Question 1

There is only one firm in the market. The economist analyzing that market has said she would expect the price to equal the firm's average total costs.

Accepted Answer

A)  She must be analyzing this market using a contestable market model. 
B)  She must be analyzing this market using a game theory model. 
C)  She must be analyzing this market using a cartel model. 
D)  She must not be an economist, because that answer is clearly wrong. 
A)  She must be analyzing this market using a contestable market model. 
B)  She must be analyzing this market using a game theory model. 
C)  She must be analyzing this market using a cartel model. 
D)  She must not be an economist, because that answer is clearly wrong.

Question 2

The North American Industry Classification System (NAICS) categorizes firms by:

Accepted Answer

A)  market structure, ranking them from perfectly competitive to monopoly. 
B)  profits, since profits tend to be higher in more concentrated industries. 
C)  type of economic activity, and groups firms with like production processes. 
D)  market share, and groups firms with like market power. 
A)  market structure, ranking them from perfectly competitive to monopoly. 
B)  profits, since profits tend to be higher in more concentrated industries. 
C)  type of economic activity, and groups firms with like production processes. 
D)  market share, and groups firms with like market power.

Question 3

In which of the following models of firm behavior do firms make strategic pricing decisions and also charge a perfectly competitive price?

Accepted Answer

A)  Cartel model of oligopoly 
B)  Contestable market model of oligopoly 
C)  Perfectly competitive model 
D)  Monopoly model 
A)  Cartel model of oligopoly 
B)  Contestable market model of oligopoly 
C)  Perfectly competitive model 
D)  Monopoly model

Question 4

Implicit collusion occurs when oligopolistic firms negotiate a common price.

Accepted Answer

A) True 
 B)False

Question 5

The cartel model of oligopoly assumes that firms jointly behave as a monopolist in order to maximize joint profits.

Accepted Answer

A) True 
 B)False

Question 6

A firm could be guilty of antitrust violations using the judgment by structure criteria despite:

Accepted Answer

A)  pricing goods above the competitive price. 
B)  producing the best product it could at the lowest possible cost. 
C)  controlling only 10 percent of the market. 
D)  restraining trade through cartels. 
A)  pricing goods above the competitive price. 
B)  producing the best product it could at the lowest possible cost. 
C)  controlling only 10 percent of the market. 
D)  restraining trade through cartels.

Question 7

In a contestable market model of oligopoly, prices are determined by:

Accepted Answer

A)  costs and barriers to exit. 
B)  costs and barriers to entry. 
C)  costs, barriers to entry, and barriers to exit. 
D)  costs alone. 
A)  costs and barriers to exit. 
B)  costs and barriers to entry. 
C)  costs, barriers to entry, and barriers to exit. 
D)  costs alone.

Question 8

Under oligopoly:

Accepted Answer

A)  there are many sellers in the industry. 
B)  there are only a few sellers in the industry. 
C)  the demand for each firm's output is perfectly elastic. 
D)  there are no barriers to entry. 
A)  there are many sellers in the industry. 
B)  there are only a few sellers in the industry. 
C)  the demand for each firm's output is perfectly elastic. 
D)  there are no barriers to entry.

Question 9

Platform monopolies are most likely:

Accepted Answer

A)  natural monopolies. 
B)  contestable monopolies. 
C)  cartels. 
D)  perfect competitors. 
A)  natural monopolies. 
B)  contestable monopolies. 
C)  cartels. 
D)  perfect competitors.

Question 10

In a market, there are many firms selling differentiated products. 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 11

In the 1945 ALCOA case, the court used company performance rather than the structure of the market to determine whether the company was in violation of antitrust laws.

Accepted Answer

A) True 
 B)False

Question 12

An important law in the U.S. regulation of markets is the:

Accepted Answer

A)  Standard Oil Antitrust Act of 1890. 
B)  Sherman Antitrust Act of 1890. 
C)  Alcoa Antitrust Act of 1890. 
D)  Lincoln Antitrust Act of 1890. 
A)  Standard Oil Antitrust Act of 1890. 
B)  Sherman Antitrust Act of 1890. 
C)  Alcoa Antitrust Act of 1890. 
D)  Lincoln Antitrust Act of 1890.

Question 13

If an industry has exactly 20 firms with identical sales, the Herfindahl index must be:

Accepted Answer

A)  less than 100. 
B)  greater than 100 but less than 200. 
C)  greater than 200 but less than 400. 
D)  greater than 400. 
A)  less than 100. 
B)  greater than 100 but less than 200. 
C)  greater than 200 but less than 400. 
D)  greater than 400.

