Question 1

A firm cannot maintain above-normal profits over the long run

Accepted Answer

A) Without the existence of a cartel. 
B) Unless barriers to entry exist. 
C) Unless predatory pricing occurs. 
D) Without retaliation occurring. 
A) Without the existence of a cartel. 
B) Unless barriers to entry exist. 
C) Unless predatory pricing occurs. 
D) Without retaliation occurring.

Question 2

Table 25.2 $$\begin{array} { | l | r | c | } 
\hline { \text { Pool Sweeper } } & \text { Output (Revenue) } & \text { Market Share (\%) } \
\hline \text { North Star } & \$ 20,000 & \
\hline \text { Hurricarne } & \$ 16,000 & \
\hline \text { Blue Lagoon } & \$ 2,000 & \
\hline \text { Clean Sweep } & \$ 2,000 & \
\hline
\end{array}$$ Refer to Table 25.2.Assume there are only four firms in the pool sweeper industry.The U.S.Justice Department would most likely

Accepted Answer

A) Allow a merger between North Star and Blue Lagoon. 
B) Allow a merger between Hurricane and Blue Lagoon. 
C) Allow a merger between Blue Lagoon and Clean Sweep. 
D) Not allow any mergers among firms in this industry. 
A) Allow a merger between North Star and Blue Lagoon. 
B) Allow a merger between Hurricane and Blue Lagoon. 
C) Allow a merger between Blue Lagoon and Clean Sweep. 
D) Not allow any mergers among firms in this industry.

Question 3

Oligopolists have a mutual interest in coordinating production decisions in order to maximize joint

Accepted Answer

A) Costs. 
B) Profits. 
C) Revenues. 
D) Market share. 
A) Costs. 
B) Profits. 
C) Revenues. 
D) Market share.

Question 4

Oligopolistic behavior includes

Accepted Answer

A) Tacit collusion. 
B) High concentration ratios. 
C) High barriers to entry. 
D) Independent pricing. 
A) Tacit collusion. 
B) High concentration ratios. 
C) High barriers to entry. 
D) Independent pricing.

Question 5

An industry's market structure refers to

Accepted Answer

A) The number and size of the firms in the industry. 
B) How much firms spend on advertising. 
C) What types of products are produced in that industry. 
D) Whether the market is a product market or a resource market. 
A) The number and size of the firms in the industry. 
B) How much firms spend on advertising. 
C) What types of products are produced in that industry. 
D) Whether the market is a product market or a resource market.

Question 6

Table 25.2 $$\begin{array} { | l | r | c | } 
\hline{ \text { Pool Sweeper } } & \text { Output (Revenue) } & \text { Market Share (\%) } \
\hline \text { North Star } & \$ 20,000 & \
\hline \text { Hurricarne } & \$ 16,000 & \
\hline \text { Blue Lagoon } & \$ 2,000 & \
\hline \text { Clean Sweep } & \$ 2,000 & \
\hline
\end{array}$$ Refer to Table 25.2.Assume there are only four firms in the pool sweeper industry.What is the market share for North Star?

Accepted Answer

A) 20 percent. 
B) 50 percent. 
C) 10 percent. 
D) 5 percent. 
A) 20 percent. 
B) 50 percent. 
C) 10 percent. 
D) 5 percent.

Question 7

The Herfindahl-Hirschman Index is

Accepted Answer

A) Used to identify cases worthy of antitrust concern. 
B) A barrier to entry. 
C) An example of government failure. 
D) A way to account for the combined market share of the top four firms. 
A) Used to identify cases worthy of antitrust concern. 
B) A barrier to entry. 
C) An example of government failure. 
D) A way to account for the combined market share of the top four firms.

Question 8

High training costs make it more costly for consumers to switch products.This is an example of

Accepted Answer

A) Contestable markets. 
B) Cartels. 
C) Government regulation. 
D) Barriers to entry. 
A) Contestable markets. 
B) Cartels. 
C) Government regulation. 
D) Barriers to entry.

Question 9

When a business advertises that its product has unique features that make it superior to other similar products,it is engaging in

Accepted Answer

A) Price competition. 
B) Predatory pricing. 
C) Product differentiation. 
D) Contestable market advertising. 
A) Price competition. 
B) Predatory pricing. 
C) Product differentiation. 
D) Contestable market advertising.

Question 10

The kinked demand curve explains

Accepted Answer

A) The consequences of the interdependent behavior of oligopolists. 
B) Why oligopolists are more sensitive to cost changes than are competitive markets. 
C) Price-fixing along the elastic part of the demand curve and predatory pricing on the inelastic portion. 
D) How an oligopoly can achieve monopoly profits. 
A) The consequences of the interdependent behavior of oligopolists. 
B) Why oligopolists are more sensitive to cost changes than are competitive markets. 
C) Price-fixing along the elastic part of the demand curve and predatory pricing on the inelastic portion. 
D) How an oligopoly can achieve monopoly profits.

