Question 1

If an oligopolist is faced with a marginal revenue curve that has a gap in it, we may assume that

Accepted Answer

A) it is colluding with its rivals to maximize joint profits. 
B) its demand curve is kinked. 
C) it is selling a standardized product. 
D) it is selling a differentiated product. 
A) it is colluding with its rivals to maximize joint profits. 
B) its demand curve is kinked. 
C) it is selling a standardized product. 
D) it is selling a differentiated product.

Question 2

A prediction from the kinked demand curve model of oligopoly is that, for an individual firm, small changes in

Accepted Answer

A) demand will lead to changes in price or output. 
B) marginal revenue will lead to changes in price and output. 
C) marginal cost will lead to changes in price and output. 
D) marginal cost will not lead to changes in price or output. 
A) demand will lead to changes in price or output. 
B) marginal revenue will lead to changes in price and output. 
C) marginal cost will lead to changes in price and output. 
D) marginal cost will not lead to changes in price or output.

Question 3

The kinked-demand curve of an oligopolist is based on the assumption that

Accepted Answer

A) competitors will follow a price cut but ignore a price increase. 
B) competitors will match both price cuts and price increases. 
C) competitors will ignore a price cut but follow a price increase. 
D) there is no product differentiation. 
A) competitors will follow a price cut but ignore a price increase. 
B) competitors will match both price cuts and price increases. 
C) competitors will ignore a price cut but follow a price increase. 
D) there is no product differentiation.

Question 4

The characteristic most closely associated with oligopoly is

Accepted Answer

A) easy entry into the industry. 
B) a few large producers. 
C) product standardization. 
D) no control over price. 
A) easy entry into the industry. 
B) a few large producers. 
C) product standardization. 
D) no control over price.

Question 5

If firms E and Fin this table merged into a single firm, the Herfindahl index would

Accepted Answer

A) not change. 
B) rise, as would the four-firm concentration ratio. 
C) rise, but the four-firm concentration ratio would remain unchanged. 
D) fall. 
A) not change. 
B) rise, as would the four-firm concentration ratio. 
C) rise, but the four-firm concentration ratio would remain unchanged. 
D) fall.

Question 6

OPEC provides an example of

Accepted Answer

A) an unwritten, informal understanding. 
B) noncollusive oligopoly. 
C) an international cartel. 
D) a monopolistically competitive industry. 
A) an unwritten, informal understanding. 
B) noncollusive oligopoly. 
C) an international cartel. 
D) a monopolistically competitive industry.

Question 7

OPEC functions as a classic example of a kinked demand curve oligopoly.

Accepted Answer

A) True 
 B)False

Question 8

The Herfindahl index is a measure of

Accepted Answer

A) profitability in an industry. 
B) the price level in an industry. 
C) the costs in an industry. 
D) market power in an industry. 
A) profitability in an industry. 
B) the price level in an industry. 
C) the costs in an industry. 
D) market power in an industry.

Question 9

A two-player game in which one player's gain is not completely offset by the other player'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 10

A game has a Nash equilibrium when the two players' dominant strategies

Accepted Answer

A) depend on what the other player does. 
B) intersect in a specific cell of the payoff matrix. 
C) result in the largest total payoff for the two players combined. 
D) result in no loss for either player. 
A) depend on what the other player does. 
B) intersect in a specific cell of the payoff matrix. 
C) result in the largest total payoff for the two players combined. 
D) result in no loss for either player.

Question 11

If output is set at the kink of the kinked-demand model, then there

Accepted Answer

A) is a strong incentive for rivals to decrease prices. 
B) is a strong incentive for rivals to increase prices. 
C) is one price at which marginal revenue equals marginal cost. 
D) are several prices at which marginal revenue equals marginal cost. 
A) is a strong incentive for rivals to decrease prices. 
B) is a strong incentive for rivals to increase prices. 
C) is one price at which marginal revenue equals marginal cost. 
D) are several prices at which marginal revenue equals marginal cost.

Question 12

Suppose the only three existing manufacturers of video game players signed a written contract by which each agreed to charge the same price for products and to distribute their products only in the geographical area assigned them in the contract.This best describes

Accepted Answer

A) cost-plus pricing. 
B) multiproduct pricing. 
C) a cartel. 
D) price leadership. 
A) cost-plus pricing. 
B) multiproduct pricing. 
C) a cartel. 
D) price leadership.

