Question 1

A problem with using the judgment by performance criterion is that:

Accepted Answer

A)  it is difficult to determine the relevant market. 
B)  it is difficult to determine the relevant industry. 
C)  each action of a firm must be analyzed separately and within a particular context. 
D)  the court must decide whether to use concentration ratios or the Herfindahl index. 
A)  it is difficult to determine the relevant market. 
B)  it is difficult to determine the relevant industry. 
C)  each action of a firm must be analyzed separately and within a particular context. 
D)  the court must decide whether to use concentration ratios or the Herfindahl index. C

Question 2

A market structure in which there are a few interdependent firms is called:

Accepted Answer

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

Question 3

The cartel model of oligopoly assumes that:

Accepted Answer

A)  monopolists sometimes act like oligopolists when they pit divisions of the same corporation against one other. 
B)  oligopolies act as if they are perfectly competitive when there are no barriers to entry. 
C)  oligopolies act as if they are monopolists by assigning output quotas to each member so that joint profits are maximized. 
D)  oligopolies act as if they are monopolists by setting prices competitively for each member. 
A)  monopolists sometimes act like oligopolists when they pit divisions of the same corporation against one other. 
B)  oligopolies act as if they are perfectly competitive when there are no barriers to entry. 
C)  oligopolies act as if they are monopolists by assigning output quotas to each member so that joint profits are maximized. 
D)  oligopolies act as if they are monopolists by setting prices competitively for each member. C

Question 4

When judging the competitiveness of markets by the behavior of firms in that market, one is using the:

Accepted Answer

A)  "judgment by performance" criteria. 
B)  "judgment by structure" criteria. 
C)  "judgment by merger" criteria. 
D)  "judgment by antitrust" criteria. 
A)  "judgment by performance" criteria. 
B)  "judgment by structure" criteria. 
C)  "judgment by merger" criteria. 
D)  "judgment by antitrust" criteria.

Question 5

Network externalities create a push toward:

Accepted Answer

A)  natural monopoly. 
B)  government deregulation. 
C)  foreign competition. 
D)  perfect competition. 
A)  natural monopoly. 
B)  government deregulation. 
C)  foreign competition. 
D)  perfect competition.

Question 6

To be successful in increasing prices for their product, members of a cartel:

Accepted Answer

A)  do not talk to one another. 
B)  limit output. 
C)  encourage entry. 
D)  engage in predatory pricing. 
A)  do not talk to one another. 
B)  limit output. 
C)  encourage entry. 
D)  engage in predatory pricing.

Question 7

Platform monopolies can undermine competitive markets because they:

Accepted Answer

A)  increase the amount of information available to the market. 
B)  decrease the amount of information available to the market. 
C)  asymmetrically increase the amount of information available to the market. 
D)  symmetrically increase the amount of information available to the market. 
A)  increase the amount of information available to the market. 
B)  decrease the amount of information available to the market. 
C)  asymmetrically increase the amount of information available to the market. 
D)  symmetrically increase the amount of information available to the market.

Question 8

Refer to the table shown. Using the four-firm concentration ratio, the tire industry is best categorized as: $$\begin{array} { | c | c | c | } 
\hline \text { Industry } & \begin{array} { c } 
\text { Number of } \
\text { sellers }
\end{array} & \begin{array} { c } 
\text { \% of shipments accuunted far by the } 4 \
\text { larget comnanies }
\end{array} \
\hline \text { Tires } & 15 & 95 \
\hline \begin{array} { c } 
\text { Upholstered } \
\text { furniture }
\end{array} & 2,000 & 15 \
\hline
\end{array}$$

Accepted Answer

A)  perfectly competitive. 
B)  a pure monopoly. 
C)  monopolistically competitive. 
D)  oligopolistic. 
A)  perfectly competitive. 
B)  a pure monopoly. 
C)  monopolistically competitive. 
D)  oligopolistic.