Question 11

A kinked demand curve indicates that rival oligopolists match all

Accepted Answer

A) Increased advertising. 
B) Advertising reductions. 
C) Price increases. 
D) Price reductions. 
A) Increased advertising. 
B) Advertising reductions. 
C) Price increases. 
D) Price reductions.

Question 12

If a firm is producing at the kink in its demand curve and it decides to increase its price,according to the kinked demand model

Accepted Answer

A) It will gain market share. 
B) It will lose market share to the firms that do not follow the price increase. 
C) Its market share will not be affected. 
D) It will not gain market share but will definitely increase profits. 
A) It will gain market share. 
B) It will lose market share to the firms that do not follow the price increase. 
C) Its market share will not be affected. 
D) It will not gain market share but will definitely increase profits.

Question 13

The degree of market power exercised by a firm is related to all but

Accepted Answer

A) The number and proximity of competing firms. 
B) The price elasticity of demand for the firm's product. 
C) Its ability to influence the market price of its output. 
D) The age of the industry. 
A) The number and proximity of competing firms. 
B) The price elasticity of demand for the firm's product. 
C) Its ability to influence the market price of its output. 
D) The age of the industry.

Question 14

If a firm in an oligopoly expands its market share at prevailing prices,its competitors

Accepted Answer

A) Lose market share. 
B) Increase their market share. 
C) Ignore the expansion. 
D) Increase their profits. 
A) Lose market share. 
B) Increase their market share. 
C) Ignore the expansion. 
D) Increase their profits.

Question 15

Table 25.2 $$\begin{array} { | l | r | c | } 
\hline  { \text { Pool Sweeper } } & \text { Output (Revenue) } & \text { Market Share (\%) } \
\hline \text { North Star } & \$ 20,000 & \
\hline \text { Hurricane } & \$ 16,000 & \
\hline \text { Blue Lagoon } & \$ 2,000 & \
\hline \text { Clean Sweep } & \$ 2,000 & \
\hline
\end{array}$$ Refer to Table 25.2.Assume there are only four firms in the pool sweeper industry.What is the market share for Blue Lagoon?

Accepted Answer

A) 20 percent. 
B) 50 percent. 
C) 10 percent. 
D) 5 percent. 
A) 20 percent. 
B) 50 percent. 
C) 10 percent. 
D) 5 percent.

Question 16

Explain how market power is measured.

Accepted Answer

The standard measure of market power is

Question 17

Colluding oligopolists face a conflict between maximizing joint market profit or their own market share.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following market structures is characterized by the absence of market power?

Accepted Answer

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

Question 19

The kinked demand curve explains the observation that in oligopoly markets

Accepted Answer

A) Rivals match price increases. 
B) Rivals do not match price reductions. 
C) Prices may not change even in the face of cost increases. 
D) Practice product differentiation. 
A) Rivals match price increases. 
B) Rivals do not match price reductions. 
C) Prices may not change even in the face of cost increases. 
D) Practice product differentiation.

Question 20

Why is there an emphasis on nonprice competition in oligopoly markets rather than on lowering prices to gain market share?

Accepted Answer

Oligopoly firms resist lowering prices b

Exam 25: Oligopoly

A firm cannot maintain above-normal profits over the long run

Table 25.2 Pool Sweeper Output (Revenue) Market Share (\%) North Star \ 20,000 Hurricarne \ 16,000 Blue Lagoon \ 2,000 Clean Sweep \ 2,000 Refer to Table 25.2.Assume there are only four firms in the pool sweeper industry.The U.S.Justice Department would most likely

Oligopolists have a mutual interest in coordinating production decisions in order to maximize joint

Oligopolistic behavior includes

An industry's market structure refers to

Table 25.2 Pool Sweeper Output (Revenue) Market Share (\%) North Star \ 20,000 Hurricarne \ 16,000 Blue Lagoon \ 2,000 Clean Sweep \ 2,000 Refer to Table 25.2.Assume there are only four firms in the pool sweeper industry.What is the market share for North Star?

The Herfindahl-Hirschman Index is

High training costs make it more costly for consumers to switch products.This is an example of

When a business advertises that its product has unique features that make it superior to other similar products,it is engaging in

The kinked demand curve explains

A kinked demand curve indicates that rival oligopolists match all

If a firm is producing at the kink in its demand curve and it decides to increase its price,according to the kinked demand model

The degree of market power exercised by a firm is related to all but

If a firm in an oligopoly expands its market share at prevailing prices,its competitors

Table 25.2 Pool Sweeper Output (Revenue) Market Share (\%) North Star \ 20,000 Hurricane \ 16,000 Blue Lagoon \ 2,000 Clean Sweep \ 2,000 Refer to Table 25.2.Assume there are only four firms in the pool sweeper industry.What is the market share for Blue Lagoon?

Explain how market power is measured.

Colluding oligopolists face a conflict between maximizing joint market profit or their own market share.

Which of the following market structures is characterized by the absence of market power?

The kinked demand curve explains the observation that in oligopoly markets

Why is there an emphasis on nonprice competition in oligopoly markets rather than on lowering prices to gain market share?

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