Question 1

The primary advantage of displaying a game in extensive form instead of strategic form is that extensive form allows one to

Accepted Answer

A) display the order in which decisions are made; strategic form does not. 
B) analyze repeated games; strategic form does not. 
C) determine the existence of a Nash equilibrium; strategic form does not. 
D) determine whether credible threats are possible; strategic form does not. 
A) display the order in which decisions are made; strategic form does not. 
B) analyze repeated games; strategic form does not. 
C) determine the existence of a Nash equilibrium; strategic form does not. 
D) determine whether credible threats are possible; strategic form does not.

Question 2

Which would be a qualification to the view that oligopoly is allocatively and productively inefficient?

Accepted Answer

A) Less foreign competition has stimulated more price competition in oligopolies. 
B) Oligopolies are less technologically competitive, so they lose market share. 
C) Oligopolies may purposely keep prices below short-run profit-maximizing levels to bolster barriers to entry. 
D) The more collusive practices of oligopolies lead to more profit-sharing among firms in the industry. 
A) Less foreign competition has stimulated more price competition in oligopolies. 
B) Oligopolies are less technologically competitive, so they lose market share. 
C) Oligopolies may purposely keep prices below short-run profit-maximizing levels to bolster barriers to entry. 
D) The more collusive practices of oligopolies lead to more profit-sharing among firms in the industry.

Question 3

One shortcoming of the kinked demand curve model of oligopoly is that it does not explain

Accepted Answer

A) why the marginal revenue curve is kinked. 
B) how the current price gets determined. 
C) what the level of profits is for the firm. 
D) why the firm is a least-cost producer. 
A) why the marginal revenue curve is kinked. 
B) how the current price gets determined. 
C) what the level of profits is for the firm. 
D) why the firm is a least-cost producer.

Question 4

The strategy of establishing a price that prevents the entry of new firms is called

Accepted Answer

A) cartel pricing. 
B) limit pricing. 
C) price leadership. 
D) profit maximizing price. 
A) cartel pricing. 
B) limit pricing. 
C) price leadership. 
D) profit maximizing price.

Question 5

The four-firm concentration ratio for an industry measures the

Accepted Answer

A) profitability of the four largest firms in the industry. 
B) extent to which the four largest firms dominate the sales of a good. 
C) percentage of the industry's workforce employed by the four largest firms. 
D) degree of product variation in the industry. 
A) profitability of the four largest firms in the industry. 
B) extent to which the four largest firms dominate the sales of a good. 
C) percentage of the industry's workforce employed by the four largest firms. 
D) degree of product variation in the industry.

Question 6

When firms in an industry reach an agreement to fix prices, divide up market share, or otherwise restrict competition, they are practicing the strategy of

Accepted Answer

A) interindustry competition. 
B) limit pricing. 
C) price leadership. 
D) collusion. 
A) interindustry competition. 
B) limit pricing. 
C) price leadership. 
D) collusion.

Question 7

Two important characteristics of oligopolists are that they have significant control over price and that there is mutual interdependence among them.

Accepted Answer

A) True 
 B)False

Question 8

If the firms in an oligopolistic industry can establish an effective cartel, the resulting output and price will approximate those of

Accepted Answer

A) a purely competitive producer. 
B) a pure monopoly. 
C) a monopolistically competitive producer. 
D) an industry with a low four-firm concentration ratio. 
A) a purely competitive producer. 
B) a pure monopoly. 
C) a monopolistically competitive producer. 
D) an industry with a low four-firm concentration ratio.

Question 9

An industry having a four-firm concentration ratio of 85 percent

Accepted Answer

A) approximates pure competition. 
B) is monopolistically competitive. 
C) is a pure monopoly. 
D) is an oligopoly. 
A) approximates pure competition. 
B) is monopolistically competitive. 
C) is a pure monopoly. 
D) is an oligopoly.

Question 10

(Consider This) The prisoner's dilemma reveals that

Accepted Answer

A) collusive agreements will always fail. 
B) the price leadership model does not work. 
C) nonprice competition is more profitable than price competition. 
D) sometimes when individuals act independently in their own self-interest, everyone is worse off than if they had cooperated. 
A) collusive agreements will always fail. 
B) the price leadership model does not work. 
C) nonprice competition is more profitable than price competition. 
D) sometimes when individuals act independently in their own self-interest, everyone is worse off than if they had cooperated.

Question 11

Firm Market Share (%) A 20 B 20
C 20
D 20
E 10
F 10
Refer to the data.Suppose that firms A and F merged into a single firm.The four-firm concentration ratio and the Herfindahl index would be

Accepted Answer

A) 90 percent and 2,100, respectively. 
B) 80 percent and 2,100, respectively. 
C) 100 percent and 2,200, respectively. 
D) 90 percent and 2,200, respectively. 
A) 90 percent and 2,100, respectively. 
B) 80 percent and 2,100, respectively. 
C) 100 percent and 2,200, respectively. 
D) 90 percent and 2,200, respectively.

