Question 1

The concentration ratio measures the

Accepted Answer

A) Number of plants owned by an oligopoly. 
B) Percentage of total profits made by a firm in a specific market. 
C) Proportion of total output produced by the largest firms in a specific market. 
D) Relative size of a firm compared to other industries. 
A) Number of plants owned by an oligopoly. 
B) Percentage of total profits made by a firm in a specific market. 
C) Proportion of total output produced by the largest firms in a specific market. 
D) Relative size of a firm compared to other industries.

Question 2

The only market structure in which there is significant interdependence among firms with regard to their pricing and output decisions is

Accepted Answer

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

Question 3

The number of firms in an oligopoly must be

Accepted Answer

A) Four. 
B) Large enough so that firms cannot coordinate. 
C) Small enough so that one firm's decisions have a significant impact on the decisions of the other firms in the industry. 
D) Small enough so that revenues are large enough to support advertising expenditures. 
A) Four. 
B) Large enough so that firms cannot coordinate. 
C) Small enough so that one firm's decisions have a significant impact on the decisions of the other firms in the industry. 
D) Small enough so that revenues are large enough to support advertising expenditures.

Question 4

Adding together the market share of the largest firms in an industry results in the concentration ratio for a market.

Accepted Answer

A) True 
 B)False

Question 5

The kinked demand curve demonstrates that if an oligopolist raises its prices,it is likely to gain market share.

Accepted Answer

A) True 
 B)False

Question 6

The correct ranking of degree of market power (from highest to lowest)is

Accepted Answer

A) Monopoly,monopolistic competition,perfect competition,oligopoly. 
B) Monopoly,monopolistic competition,oligopoly,perfect competition. 
C) Monopoly,oligopoly,monopolistic competition,perfect competition. 
D) Oligopoly,monopoly,monopolistic competition,perfect competition. 
A) Monopoly,monopolistic competition,perfect competition,oligopoly. 
B) Monopoly,monopolistic competition,oligopoly,perfect competition. 
C) Monopoly,oligopoly,monopolistic competition,perfect competition. 
D) Oligopoly,monopoly,monopolistic competition,perfect competition.

Question 7

The pricing strategy in which there is an explicit agreement among producers regarding price is called

Accepted Answer

A) Price discrimination. 
B) Price-fixing. 
C) Price leadership. 
D) Marginal cost pricing. 
A) Price discrimination. 
B) Price-fixing. 
C) Price leadership. 
D) Marginal cost pricing.

Question 8

Small firms can never achieve market power.

Accepted Answer

A) True 
 B)False

Question 9

Sky-High Skywriters temporarily reduces its price when a new firm called The Sky's the Limit Skywriting enters the industry.Sky-High Skywriters is practicing

Accepted Answer

A) Retaliation. 
B) Price leadership. 
C) Predatory pricing. 
D) Cartel pricing. 
A) Retaliation. 
B) Price leadership. 
C) Predatory pricing. 
D) Cartel pricing.

Question 10

The joint and individual interests of oligopolists are to maximize industry profit.

Accepted Answer

A) True 
 B)False

Question 11

A contestable market is

Accepted Answer

A) A perfectly competitive market. 
B) An imperfectly competitive situation that is subject to entry. 
C) An imperfectly competitive situation with high barriers to entry. 
D) A market with only one producer. 
A) A perfectly competitive market. 
B) An imperfectly competitive situation that is subject to entry. 
C) An imperfectly competitive situation with high barriers to entry. 
D) A market with only one producer.

Question 12

The goal of a company in an oligopoly industry is to

Accepted Answer

A) Increase market share and profits. 
B) Obtain the highest price possible. 
C) Always follow rivals if they raise price. 
D) Be the market leader in innovation. 
A) Increase market share and profits. 
B) Obtain the highest price possible. 
C) Always follow rivals if they raise price. 
D) Be the market leader in innovation.

Question 13

Since there are many college bookstores in the United States,college bookstores have no power to influence book prices on campus.

Accepted Answer

A) True 
 B)False

Question 14

Which market structure is characterized by a few interdependent firms?

Accepted Answer

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

Question 15

What is the most likely response by rivals when an oligopolist cuts its price to increase its sales?

Accepted Answer

A) Raise their prices. 
B) Ignore the change. 
C) Cut their prices. 
D) Reduce their costs. 
A) Raise their prices. 
B) Ignore the change. 
C) Cut their prices. 
D) Reduce their costs.