Question 9

In the Standard Oil antitrust case in 1911, the Court ruled that the:

Accepted Answer

A)  company had a monopolistic structure and therefore should be broken up. 
B)  company was guilty of unfair business practices and therefore should be broken up. 
C)  Sherman Antitrust Act did not apply. 
D)  company had to be disbanded. 
A)  company had a monopolistic structure and therefore should be broken up. 
B)  company was guilty of unfair business practices and therefore should be broken up. 
C)  Sherman Antitrust Act did not apply. 
D)  company had to be disbanded.

Question 10

A problem in using the judgment by market structure criterion is that:

Accepted Answer

A)  each action of a firm must be analyzed separately and within a particular context. 
B)  it is difficult to determine the relevant industry and geographic market. 
C)  it is an expensive and time-consuming standard. 
D)  it is the most subjective standard. 
A)  each action of a firm must be analyzed separately and within a particular context. 
B)  it is difficult to determine the relevant industry and geographic market. 
C)  it is an expensive and time-consuming standard. 
D)  it is the most subjective standard.

Question 11

Suppose an oligopolistic firm assumes that its rivals will ignore a price increase but match a price cut. In this case, the firm perceives its demand curve to be:

Accepted Answer

A)  kinked, being steeper above the going price than below. 
B)  kinked, being steeper below the going price than above. 
C)  linear, being less elastic at lower prices. 
D)  linear, being more elastic at higher prices. 
A)  kinked, being steeper above the going price than below. 
B)  kinked, being steeper below the going price than above. 
C)  linear, being less elastic at lower prices. 
D)  linear, being more elastic at higher prices.

Question 12

Several firms are operating in a market where they take the other firms' response to their actions into account. This market is:

Accepted Answer

A)  a competitive market. 
B)  a monopolistically competitive market. 
C)  an oligopolistic market. 
D)  a monopoly. 
A)  a competitive market. 
B)  a monopolistically competitive market. 
C)  an oligopolistic market. 
D)  a monopoly.

Question 13

In breaking up the Standard Oil Company, the U.S. Supreme Court established that a company's violation of the Sherman Antitrust Act was determined by:

Accepted Answer

A)  the structure of the industry. 
B)  whether or not the firm engaged in "unfair business practices." 
C)  the percentage of the market controlled by the firm. 
D)  concentration ratios. 
A)  the structure of the industry. 
B)  whether or not the firm engaged in "unfair business practices." 
C)  the percentage of the market controlled by the firm. 
D)  concentration ratios.

Question 14

Oligopolistic firms:

Accepted Answer

A)  may seek to drive competitors out of business for personal reasons, even at great expense. 
B)  would not drive competitors out of business to gain control of the market. 
C)  know that their competitors pay no attention to their pricing decisions and therefore hope to gain market share by lowering price. 
D)  do not pay attention to a competitor's prices because there's nothing they can do about them. 
A)  may seek to drive competitors out of business for personal reasons, even at great expense. 
B)  would not drive competitors out of business to gain control of the market. 
C)  know that their competitors pay no attention to their pricing decisions and therefore hope to gain market share by lowering price. 
D)  do not pay attention to a competitor's prices because there's nothing they can do about them.

Question 15

Cartels are organizations that:

Accepted Answer

A)  keep markets contestable. 
B)  encourage price wars. 
C)  coordinate the output and pricing decisions of a group of firms. 
D)  use predatory pricing to monopolize industries. 
A)  keep markets contestable. 
B)  encourage price wars. 
C)  coordinate the output and pricing decisions of a group of firms. 
D)  use predatory pricing to monopolize industries.

Question 16

In 1996, Archer Daniels Midland Company was found guilty of fixing the price of lysine. This is an example of:

Accepted Answer

A)  judgment by performance. 
B)  judgment by structure. 
C)  judgment by design. 
D)  judgment that is not part of U.S. antitrust policy. 
A)  judgment by performance. 
B)  judgment by structure. 
C)  judgment by design. 
D)  judgment that is not part of U.S. antitrust policy.

Question 17

An industry in which 5 firms each have a 10 percent market share and 50 firms each have a 1 percent market share will have a Herfindahl index equal to:

Accepted Answer

A)  500. 
B)  550. 
C)  1,100. 
D)  1,500. 
A)  500. 
B)  550. 
C)  1,100. 
D)  1,500.

Question 18

A cartel is:

Accepted Answer

A)  legal in the United States as long as collusion is explicit. 
B)  a group of firms that collude to maximize group profits. 
C)  found in monopolistically competitive industries. 
D)  a group of fringe firms. 
A)  legal in the United States as long as collusion is explicit. 
B)  a group of firms that collude to maximize group profits. 
C)  found in monopolistically competitive industries. 
D)  a group of fringe firms.

Question 19

Suppose there are no barriers to entry in the market for facial tissues, where two brands dominate the industry. According to the theory of contestable markets, the price charged for facial tissues will be:

Accepted Answer

A)  far below the cost of producing a box of facial tissue. 
B)  far above the cost of producing a box of facial tissue. 
C)  roughly equal to the cost of producing a box of facial tissue. 
D)  much higher for the number-one-selling brand than it is for the number-two-selling brand. 
A)  far below the cost of producing a box of facial tissue. 
B)  far above the cost of producing a box of facial tissue. 
C)  roughly equal to the cost of producing a box of facial tissue. 
D)  much higher for the number-one-selling brand than it is for the number-two-selling brand.

Question 20

Suppose an industry has a four-firm concentration ratio of 20 percent and a Herfindahl index of 600. According to the cartel model, the industry would be more likely to have:

Accepted Answer

A)  a monopolistic price. 
B)  a competitive price. 
C)  either a monopolistic or a competitive price, depending on barriers to entry and exit. 
D)  a price war. 
A)  a monopolistic price. 
B)  a competitive price. 
C)  either a monopolistic or a competitive price, depending on barriers to entry and exit. 
D)  a price war.

Exam 15: Oligopoly and Antitrust Policy

A problem with using the judgment by performance criterion is that:

A market structure in which there are a few interdependent firms is called:

The cartel model of oligopoly assumes that:

When judging the competitiveness of markets by the behavior of firms in that market, one is using the:

Network externalities create a push toward:

To be successful in increasing prices for their product, members of a cartel:

Platform monopolies can undermine competitive markets because they:

Refer to the table shown. Using the four-firm concentration ratio, the tire industry is best categorized as: Industry Number of sellers \% of shipments accuunted far by the 4 larget comnanies Tires 15 95 Upholstered furniture 2,000 15

In the Standard Oil antitrust case in 1911, the Court ruled that the:

A problem in using the judgment by market structure criterion is that:

Suppose an oligopolistic firm assumes that its rivals will ignore a price increase but match a price cut. In this case, the firm perceives its demand curve to be:

Several firms are operating in a market where they take the other firms' response to their actions into account. This market is:

In breaking up the Standard Oil Company, the U.S. Supreme Court established that a company's violation of the Sherman Antitrust Act was determined by:

Oligopolistic firms:

Cartels are organizations that:

In 1996, Archer Daniels Midland Company was found guilty of fixing the price of lysine. This is an example of:

An industry in which 5 firms each have a 10 percent market share and 50 firms each have a 1 percent market share will have a Herfindahl index equal to:

A cartel is:

Suppose there are no barriers to entry in the market for facial tissues, where two brands dominate the industry. According to the theory of contestable markets, the price charged for facial tissues will be:

Suppose an industry has a four-firm concentration ratio of 20 percent and a Herfindahl index of 600. According to the cartel model, the industry would be more likely to have:

Economics and Economic Reasoning

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Economic Institutions

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Using Supply and Demand

Describing Supply and Demand: Elasticities

Taxation and Government Intervention

Market Failure Versus Government Failure

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Production and Cost Analysis I

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Perfect Competition

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Who Gets What the Distribution of Income

The Logic of Individual Choice: the Foundation of Supply and Demand

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