Question 1

What is the dilemma faced by firms in collusive agreement to restrict output and boost price?

Accepted Answer

Because there are just a few large firms

Question 2

A single firm in a contestable market is limited in the amount of economic profit it can earn because there

Accepted Answer

A)  are barriers to entry. 
B)  are no barriers to entry. 
C)  is collusion. 
D)  are government regulations limiting its profit. 
A)  are barriers to entry. 
B)  are no barriers to entry. 
C)  is collusion. 
D)  are government regulations limiting its profit.

Question 3

A cartel is a group of firms which agree to

Accepted Answer

A)  behave competitively. 
B)  raise the price of their product. 
C)  lower the price of their product. 
D)  increase the amount they produce. 
A)  behave competitively. 
B)  raise the price of their product. 
C)  lower the price of their product. 
D)  increase the amount they produce.

Question 4

If the Herfindahl-Hirschman Index (HHI) among the firms in the long distance telecommunications market is equal to 855, when would the Federal Trade Commission probably challenge a proposed merger between any two of the firms?

Accepted Answer

A)  It would challenge if the HHI would increase by more than 50 points. 
B)  It would challenge if the HHI would increase by more than 100 points. 
C)  It would challenge no matter what happened to the HHI because the market has so few firms. 
D)  It would not challenge because the HHI is less than 1500. 
A)  It would challenge if the HHI would increase by more than 50 points. 
B)  It would challenge if the HHI would increase by more than 100 points. 
C)  It would challenge no matter what happened to the HHI because the market has so few firms. 
D)  It would not challenge because the HHI is less than 1500.

Question 5

An oligopoly is a market structure in which there are

Accepted Answer

A)  only a few buyers but many sellers. 
B)  only a few sellers selling either an identical or differentiated product. 
C)  many sellers selling a differentiated product. 
D)  a few products sold by many sellers. 
A)  only a few buyers but many sellers. 
B)  only a few sellers selling either an identical or differentiated product. 
C)  many sellers selling a differentiated product. 
D)  a few products sold by many sellers.

Question 6

A group of firms that has entered into a collusive agreement to restrict output and increase prices and profits is called

Accepted Answer

A)  a compliance. 
B)  a cartel. 
C)  an oligopoly. 
D)  a duopoly. 
A)  a compliance. 
B)  a cartel. 
C)  an oligopoly. 
D)  a duopoly.

Question 7

Market share in the Widget industry  
-Using the market shares in the table above, if Big W wants to buy Widgette, the Federal Trade Commission will probably

Accepted Answer

A)  approve the merger because the industry is moderately concentrated and the increase in the Herfindahl-Hirschman index (HHI) is small enough. 
B)  block the merger because the industry is moderately concentrated (HHI between 1,500 and 2,500) and the increase in the HHI is too much. 
C)  approve the merger because the industry is highly concentrated (HHI exceeds 2,500) but the increase in the HHI is small enough. 
D)  block the merger because the industry is highly concentrated (HHI exceeds 2,500) and the increase in the HHI is too much. 
A)  approve the merger because the industry is moderately concentrated and the increase in the Herfindahl-Hirschman index (HHI) is small enough. 
B)  block the merger because the industry is moderately concentrated (HHI between 1,500 and 2,500) and the increase in the HHI is too much. 
C)  approve the merger because the industry is highly concentrated (HHI exceeds 2,500) but the increase in the HHI is small enough. 
D)  block the merger because the industry is highly concentrated (HHI exceeds 2,500) and the increase in the HHI is too much.

Question 8

If a duopolist's collusive price-fixing game can be played repeatedly,

Accepted Answer

A)  one possible equilibrium is that both firms cheat. 
B)  players can signal their willingness to cooperate. 
C)  players can punish cheaters in the following game. 
D)  All of the above answers are correct. 
A)  one possible equilibrium is that both firms cheat. 
B)  players can signal their willingness to cooperate. 
C)  players can punish cheaters in the following game. 
D)  All of the above answers are correct.

Question 9

Of the following, the best example of firm that might operate in a contestable market is a

Accepted Answer

A)  cable TV company. 
B)  wheat farmer. 
C)  ship owner operating on a major waterway. 
D)  private college operating in a state with many public colleges. 
A)  cable TV company. 
B)  wheat farmer. 
C)  ship owner operating on a major waterway. 
D)  private college operating in a state with many public colleges.

Question 10

A trigger strategy is one in which a player

Accepted Answer

A)  cooperates in the current period if the other player cooperated in the previous period, but cheats in the current period only if the other player cheated in the previous period. 
B)  cheats in the current period if the other player cooperated in the previous period, but cooperates in the current period if the other player cheated in the previous period. 
C)  cooperates in the current period if the other player has always cooperated, but cheats forever if the other player ever cheats. 
D)  cheats in the current period if the other player has always cheated, but cooperates forever if the other player has ever cooperated. 
A)  cooperates in the current period if the other player cooperated in the previous period, but cheats in the current period only if the other player cheated in the previous period. 
B)  cheats in the current period if the other player cooperated in the previous period, but cooperates in the current period if the other player cheated in the previous period. 
C)  cooperates in the current period if the other player has always cooperated, but cheats forever if the other player ever cheats. 
D)  cheats in the current period if the other player has always cheated, but cooperates forever if the other player has ever cooperated.

Question 11

A cartel is an arrangement

Accepted Answer

A)  to flood the market and eliminate competition. 
B)  to steal industrial processes from rival firms. 
C)  among firms to decrease output and raise price. 
D)  by the government to restrict imports. 
A)  to flood the market and eliminate competition. 
B)  to steal industrial processes from rival firms. 
C)  among firms to decrease output and raise price. 
D)  by the government to restrict imports.

Question 12

An market in which the Herfindahl-Hirschman Index (HHI) is 1,250 is considered to be

Accepted Answer

A)  an oligopoly. 
B)  monopolistically competitive. 
C)  a monopoly. 
D)  perfectly competitive. 
A)  an oligopoly. 
B)  monopolistically competitive. 
C)  a monopoly. 
D)  perfectly competitive.

Question 13

In oligopolistic markets,

Accepted Answer

A)  there are many firms. 
B)  there are no barriers to entry. 
C)  there are only a few firms. 
D)  all firms are price takers. 
A)  there are many firms. 
B)  there are no barriers to entry. 
C)  there are only a few firms. 
D)  all firms are price takers.

Question 14

Under Federal Trade Commission merger guidelines, an industry with a Herfindahl-Hirschman index (HHI) of 800 points is considered

Accepted Answer

A)  unconcentrated. 
B)  moderately concentrated. 
C)  concentrated. 
D)  a monopoly. 
A)  unconcentrated. 
B)  moderately concentrated. 
C)  concentrated. 
D)  a monopoly.

Question 15

Natural oligopoly is a situation where

Accepted Answer

A)  the level of demand can support only a few firms. 
B)  there is only one firm. 
C)  there are only two firms. 
D)  there are legal barriers to entry. 
A)  the level of demand can support only a few firms. 
B)  there is only one firm. 
C)  there are only two firms. 
D)  there are legal barriers to entry.

Question 16

In the prisoners' dilemma game, each player has only one possible strategy.

Accepted Answer

A) True 
 B)False

Question 17

Under current guidelines, the Federal Trade Commission will likely challenge

Accepted Answer

A)  all mergers if the Herfindahl-Hirschman index (HHI) is greater than 1500. 
B)  a merger if the HHI is between 1500 and 2500 and the merger increases the HHI by 50 points or more. 
C)  a merger if the HHI is between 1500 and 2500 and the merger increases the HHI by 100 points or more. 
D)  a merger if the HHI is below 1500 and the merger increases the HHI by less than 100 points. 
A)  all mergers if the Herfindahl-Hirschman index (HHI) is greater than 1500. 
B)  a merger if the HHI is between 1500 and 2500 and the merger increases the HHI by 50 points or more. 
C)  a merger if the HHI is between 1500 and 2500 and the merger increases the HHI by 100 points or more. 
D)  a merger if the HHI is below 1500 and the merger increases the HHI by less than 100 points.

Question 18

A natural oligopoly can form

Accepted Answer

A)  if there are economies of scale. 
B)  only if firms sell a differentiated good. 
C)  only if firms sell a homogeneous good. 
D)  if there is only one firm in the industry. 
A)  if there are economies of scale. 
B)  only if firms sell a differentiated good. 
C)  only if firms sell a homogeneous good. 
D)  if there is only one firm in the industry.

Question 19

A duopoly is a form of

Accepted Answer

A)  perfect competition. 
B)  monopolistic competition. 
C)  oligopoly. 
D)  monopoly. 
A)  perfect competition. 
B)  monopolistic competition. 
C)  oligopoly. 
D)  monopoly.

Question 20

Disney  
-Disney and Fox must decide when to release their next films. The revenues received by each studio depend in part on when the other studio releases its film. Each studio can release its film at Thanksgiving or at Christmas. The revenues received by each studio, in millions of dollars, are depicted in the payoff matrix above. Which of the following statements correctly describes Disney's strategy given what Fox's release choice may be?

Accepted Answer

A)  If Fox chooses a Thanksgiving release, Disney should choose a Christmas release. 
B)  If Fox chooses a Christmas release, Disney should choose a Thanksgiving release. 
C)  Disney should release on Thanksgiving regardless of what Fox does. 
D)  Both answers A and B are correct. 
A)  If Fox chooses a Thanksgiving release, Disney should choose a Christmas release. 
B)  If Fox chooses a Christmas release, Disney should choose a Thanksgiving release. 
C)  Disney should release on Thanksgiving regardless of what Fox does. 
D)  Both answers A and B are correct.

Exam 15: Oligopoly

What is the dilemma faced by firms in collusive agreement to restrict output and boost price?

A single firm in a contestable market is limited in the amount of economic profit it can earn because there

A cartel is a group of firms which agree to

If the Herfindahl-Hirschman Index (HHI) among the firms in the long distance telecommunications market is equal to 855, when would the Federal Trade Commission probably challenge a proposed merger between any two of the firms?

An oligopoly is a market structure in which there are

A group of firms that has entered into a collusive agreement to restrict output and increase prices and profits is called

Market share in the Widget industry -Using the market shares in the table above, if Big W wants to buy Widgette, the Federal Trade Commission will probably

If a duopolist's collusive price-fixing game can be played repeatedly,

Of the following, the best example of firm that might operate in a contestable market is a

A trigger strategy is one in which a player

A cartel is an arrangement

An market in which the Herfindahl-Hirschman Index (HHI) is 1,250 is considered to be

In oligopolistic markets,

Under Federal Trade Commission merger guidelines, an industry with a Herfindahl-Hirschman index (HHI) of 800 points is considered

Natural oligopoly is a situation where

In the prisoners' dilemma game, each player has only one possible strategy.

Under current guidelines, the Federal Trade Commission will likely challenge

A natural oligopoly can form

A duopoly is a form of

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Public Choices and Public Goods

Externalities and the Environment

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Extension A: Review

Extension B: Review

Extension C: Review

Extension D: Review

Extension E: Review

Extension F: Review

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