Question 1

The top four firms in the industry have 10 percent, 8 percent, 8 percent, and 6 percent of the market. The four-firm concentration ratio of this market is:

Accepted Answer

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

Question 2

One of the reasons fewer antitrust cases have been brought before the courts is:

Accepted Answer

A)  input prices have fallen significantly. 
B)  the United States is engaged in more trade wars. 
C)  the rate of technological change has accelerated. 
D)  firms have become increasingly larger. 
A)  input prices have fallen significantly. 
B)  the United States is engaged in more trade wars. 
C)  the rate of technological change has accelerated. 
D)  firms have become increasingly larger.

Question 3

Taking explicit account of a rival's expected response to a decision you are making is called:

Accepted Answer

A)  economic decision making. 
B)  monopolistic decision making. 
C)  strategic decision making. 
D)  competitive decision making. 
A)  economic decision making. 
B)  monopolistic decision making. 
C)  strategic decision making. 
D)  competitive decision making.

Question 4

Refer to the graph shown. The oligopolist shown currently charges a price P1. It believes that rival firms will:

Accepted Answer

A)  gain market share if it lowers price. 
B)  lose market share if it lowers price. 
C)  raise price if it raises price. 
D)  lower price if it lowers price. 
A)  gain market share if it lowers price. 
B)  lose market share if it lowers price. 
C)  raise price if it raises price. 
D)  lower price if it lowers price.

Question 5

The higher the concentration ratio in a given industry, the:

Accepted Answer

A)  closer the industry is to a perfectly competitive market structure. 
B)  larger the market shares of the smallest four firms in the industry. 
C)  closer the industry is to an oligopolistic or monopolistic type of market structure. 
D)  smaller the market shares of the largest four firms in the industry. 
A)  closer the industry is to a perfectly competitive market structure. 
B)  larger the market shares of the smallest four firms in the industry. 
C)  closer the industry is to an oligopolistic or monopolistic type of market structure. 
D)  smaller the market shares of the largest four firms in the industry.

Question 6

Judgment by performance means that the competitiveness of a market is determined by:

Accepted Answer

A)  the actual behavior of firms in the market. 
B)  the structure of the industry. 
C)  the number of firms in the market. 
D)  technological considerations. 
A)  the actual behavior of firms in the market. 
B)  the structure of the industry. 
C)  the number of firms in the market. 
D)  technological considerations.

Question 7

In the market for bank credit, a large bank sometimes announces a change in interest rates. After the changes in interest rates are announced, other banks in the industry usually react by changing their rates in the same way. This is an example of:

Accepted Answer

A)  a cartel. 
B)  monopolistic competition. 
C)  implicit collusion. 
D)  the kinked demand curve model. 
A)  a cartel. 
B)  monopolistic competition. 
C)  implicit collusion. 
D)  the kinked demand curve model.

Question 8

A four-firm concentration ratio of 75 tells you that the top:

Accepted Answer

A)  firm in the industry produces 75 percent of the industry's output. 
B)  four firms in the industry produce 75 percent of the industry's output. 
C)  four firms in the industry produce 25 percent of the industry's output. 
D)  four firms in the industry earn 75 percent of the industry's profits. 
A)  firm in the industry produces 75 percent of the industry's output. 
B)  four firms in the industry produce 75 percent of the industry's output. 
C)  four firms in the industry produce 25 percent of the industry's output. 
D)  four firms in the industry earn 75 percent of the industry's profits.

Question 9

Which of the following is a problem associated with judging competitiveness by structure?

Accepted Answer

A)  It requires that each action of a firm be analyzed on a case-by-case basis, which is very time- consuming and expensive. 
B)  Whether the actions of a firm can be considered appropriate competitive behavior depends on the circumstances. 
C)  Structure can be a predictor of future performance. 
D)  It is difficult to determine the relevant market and the relevant industry necessary to identify the structural competitiveness of any industry. 
A)  It requires that each action of a firm be analyzed on a case-by-case basis, which is very time- consuming and expensive. 
B)  Whether the actions of a firm can be considered appropriate competitive behavior depends on the circumstances. 
C)  Structure can be a predictor of future performance. 
D)  It is difficult to determine the relevant market and the relevant industry necessary to identify the structural competitiveness of any industry.

Question 10

Platform businesses such as Google and Facebook:

Accepted Answer

A)  do not face competition. 
B)  use data to retain market power. 
C)  are highly regulated. 
D)  are public utilities. 
A)  do not face competition. 
B)  use data to retain market power. 
C)  are highly regulated. 
D)  are public utilities.

Question 11

The oligopoly model is the only model that explicitly considers how the pricing and output decisions of one firm affect other firms.

Accepted Answer

A) True 
 B)False

Question 12

The only way to judge monopoly is to use both structure and performance criterion simultaneously.

Accepted Answer

A) True 
 B)False

Question 13

Refer to the graph shown, which shows an oligopolist facing a kinked demand curve. The firm will not increase price when marginal costs fluctuate between which two points?

