Question 1

Mergers of firms in an industry tend to

Accepted Answer

A) transform monopolistic competition into pure competition. 
B) transform monopolistic competition into oligopoly. 
C) reduce the Herfindahl index for the industry. 
D) break up an oligopoly. 
A) transform monopolistic competition into pure competition. 
B) transform monopolistic competition into oligopoly. 
C) reduce the Herfindahl index for the industry. 
D) break up an oligopoly. B

Question 2

Some observers assert that oligopolies are less socially desirable than pure monopolies because

Accepted Answer

A) monopolies are often government-regulated, whereas collusion among oligopolies may lead to similar results as a monopoly yet, having several firms, may give the illusion of competition. 
B) monopolies have unique products, whereas product differentiation in oligopolies would lead to economic inefficiencies. 
C) mutual interdependence among firms in an oligopoly would lead to more inefficiencies than in the case of a monopoly. 
D) oligopolies tend to engage in advertising more so than monopolies. 
A) monopolies are often government-regulated, whereas collusion among oligopolies may lead to similar results as a monopoly yet, having several firms, may give the illusion of competition. 
B) monopolies have unique products, whereas product differentiation in oligopolies would lead to economic inefficiencies. 
C) mutual interdependence among firms in an oligopoly would lead to more inefficiencies than in the case of a monopoly. 
D) oligopolies tend to engage in advertising more so than monopolies. A

Question 3

Secret conspiracies to fix prices are examples of

Accepted Answer

A) cartels. 
B) price leadership. 
C) overt collusion. 
D) covert collusion. 
A) cartels. 
B) price leadership. 
C) overt collusion. 
D) covert collusion. D

Question 4

If the four-firm concentration ratio in an oligopolistic five-firm industry is 80 percent, and each firm has an equal percentage of sales, the Herfindahl index is

Accepted Answer

A) 8,000. 
B) 2,000. 
C) 2,500. 
D) 1,600. 
A) 8,000. 
B) 2,000. 
C) 2,500. 
D) 1,600.

Question 5

The kinked-demand curve model of oligopoly

Accepted Answer

A) assumes a firm's rivals will ignore a price cut but match a price increase. 
B) embodies the possibility that changes in unit costs will have no effect on equilibrium price and output. 
C) assumes a firm's rivals will match any price change it may initiate. 
D) assumes a firm's rivals will ignore any price change it may initiate. 
A) assumes a firm's rivals will ignore a price cut but match a price increase. 
B) embodies the possibility that changes in unit costs will have no effect on equilibrium price and output. 
C) assumes a firm's rivals will match any price change it may initiate. 
D) assumes a firm's rivals will ignore any price change it may initiate.

Question 6

A two-player or firm game in which one firm's gain must equal the other firm's loss is called a

Accepted Answer

A) positive-sum game. 
B) zero-sum game. 
C) negative-sum game. 
D) one-time game. 
A) positive-sum game. 
B) zero-sum game. 
C) negative-sum game. 
D) one-time game.

Question 7

The kinked-demand curve model shows that oligopolistic firms tend to change their prices frequently.

Accepted Answer

A) True 
 B)False

Question 8

(Last Word) Microsoft

Accepted Answer

A) dominates the primary Internet markets. 
B) is attempting to gain market share in the Internet, smartphone, and tablet markets in an effort to offset a shrinking PC market. 
C) has colluded with Amazon and Google to fix online advertising prices. 
D) holds a near-monopoly in the Internet search market. 
A) dominates the primary Internet markets. 
B) is attempting to gain market share in the Internet, smartphone, and tablet markets in an effort to offset a shrinking PC market. 
C) has colluded with Amazon and Google to fix online advertising prices. 
D) holds a near-monopoly in the Internet search market.

Question 9

As it relates to oligopoly, game theory focuses on the strategic behavior of rival firms.

Accepted Answer

A) True 
 B)False

Question 10

Economic efficiency can suffer as a result of advertising, when it

Accepted Answer

A) enhances competition among oligopolistic firms. 
B) facilitates the introduction and success of new products to replace old one. 
C) increases sales of firms and enhances their monopoly power. 
D) increases brand loyalty, reducing buyers' elasticity of demand.Difficulty: 02 Medium 
A) enhances competition among oligopolistic firms. 
B) facilitates the introduction and success of new products to replace old one. 
C) increases sales of firms and enhances their monopoly power. 
D) increases brand loyalty, reducing buyers' elasticity of demand.Difficulty: 02 Medium

Question 11

The terminal nodes in an extensive form representation

Accepted Answer

A) are used solely to show payoffs that represent a Nash equilibrium. 
B) represent the starting points for a sequential game. 
C) indicate the strategies available to the players of a game. 
D) indicate the possible outcomes of a game. 
A) are used solely to show payoffs that represent a Nash equilibrium. 
B) represent the starting points for a sequential game. 
C) indicate the strategies available to the players of a game. 
D) indicate the possible outcomes of a game.

Question 12

Which one of the following is not illustrated by the so-called Prisoner's Dilemma?