Question 16

Suppose the larger firm of a duopoly has sales of $900 million and the smaller firm has sales of $100 million.The market share of the larger firm is

Accepted Answer

A) 90 percent. 
B) 80 percent. 
C) 10 percent. 
D) 20 percent. 
A) 90 percent. 
B) 80 percent. 
C) 10 percent. 
D) 20 percent.

Question 17

Refer to Figure 25.1 for an oligopoly firm.Assume that the existing price and quantity are $10 and 2,000 units.Which of the following statements is most likely correct?

Accepted Answer

A) Demand curves D1 and D2 both assume that rivals will not match any price changes. 
B) Demand curves D1 and D2 both assume that rivals match any price changes. 
C) Demand curve D1 assumes that rivals match any price changes. 
D) Demand curve D2 assumes that rivals match any price changes. 
A) Demand curves D1 and D2 both assume that rivals will not match any price changes. 
B) Demand curves D1 and D2 both assume that rivals match any price changes. 
C) Demand curve D1 assumes that rivals match any price changes. 
D) Demand curve D2 assumes that rivals match any price changes.

Question 18

In an oligopolistic market structure,other firms will not notice if one firm experiences increased sales.

Accepted Answer

A) True 
 B)False

Question 19

Table 25.1 $\quad $$\quad $$\quad $$\quad $$\quad $$\quad $$\quad $$\quad $$\quad $$\quad $$\quad $$\quad $$\quad $$\quad $$\text { Company XYZ's Possible Responses }$
$\begin{array} { | l | c | c | } 
\hline \text { Company ABC's Action } & \text { Charge hiph Prices } & \text { Charge low Prices } \
\hline \text { Charge hiph Prices } & \text { Profit gair/loss= } \$ 0 & \text { Profit loss } = \$ 5,000 \
\hline \text { Charge low Prices } & \text { Profit gain= } \$ 50,000 & \text { Profit loss } = \$ 500 \
\hline
\end{array}$ Given the payoff matrix in Table 25.1,if the probability of rivals matching a price reduction is 99 percent,what is the expected payoff for a price cut by Company ABC?

Accepted Answer

A) $0. 
B) $5. 
C) -$500. 
D) -$5,000. 
A) $0. 
B) $5. 
C) -$500. 
D) -$5,000.

Question 20

Which one of the following is not a danger of experimenting with pricing for an oligopoly?

Accepted Answer

A) Retaliation. 
B) Firms matching price reductions. 
C) The uncertainty of competitor response. 
D) Product differentiation. 
A) Retaliation. 
B) Firms matching price reductions. 
C) The uncertainty of competitor response. 
D) Product differentiation.

Exam 25: Oligopoly

The concentration ratio measures the

The only market structure in which there is significant interdependence among firms with regard to their pricing and output decisions is

The number of firms in an oligopoly must be

Adding together the market share of the largest firms in an industry results in the concentration ratio for a market.

The kinked demand curve demonstrates that if an oligopolist raises its prices,it is likely to gain market share.

The correct ranking of degree of market power (from highest to lowest)is

The pricing strategy in which there is an explicit agreement among producers regarding price is called

Small firms can never achieve market power.

Sky-High Skywriters temporarily reduces its price when a new firm called The Sky's the Limit Skywriting enters the industry.Sky-High Skywriters is practicing

The joint and individual interests of oligopolists are to maximize industry profit.

A contestable market is

The goal of a company in an oligopoly industry is to

Since there are many college bookstores in the United States,college bookstores have no power to influence book prices on campus.

Which market structure is characterized by a few interdependent firms?

What is the most likely response by rivals when an oligopolist cuts its price to increase its sales?

Suppose the larger firm of a duopoly has sales of $900 million and the smaller firm has sales of $100 million.The market share of the larger firm is

Refer to Figure 25.1 for an oligopoly firm.Assume that the existing price and quantity are $10 and 2,000 units.Which of the following statements is most likely correct?

In an oligopolistic market structure,other firms will not notice if one firm experiences increased sales.

Which one of the following is not a danger of experimenting with pricing for an oligopoly?

Economics: the Core Issues

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National Income Accounting

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Aggregate Demand

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Growth and Productivity: Long-Run Possibilities

Theory Versus Reality

Consumer Choice

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The Competitive Firm

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Monopoly

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Natural Monopolies: Deregulation

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