Question 1

Tacit collusion

Accepted Answer

A)  is legal under the U.S. antitrust laws. 
B)  occurs when firms engage in formal agreements to reduce output and increase prices in their industry. 
C)  is more likely to be successful in increasing industry profits when there are a few, similar firms in the industry. 
D)  is more likely to effectively raise prices in the industry when demand is elastic. 
A)  is legal under the U.S. antitrust laws. 
B)  occurs when firms engage in formal agreements to reduce output and increase prices in their industry. 
C)  is more likely to be successful in increasing industry profits when there are a few, similar firms in the industry. 
D)  is more likely to effectively raise prices in the industry when demand is elastic.

Question 2

Under the collusion model, the outcome in an oligopoly is the same as a monopoly.

Accepted Answer

A) True 
 B)False

Question 3

An oligopoly with a dominant price leader will produce a level of output between that which would prevail under competition and that which a monopolist would choose in the same industry.

Accepted Answer

A) True 
 B)False

Question 4

A player chooses a maximin strategy to ________ gain the player can earn.

Accepted Answer

A)  minimize the minimum 
B)  maximize the maximum 
C)  maximize the minimum 
D)  minimize the maximum 
A)  minimize the minimum 
B)  maximize the maximum 
C)  maximize the minimum 
D)  minimize the maximum

Question 5

If the Herfindahl-Hirschman Index of an industry is greater than 1,800, then the Antitrust Division of the Justice Department

Accepted Answer

A)  will not challenge any merger. 
B)  considers the industry unconcentrated. 
C)  considers the industry moderately concentrated. 
D)  will challenge any merger that raises the index by more than 50 points. 
A)  will not challenge any merger. 
B)  considers the industry unconcentrated. 
C)  considers the industry moderately concentrated. 
D)  will challenge any merger that raises the index by more than 50 points.

Question 6

The Five Forces Model illustrates the forces that determine the level of product differentiation and price competition in an industry.

Accepted Answer

A) True 
 B)False

Question 7

The demand curve facing a dominant firm in the ________ model is derived by subtracting the amount supplied by the smaller firms from market demand.

Accepted Answer

A)  price leadership 
B)  Cournot 
C)  cartel 
D)  collusion 
A)  price leadership 
B)  Cournot 
C)  cartel 
D)  collusion

Question 8

In general, oligopolists compete

Accepted Answer

A)  on price alone. 
B)  on many dimensions except for price. 
C)  on price, R&D, and marketing and advertising. 
D)  None of the above. There is no competition in oligopolistic industries. 
A)  on price alone. 
B)  on many dimensions except for price. 
C)  on price, R&D, and marketing and advertising. 
D)  None of the above. There is no competition in oligopolistic industries.

Question 9

If there are four firms in an industry and each has a 25 percent market share, then the Herfindahl-Hirschman Index equals

Accepted Answer

A)  2,500. 
B)  2,800. 
C)  5,000. 
D)  6,600. 
A)  2,500. 
B)  2,800. 
C)  5,000. 
D)  6,600.

Question 10

The oligopolistic model in which firms produce exactly the same results as would exist if a monopolist controlled the entire industry is called the ________ model.

Accepted Answer

A)  Cournot 
B)  price leadership 
C)  maximin strategy 
D)  collusion 
A)  Cournot 
B)  price leadership 
C)  maximin strategy 
D)  collusion

Question 11

Oligopolists have market power.

Accepted Answer

A) True 
 B)False

Question 12

In an oligopolistic industry, the price firms charge and the quantity they produce would be the same as if the industry were a monopoly if

Accepted Answer

A)  the market is contestable. 
B)  the oligopolists behave as Cournot assumed. 
C)  one of the oligopolists acts as a dominant firm price leader. 
D)  the oligopolists collude. 
A)  the market is contestable. 
B)  the oligopolists behave as Cournot assumed. 
C)  one of the oligopolists acts as a dominant firm price leader. 
D)  the oligopolists collude.

Question 13

The ________ is the share of industry output in sales or employment accounted for by the top firms in an industry.

Accepted Answer

A)  concentration ratio 
B)  contestability ratio 
C)  competitive index 
D)  collusive level 
A)  concentration ratio 
B)  contestability ratio 
C)  competitive index 
D)  collusive level

Question 14

Evidence generally suggests that oligopolies inhibit technological advances.

Accepted Answer

A) True 
 B)False

Question 15

A(n) ________ industry has a single, unique product and blocked entry.