Accepted Answer

A)  a and b 
B)  b and c 
C)  c and d 
D)  a and d 
A)  a and b 
B)  b and c 
C)  c and d 
D)  a and d

Question 14

When OPEC reduces output to keep prices high, OPEC is acting as a:

Accepted Answer

A)  cartel. 
B)  price taker. 
C)  producer in a contestable market. 
D)  producer moving along a supply curve, cutting output as price falls. 
A)  cartel. 
B)  price taker. 
C)  producer in a contestable market. 
D)  producer moving along a supply curve, cutting output as price falls.

Question 15

If an industry has a Herfindahl index of 3,000, the contestable market model probably would predict that the industry would be more likely to have a:

Accepted Answer

A)  monopolistic price. 
B)  competitive price. 
C)  monopolistic price if there are no barriers to entry. 
D)  competitive price if there are no barriers to entry. 
A)  monopolistic price. 
B)  competitive price. 
C)  monopolistic price if there are no barriers to entry. 
D)  competitive price if there are no barriers to entry.

Question 16

One of the reasons fewer antitrust cases have been brought before the courts is:

Accepted Answer

A)  antitrust laws have been preemptively effective. 
B)  the market is more competitive. 
C)  foreign goods comprise a larger share of goods purchased. 
D)  union workers have gained more power. 
A)  antitrust laws have been preemptively effective. 
B)  the market is more competitive. 
C)  foreign goods comprise a larger share of goods purchased. 
D)  union workers have gained more power.

Question 17

Over the past two decades anti-trust policy has become:

Accepted Answer

A)  more permissive. 
B)  more restrictive. 
C)  non-existent. 
D)  differentiated. 
A)  more permissive. 
B)  more restrictive. 
C)  non-existent. 
D)  differentiated.

Question 18

Suppose there are only four airlines that service the air route between two cities. If there is a barrier to entering the market (such as a limited number of gates), the market is best characterized as:

Accepted Answer

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

Question 19

Which of the following is an argument in favor of judging competitiveness by performance rather than structure?

Accepted Answer

A)  Judgment by performance requires that each action of a firm be analyzed on a case-by-case basis, which is very time-consuming and expensive. 
B)  Under the judgment by structure criterion, a firm may be breaking the law if it does what it's supposed to be doing: producing the best product it can at the lowest cost. 
C)  Courts know little economic theory. 
D)  Structure can be a predictor of future performance. 
A)  Judgment by performance requires that each action of a firm be analyzed on a case-by-case basis, which is very time-consuming and expensive. 
B)  Under the judgment by structure criterion, a firm may be breaking the law if it does what it's supposed to be doing: producing the best product it can at the lowest cost. 
C)  Courts know little economic theory. 
D)  Structure can be a predictor of future performance.

Question 20

A market has the following characteristics: There is strategic pricing, output is somewhat restricted, there is interdependent decision making, and some long-run economic profits are possible. This market is:

Accepted Answer

A)  a monopoly. 
B)  an oligopoly. 
C)  monopolistically competitive. 
D)  perfectly competitive. 
A)  a monopoly. 
B)  an oligopoly. 
C)  monopolistically competitive. 
D)  perfectly competitive.

Exam 15: Oligopoly and Antitrust Policy

The top four firms in the industry have 10 percent, 8 percent, 8 percent, and 6 percent of the market. The four-firm concentration ratio of this market is:

One of the reasons fewer antitrust cases have been brought before the courts is:

Taking explicit account of a rival's expected response to a decision you are making is called:

Refer to the graph shown. The oligopolist shown currently charges a price P1. It believes that rival firms will:

The higher the concentration ratio in a given industry, the:

Judgment by performance means that the competitiveness of a market is determined by:

In the market for bank credit, a large bank sometimes announces a change in interest rates. After the changes in interest rates are announced, other banks in the industry usually react by changing their rates in the same way. This is an example of:

A four-firm concentration ratio of 75 tells you that the top:

Which of the following is a problem associated with judging competitiveness by structure?

Platform businesses such as Google and Facebook:

The oligopoly model is the only model that explicitly considers how the pricing and output decisions of one firm affect other firms.

The only way to judge monopoly is to use both structure and performance criterion simultaneously.

Refer to the graph shown, which shows an oligopolist facing a kinked demand curve. The firm will not increase price when marginal costs fluctuate between which two points?

When OPEC reduces output to keep prices high, OPEC is acting as a:

If an industry has a Herfindahl index of 3,000, the contestable market model probably would predict that the industry would be more likely to have a:

One of the reasons fewer antitrust cases have been brought before the courts is:

Over the past two decades anti-trust policy has become:

Suppose there are only four airlines that service the air route between two cities. If there is a barrier to entering the market (such as a limited number of gates), the market is best characterized as:

Which of the following is an argument in favor of judging competitiveness by performance rather than structure?

A market has the following characteristics: There is strategic pricing, output is somewhat restricted, there is interdependent decision making, and some long-run economic profits are possible. This market is:

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

Filters

Refer to the graph shown. The oligopolist shown currently charges a price P₁. It believes that rival firms will: