Question 1

If rival oligopolists completely ignore Mitchell's Tool Company's price changes,then Mitchell's Tool Company's

Accepted Answer

A) Demand curve will not have a kink. 
B) Most profitable strategy will be to raise its price. 
C) Demand curve will be less elastic than if rivals matched price changes. 
D) Demand and marginal revenue curves will be the same. 
A) Demand curve will not have a kink. 
B) Most profitable strategy will be to raise its price. 
C) Demand curve will be less elastic than if rivals matched price changes. 
D) Demand and marginal revenue curves will be the same. A

Question 2

In which of the following market structures are entry barriers the highest?

Accepted Answer

A) Perfect competition. 
B) Monopolistic competition. 
C) Oligopoly. 
D) Monopoly. 
A) Perfect competition. 
B) Monopolistic competition. 
C) Oligopoly. 
D) Monopoly. D

Question 3

Oligopolists have an incentive to coordinate price because with coordination

Accepted Answer

A) The demand for each firm's product is kinked. 
B) Each firm faces a perfectly inelastic demand for its product. 
C) The market demand curve is perfectly inelastic. 
D) Each firm faces a relatively inelastic demand for its product. 
A) The demand for each firm's product is kinked. 
B) Each firm faces a perfectly inelastic demand for its product. 
C) The market demand curve is perfectly inelastic. 
D) Each firm faces a relatively inelastic demand for its product. D

Question 4

General Electric and Westinghouse were convicted of

Accepted Answer

A) Price-fixing. 
B) Marginal cost pricing. 
C) Price leadership. 
D) Allocation of market shares. 
A) Price-fixing. 
B) Marginal cost pricing. 
C) Price leadership. 
D) Allocation of market shares.

Question 5

Predatory pricing is a permanent price reduction designed to alter market shares or drive out competition.

Accepted Answer

A) True 
 B)False

Question 6

Oligopoly is a type of industry in which firms are independent.

Accepted Answer

A) True 
 B)False

Question 7

The potential for maximizing total industry profits is greater in oligopolies than in perfect competition because

Accepted Answer

A) There are fewer firms and each is dependent on the actions of rivals. 
B) Firms in an oligopoly are more profitable. 
C) There are independent firms in an oligopoly. 
D) Perfectly competitive firms can easily cooperate to restrict supply. 
A) There are fewer firms and each is dependent on the actions of rivals. 
B) Firms in an oligopoly are more profitable. 
C) There are independent firms in an oligopoly. 
D) Perfectly competitive firms can easily cooperate to restrict supply.

Question 8

Price leadership

Accepted Answer

A) Typically results in greater instability in oligopolistic markets. 
B) Results in a more competitive market. 
C) Is common in perfectly competitive markets. 
D) Permits oligopolistic firms in a given market to coordinate market wide price changes. 
A) Typically results in greater instability in oligopolistic markets. 
B) Results in a more competitive market. 
C) Is common in perfectly competitive markets. 
D) Permits oligopolistic firms in a given market to coordinate market wide price changes.

Question 9

Which of the following may characterize a monopoly?

Accepted Answer

A) Substantial market power. 
B) Low barriers to entry. 
C) Many firms. 
D) Differentiated product. 
A) Substantial market power. 
B) Low barriers to entry. 
C) Many firms. 
D) Differentiated product.

Question 10

Temporary price reductions intended to alter market shares or drive out competition are referred to as

Accepted Answer

A) Predatory pricing. 
B) Price-fixing. 
C) Price leadership. 
D) Retaliation. 
A) Predatory pricing. 
B) Price-fixing. 
C) Price leadership. 
D) Retaliation.

Question 11

An attempt by one oligopolist to increase its market share by cutting prices will leave competitors unaffected.

Accepted Answer

A) True 
 B)False

Question 12

Market power can cause market failure if it results in a misallocation of resources.

Accepted Answer

A) True 
 B)False

Question 13

Market power is the ability of a firm to

Accepted Answer

A) Advertise. 
B) Act as a price taker. 
C) Control the price and quantity supplied. 
D) Increase the number of substitute goods. 
A) Advertise. 
B) Act as a price taker. 
C) Control the price and quantity supplied. 
D) Increase the number of substitute goods.

Question 14

The goal of an oligopoly is to maximize

Accepted Answer

A) Market share to achieve long-run economic profit. 
B) Short-run profit to achieve long-run maximum revenue. 
C) Short-run profit to achieve long-run market share. 
D) Profit in the short run and to minimize cost in the long run. 
A) Market share to achieve long-run economic profit. 
B) Short-run profit to achieve long-run maximum revenue. 
C) Short-run profit to achieve long-run market share. 
D) Profit in the short run and to minimize cost in the long run.

Question 15

If close substitutes are available that have only slight product differentiation,a firm can still be a monopoly.

Accepted Answer

A) True 
 B)False

Question 16

If all of your friends use the same instant messaging service provider,you are likely to use it too.This behavior may create

Accepted Answer

A) Cartels. 
B) Nonprice competition. 
C) A network economy. 
D) Distribution control. 
A) Cartels. 
B) Nonprice competition. 
C) A network economy. 
D) Distribution control.

Question 17

The shape of the demand curve facing an oligopolist depends on the responses of its rivals to a change in the price of its own output.

Accepted Answer

A) True 
 B)False

Question 18

Suppose there are three firms in a market.The largest firm has sales of $50 million,and each of the other two firms has sales of $25 million.The Herfindahl-Hirschman Index of this industry is

Accepted Answer

A) 2,500. 
B) 3,750. 
C) 2,550. 
D) 3,125. 
A) 2,500. 
B) 3,750. 
C) 2,550. 
D) 3,125.

Question 19

Which of the following is not a determinant of market power?

Accepted Answer

A) Number of producers. 
B) Availability of substitutes. 
C) Barriers to entry. 
D) Age of the industry. 
A) Number of producers. 
B) Availability of substitutes. 
C) Barriers to entry. 
D) Age of the industry.

Question 20

Product differentiation is used by an oligopoly in an effort to gain market share.

Accepted Answer

A) True 
 B)False

Exam 25: Oligopoly

If rival oligopolists completely ignore Mitchell's Tool Company's price changes,then Mitchell's Tool Company's

In which of the following market structures are entry barriers the highest?

Oligopolists have an incentive to coordinate price because with coordination

General Electric and Westinghouse were convicted of

Predatory pricing is a permanent price reduction designed to alter market shares or drive out competition.

Oligopoly is a type of industry in which firms are independent.

The potential for maximizing total industry profits is greater in oligopolies than in perfect competition because

Price leadership

Which of the following may characterize a monopoly?

Temporary price reductions intended to alter market shares or drive out competition are referred to as

An attempt by one oligopolist to increase its market share by cutting prices will leave competitors unaffected.

Market power can cause market failure if it results in a misallocation of resources.

Market power is the ability of a firm to

The goal of an oligopoly is to maximize

If close substitutes are available that have only slight product differentiation,a firm can still be a monopoly.

If all of your friends use the same instant messaging service provider,you are likely to use it too.This behavior may create

The shape of the demand curve facing an oligopolist depends on the responses of its rivals to a change in the price of its own output.

Suppose there are three firms in a market.The largest firm has sales of $50 million,and each of the other two firms has sales of $25 million.The Herfindahl-Hirschman Index of this industry is

Which of the following is not a determinant of market power?

Product differentiation is used by an oligopoly in an effort to gain market share.

Economics: the Core Issues

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