Accepted Answer

A)  perfectly competitive 
B)  monopolistically competitive 
C)  monopolistic 
D)  oligopolistic 
A)  perfectly competitive 
B)  monopolistically competitive 
C)  monopolistic 
D)  oligopolistic

Question 16

An oligopoly with a dominant price leader will produce an output level that is ________ than the output level that would prevail if the industry were a monopoly and sells it at a price that is ________ than the price that would prevail if the industry were a monopoly.

Accepted Answer

A)  higher; higher 
B)  higher; lower 
C)  lower; lower 
D)  lower; higher 
A)  higher; higher 
B)  higher; lower 
C)  lower; lower 
D)  lower; higher

Question 17

Which model of oligopoly results in the greatest efficiency?

Accepted Answer

A)  contestable markets model 
B)  Cournot model 
C)  price leadership model 
D)  collusion model 
A)  contestable markets model 
B)  Cournot model 
C)  price leadership model 
D)  collusion model

Question 18

Traditionally, the airline industry has competed vigorously on price.

Accepted Answer

A) True 
 B)False

Question 19

Economists no longer attack industry concentration with the same fervor they once did because

Accepted Answer

A)  even firms in highly concentrated industries can be pushed to produce efficiently under certain market circumstances. 
B)  the benefits of product differentiation and product competition are illusory. 
C)  small firms do the most research in the United States. 
D)  substantial economies of scale result in completely competitive market structures. 
A)  even firms in highly concentrated industries can be pushed to produce efficiently under certain market circumstances. 
B)  the benefits of product differentiation and product competition are illusory. 
C)  small firms do the most research in the United States. 
D)  substantial economies of scale result in completely competitive market structures.

Question 20

In the Cournot model, each firm's ________ shows the firm's optimal, profit-maximizing output given its rival's output.

Accepted Answer

A)  price leadership decision 
B)  reaction function 
C)  collusive response 
D)  dominant strategy 
A)  price leadership decision 
B)  reaction function 
C)  collusive response 
D)  dominant strategy

Exam 14: Oligopoly

Tacit collusion

Under the collusion model, the outcome in an oligopoly is the same as a monopoly.

An oligopoly with a dominant price leader will produce a level of output between that which would prevail under competition and that which a monopolist would choose in the same industry.

A player chooses a maximin strategy to ________ gain the player can earn.

If the Herfindahl-Hirschman Index of an industry is greater than 1,800, then the Antitrust Division of the Justice Department

The Five Forces Model illustrates the forces that determine the level of product differentiation and price competition in an industry.

The demand curve facing a dominant firm in the ________ model is derived by subtracting the amount supplied by the smaller firms from market demand.

In general, oligopolists compete

If there are four firms in an industry and each has a 25 percent market share, then the Herfindahl-Hirschman Index equals

The oligopolistic model in which firms produce exactly the same results as would exist if a monopolist controlled the entire industry is called the ________ model.

Oligopolists have market power.

In an oligopolistic industry, the price firms charge and the quantity they produce would be the same as if the industry were a monopoly if

The ________ is the share of industry output in sales or employment accounted for by the top firms in an industry.

Evidence generally suggests that oligopolies inhibit technological advances.

A(n) ________ industry has a single, unique product and blocked entry.

An oligopoly with a dominant price leader will produce an output level that is ________ than the output level that would prevail if the industry were a monopoly and sells it at a price that is ________ than the price that would prevail if the industry were a monopoly.

Which model of oligopoly results in the greatest efficiency?

Traditionally, the airline industry has competed vigorously on price.

Economists no longer attack industry concentration with the same fervor they once did because

In the Cournot model, each firm's ________ shows the firm's optimal, profit-maximizing output given its rival's output.

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand, Supply, and Market Equilibrium

Demand and Supply Applications

Elasticity

Household Behavior and Consumer Choice

The Production Process: the Behavior of Profit-Maximizing Firms

Short-Run Costs and Output Decisions

Long-Run Costs and Output Decisions

Input Demand: the Labor and Land Markets

Input Demand: the Capital Market and the Investment Decision

General Equilibrium and the Efficiency of Perfect Competition

Monopoly and Antitrust Policy

Monopolistic Competition

Externalities, Public Goods, and Common Resources

Uncertainty and Asymmetric Information

Income Distribution and Poverty

Public Finance: the Economics of Taxation

International Trade, Comparative Advantage, and Protectionism

Economic Growth in Developing Economies

Critical Thinking About Research

Filters

An oligopoly with a dominant price leader will produce an output level that is than the output level that would prevail if the industry were a monopoly and sells it at a price that is than the price that would prevail if the industry were a monopoly.