • Question 10 3 out of 3 points A way of changing incentives so as to make promises credible is known as: Selected Answer: a commitment device. Correct Answer: a commitment device.