Question 12

The highest possible value of the Herfindahl index is 1,000.

Accepted Answer

A) True 
 B)False

Question 13

A simultaneous game is said to exist when

Accepted Answer

A) firms are playing pricing games in different markets at the same time. 
B) firms choose their strategies at the same time as their rivals. 
C) firms can set multiple prices for the same good at the same time. 
D) strategies are set without regard to possible interactions in future time periods. 
A) firms are playing pricing games in different markets at the same time. 
B) firms choose their strategies at the same time as their rivals. 
C) firms can set multiple prices for the same good at the same time. 
D) strategies are set without regard to possible interactions in future time periods.

Question 14

If competing oligopolists completely ignore oligopolist X's price changes, then X's

Accepted Answer

A) demand curve will be less elastic than if the other oligopolists matched X's price changes. 
B) demand curve will be more elastic than if the other oligopolists matched X's price changes. 
C) marginal revenue curve will have a vertical gap. 
D) demand and marginal revenue curves will coincide. 
A) demand curve will be less elastic than if the other oligopolists matched X's price changes. 
B) demand curve will be more elastic than if the other oligopolists matched X's price changes. 
C) marginal revenue curve will have a vertical gap. 
D) demand and marginal revenue curves will coincide.

Question 15

An oligopolistic firm tends to have less control over its own pricing decisions than a firm in

Accepted Answer

A) pure competition or monopolistic competition. 
B) monopoly only. 
C) pure competition or monopoly. 
D) pure competition only. 
A) pure competition or monopolistic competition. 
B) monopoly only. 
C) pure competition or monopoly. 
D) pure competition only.

Question 16

Firm Market Share (%) A 20 B 20
C 20
D 20
E 10
F 10
The industry characterized by these data is

Accepted Answer

A) an oligopoly. 
B) a monopolistically competitive industry. 
C) a purely competitive industry. 
D) a pure monopoly. 
A) an oligopoly. 
B) a monopolistically competitive industry. 
C) a purely competitive industry. 
D) a pure monopoly.

Question 17

In game theory, credible threats can be used to maintain collusive agreements between firms.

Accepted Answer

A) True 
 B)False

Question 18

A natural monopoly's preemption of entry by other firms by exploiting its economies of scale is an example of

Accepted Answer

A) first-mover advantage. 
B) a repeated game with reciprocity. 
C) Nash equilibrium in a single-period game. 
D) collusion in game theory. 
A) first-mover advantage. 
B) a repeated game with reciprocity. 
C) Nash equilibrium in a single-period game. 
D) collusion in game theory.

Question 19

One common factor that often weakens collusion among cartel members is the incentive to cheat.

Accepted Answer

A) True 
 B)False

Question 20

A cartel of four firms that controls 100 percent of the sales in a market, and faces the same cost schedules of a monopolist, will set a price somewhat lower than the monopoly price for its product.

Accepted Answer

A) True 
 B)False

Exam 14: Oligopoly and Strategic Behavior

The primary advantage of displaying a game in extensive form instead of strategic form is that extensive form allows one to

Which would be a qualification to the view that oligopoly is allocatively and productively inefficient?

One shortcoming of the kinked demand curve model of oligopoly is that it does not explain

The strategy of establishing a price that prevents the entry of new firms is called

The four-firm concentration ratio for an industry measures the

When firms in an industry reach an agreement to fix prices, divide up market share, or otherwise restrict competition, they are practicing the strategy of

Two important characteristics of oligopolists are that they have significant control over price and that there is mutual interdependence among them.

If the firms in an oligopolistic industry can establish an effective cartel, the resulting output and price will approximate those of

An industry having a four-firm concentration ratio of 85 percent

(Consider This) The prisoner's dilemma reveals that

Firm Market Share (%) A 20 B 20 C 20 D 20 E 10 F 10 Refer to the data.Suppose that firms A and F merged into a single firm.The four-firm concentration ratio and the Herfindahl index would be

The highest possible value of the Herfindahl index is 1,000.

A simultaneous game is said to exist when

If competing oligopolists completely ignore oligopolist X's price changes, then X's

An oligopolistic firm tends to have less control over its own pricing decisions than a firm in

Firm Market Share (%) A 20 B 20 C 20 D 20 E 10 F 10 The industry characterized by these data is

In game theory, credible threats can be used to maintain collusive agreements between firms.

A natural monopoly's preemption of entry by other firms by exploiting its economies of scale is an example of

One common factor that often weakens collusion among cartel members is the incentive to cheat.

A cartel of four firms that controls 100 percent of the sales in a market, and faces the same cost schedules of a monopolist, will set a price somewhat lower than the monopoly price for its product.

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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