Question 13

Cartels are difficult to maintain in the long run because

Accepted Answer

A) they are illegal in all industrialized countries. 
B) individual members may find it profitable to cheat on agreements. 
C) it is more profitable for the industry to charge a lower price and produce more output. 
D) entry barriers are insignificant in oligopolistic industries. 
A) they are illegal in all industrialized countries. 
B) individual members may find it profitable to cheat on agreements. 
C) it is more profitable for the industry to charge a lower price and produce more output. 
D) entry barriers are insignificant in oligopolistic industries.

Question 14

A defining characteristic of an oligopolistic market is that there are

Accepted Answer

A) many buyers. 
B) few buyers. 
C) few sellers. 
D) many sellers. 
A) many buyers. 
B) few buyers. 
C) few sellers. 
D) many sellers.

Question 15

Collusive control over price may permit oligopolists to

Accepted Answer

A) use new technology, achieve economies of scale, and get government subsidies. 
B) achieve economies of scale, reduce costs, and prevent price cheating. 
C) increase product demand, increase product supply, and lower cost. 
D) reduce uncertainty, increase profits, and possibly limit entry of new firms. 
A) use new technology, achieve economies of scale, and get government subsidies. 
B) achieve economies of scale, reduce costs, and prevent price cheating. 
C) increase product demand, increase product supply, and lower cost. 
D) reduce uncertainty, increase profits, and possibly limit entry of new firms.

Question 16

The study of how people behave and decide in strategic situations is called

Accepted Answer

A) game theory. 
B) collusion. 
C) market structure. 
D) product differentiation. 
A) game theory. 
B) collusion. 
C) market structure. 
D) product differentiation.

Question 17

Three major means of collusion by oligopolists are

Accepted Answer

A) cartels, informal understandings, and price leadership. 
B) market sharing, mutual interdependence, and product differentiation. 
C) cartels, kinked-demand pricing, and product differentiation. 
D) informal understandings, P = MC pricing, and mutual interdependence. 
A) cartels, informal understandings, and price leadership. 
B) market sharing, mutual interdependence, and product differentiation. 
C) cartels, kinked-demand pricing, and product differentiation. 
D) informal understandings, P = MC pricing, and mutual interdependence.

Question 18

Game-theory analyzes oligopoly behavior by using concepts derived from the study of games-of-chance such as dice games, solitaire, and roulette.

Accepted Answer

A) True 
 B)False

Question 19

A player is said to have a dominant strategy when one of the options available is superior, regardless of what strategy the other player chooses.

Accepted Answer

A) True 
 B)False

Question 20

(Last Word) Which market structure best characterizes the various Internet markets?

Accepted Answer

A) differentiated oligopoly 
B) homogeneous oligopoly 
C) monopolistic competition 
D) pure monopoly 
A) differentiated oligopoly 
B) homogeneous oligopoly 
C) monopolistic competition 
D) pure monopoly

Exam 14: Oligopoly and Strategic Behavior

If an oligopolist is faced with a marginal revenue curve that has a gap in it, we may assume that

A prediction from the kinked demand curve model of oligopoly is that, for an individual firm, small changes in

The kinked-demand curve of an oligopolist is based on the assumption that

The characteristic most closely associated with oligopoly is

If firms E and Fin this table merged into a single firm, the Herfindahl index would

OPEC provides an example of

OPEC functions as a classic example of a kinked demand curve oligopoly.

The Herfindahl index is a measure of

A two-player game in which one player's gain is not completely offset by the other player's loss is called a

A game has a Nash equilibrium when the two players' dominant strategies

If output is set at the kink of the kinked-demand model, then there

Suppose the only three existing manufacturers of video game players signed a written contract by which each agreed to charge the same price for products and to distribute their products only in the geographical area assigned them in the contract.This best describes

Cartels are difficult to maintain in the long run because

A defining characteristic of an oligopolistic market is that there are

Collusive control over price may permit oligopolists to

The study of how people behave and decide in strategic situations is called

Three major means of collusion by oligopolists are

Game-theory analyzes oligopoly behavior by using concepts derived from the study of games-of-chance such as dice games, solitaire, and roulette.

A player is said to have a dominant strategy when one of the options available is superior, regardless of what strategy the other player chooses.

(Last Word) Which market structure best characterizes the various Internet markets?

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

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

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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