Accepted Answer

A) Each player in the game ends up with results that depend on the other player's action. 
B) It does not pay for the players to collude with each other. 
C) Both players would be better off, if they could only agree on which action to take. 
D) The results for each player in the game are uncertain, if they are not able to communicate. 
A) Each player in the game ends up with results that depend on the other player's action. 
B) It does not pay for the players to collude with each other. 
C) Both players would be better off, if they could only agree on which action to take. 
D) The results for each player in the game are uncertain, if they are not able to communicate.

Question 13

Which of the following is an illustration of differentiated oligopoly?

Accepted Answer

A) the aluminum industry 
B) the steel industry 
C) the soft drink industry 
D) retail stores in large cities 
A) the aluminum industry 
B) the steel industry 
C) the soft drink industry 
D) retail stores in large cities

Question 14

Suppose firms in a collusive oligopoly decide to establish their prices at a level that discourages new rivals from entering the industry.This is called

Accepted Answer

A) mutual interdependence. 
B) pricing the demand curve. 
C) limit pricing. 
D) price leadership. 
A) mutual interdependence. 
B) pricing the demand curve. 
C) limit pricing. 
D) price leadership.

Question 15

Which of the following is the best example of oligopoly?

Accepted Answer

A) women's dress manufacturing 
B) automobile manufacturing 
C) restaurants 
D) cotton farming 
A) women's dress manufacturing 
B) automobile manufacturing 
C) restaurants 
D) cotton farming

Question 16

Game-theory models analyze the interdependence of oligopolists' strategies.

Accepted Answer

A) True 
 B)False

Question 17

If an oligopoly is faced with a kinked-demand curve that is relatively elastic above, and relatively inelastic below, the going price, then it will

Accepted Answer

A) increase total revenue by increasing price but lower total revenue by decreasing price. 
B) decrease total revenue by either increasing or decreasing price. 
C) increase total revenue by either increasing or decreasing price. 
D) increase total revenue by decreasing price but lower total revenue by increasing price. 
A) increase total revenue by increasing price but lower total revenue by decreasing price. 
B) decrease total revenue by either increasing or decreasing price. 
C) increase total revenue by either increasing or decreasing price. 
D) increase total revenue by decreasing price but lower total revenue by increasing price.

Question 18

A low concentration ratio means that

Accepted Answer

A) there is a low probability of entering the industry. 
B) there is a low probability of success in the industry. 
C) each firm accounts for a small market share of the industry. 
D) each firm accounts for a large market share of the industry. 
A) there is a low probability of entering the industry. 
B) there is a low probability of success in the industry. 
C) each firm accounts for a small market share of the industry. 
D) each firm accounts for a large market share of the industry.

Question 19

Concentration ratios may be inaccurate indicators of the degree of monopoly power in an industry because

Accepted Answer

A) they include interindustry competition. 
B) foreign competition is not considered. 
C) they are only calculated for local and regional markets. 
D) they do not distinguish between normal and economic profit. 
A) they include interindustry competition. 
B) foreign competition is not considered. 
C) they are only calculated for local and regional markets. 
D) they do not distinguish between normal and economic profit.

Question 20

Concentration ratios measure the

Accepted Answer

A) geographic distribution of the largest corporations in each industry. 
B) degree to which a particular firm accounts for sales in a given metropolitan area. 
C) percentage of total industry sales accounted for by the largest firms in the industry. 
D) dependence of an industry on its resource suppliers. 
A) geographic distribution of the largest corporations in each industry. 
B) degree to which a particular firm accounts for sales in a given metropolitan area. 
C) percentage of total industry sales accounted for by the largest firms in the industry. 
D) dependence of an industry on its resource suppliers.

Exam 14: Oligopoly and Strategic Behavior

Mergers of firms in an industry tend to

Some observers assert that oligopolies are less socially desirable than pure monopolies because

Secret conspiracies to fix prices are examples of

If the four-firm concentration ratio in an oligopolistic five-firm industry is 80 percent, and each firm has an equal percentage of sales, the Herfindahl index is

The kinked-demand curve model of oligopoly

A two-player or firm game in which one firm's gain must equal the other firm's loss is called a

The kinked-demand curve model shows that oligopolistic firms tend to change their prices frequently.

(Last Word) Microsoft

As it relates to oligopoly, game theory focuses on the strategic behavior of rival firms.

Economic efficiency can suffer as a result of advertising, when it

The terminal nodes in an extensive form representation

Which one of the following is not illustrated by the so-called Prisoner's Dilemma?

Which of the following is an illustration of differentiated oligopoly?

Suppose firms in a collusive oligopoly decide to establish their prices at a level that discourages new rivals from entering the industry.This is called

Which of the following is the best example of oligopoly?

Game-theory models analyze the interdependence of oligopolists' strategies.

If an oligopoly is faced with a kinked-demand curve that is relatively elastic above, and relatively inelastic below, the going price, then it will

A low concentration ratio means that

Concentration ratios may be inaccurate indicators of the degree of monopoly power in an industry because

Concentration ratios measure the

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

Elasticity

Utility Maximization

Behavioral Economics

Businesses and the Costs of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition

Technology, Rd, and Efficiency

The Demand for Resources

Wage Determination

Rent, Interest, and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

Health Care

Immigration

An Introduction to Macroeconomics

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Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

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Aggregate Demand and Aggregate Supply

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Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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