Question 14

When four Infineon Technologies executives participated in an international conspiracy to fix prices for computer memory chips, they were acting with other firms as:

Accepted Answer

A)  if they were in a contestable market. 
B)  if they faced kinked demand curve. 
C)  a cartel. 
D)  an industry with monopolistic competition. 
A)  if they were in a contestable market. 
B)  if they faced kinked demand curve. 
C)  a cartel. 
D)  an industry with monopolistic competition.

Question 15

Consumers of Google and Facebook services are disadvantaged because:

Accepted Answer

A)  consumers do not have accurate information to make decisions. 
B)  potential competitors are unable to develop new competing technologies. 
C)  consumers are given a service that is now free, but which will cost significant sums later. 
D)  the data Google and Facebook collect on users is a barrier to entry to new competition. 
A)  consumers do not have accurate information to make decisions. 
B)  potential competitors are unable to develop new competing technologies. 
C)  consumers are given a service that is now free, but which will cost significant sums later. 
D)  the data Google and Facebook collect on users is a barrier to entry to new competition.

Question 16

Which of the following market structures is characterized by interdependent pricing and output decisions?

Accepted Answer

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

Question 17

Which of the following is a reason why American ideology regarding antitrust policy has changed over the past few decades?

Accepted Answer

A)  Fewer foreign firms face restrictions in their home countries. 
B)  Fewer Americans are involved in the political process. 
C)  More Americans are stockholders and benefit from monopolies. 
D)  More foreign producers provide competition for domestic producers. 
A)  Fewer foreign firms face restrictions in their home countries. 
B)  Fewer Americans are involved in the political process. 
C)  More Americans are stockholders and benefit from monopolies. 
D)  More foreign producers provide competition for domestic producers.

Question 18

The Herfindahl index is calculated by adding the squared value of the market shares of all the firms in the industry.

Accepted Answer

A) True 
 B)False

Question 19

The top four firms in the industry have 10 percent, 8 percent, 8 percent, and 6 percent of the market. The Herfindahl index of this market is closest to which of the following?

Accepted Answer

A)  8 
B)  32 
C)  66 
D)  264 
A)  8 
B)  32 
C)  66 
D)  264

Question 20

Platform monopolies initially make large losses because they:

Accepted Answer

A)  receive subsidies from government. 
B)  receive subsidies from other businesses. 
C)  are trying to gain market share as quickly as possible. 
D)  have to hire high-salary tech employees. 
A)  receive subsidies from government. 
B)  receive subsidies from other businesses. 
C)  are trying to gain market share as quickly as possible. 
D)  have to hire high-salary tech employees.

Exam 15: Oligopoly and Antitrust Policy

There is only one firm in the market. The economist analyzing that market has said she would expect the price to equal the firm's average total costs.

The North American Industry Classification System (NAICS) categorizes firms by:

In which of the following models of firm behavior do firms make strategic pricing decisions and also charge a perfectly competitive price?

Implicit collusion occurs when oligopolistic firms negotiate a common price.

The cartel model of oligopoly assumes that firms jointly behave as a monopolist in order to maximize joint profits.

A firm could be guilty of antitrust violations using the judgment by structure criteria despite:

In a contestable market model of oligopoly, prices are determined by:

Under oligopoly:

Platform monopolies are most likely:

In a market, there are many firms selling differentiated products. This market is:

In the 1945 ALCOA case, the court used company performance rather than the structure of the market to determine whether the company was in violation of antitrust laws.

An important law in the U.S. regulation of markets is the:

If an industry has exactly 20 firms with identical sales, the Herfindahl index must be:

When four Infineon Technologies executives participated in an international conspiracy to fix prices for computer memory chips, they were acting with other firms as:

Consumers of Google and Facebook services are disadvantaged because:

Which of the following market structures is characterized by interdependent pricing and output decisions?

Which of the following is a reason why American ideology regarding antitrust policy has changed over the past few decades?

The Herfindahl index is calculated by adding the squared value of the market shares of all the firms in the industry.

The top four firms in the industry have 10 percent, 8 percent, 8 percent, and 6 percent of the market. The Herfindahl index of this market is closest to which of the following?

Platform monopolies initially make large losses because they:

Economics and Economic Reasoning

The Production Possibility Model, Trade, and Globalization

Economic Institutions

Supply and Demand

Using Supply and Demand

Describing Supply and Demand: Elasticities

Taxation and Government Intervention

Market Failure Versus Government Failure

Comparative Advantage, Exchange Rates, and Globalization

International Trade Policy

Production and Cost Analysis I

Production and Cost Analysis II

Perfect Competition

Monopoly and Monopolistic Competition

Real-World Competition and Technology

Work and the Labor Market

Who Gets What the Distribution of Income

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

Game Theory, Strategic Decision Making, and Behavioral Economics

Thinking Like a Modern Economist

Behavioral Economics and Modern Economic Policy

Microeconomic Policy, Economic Reasoning, and Beyond

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