Question 1

In which set of market models are there the most significant barriers to entry?

Accepted Answer

A) monopolistic competition and pure competition 
B) monopolistic competition and pure monopoly 
C) oligopoly and monopolistic competition 
D) oligopoly and pure monopoly 
A) monopolistic competition and pure competition 
B) monopolistic competition and pure monopoly 
C) oligopoly and monopolistic competition 
D) oligopoly and pure monopoly

Question 2

Mutual interdependence means that each firm in an oligopoly

Accepted Answer

A) faces a perfectly inelastic demand for its product. 
B) considers the reactions of its rivals when it determines its pricing policy. 
C) depends on the other firms for its inputs. 
D) depends on the other firms for its markets. 
A) faces a perfectly inelastic demand for its product. 
B) considers the reactions of its rivals when it determines its pricing policy. 
C) depends on the other firms for its inputs. 
D) depends on the other firms for its markets.

Question 3

In a Stackelberg duopoly,

Accepted Answer

A) leader firms are always dominant. 
B) no Nash equilibrium is possible. 
C) the two firms move simultaneously. 
D) one firm is the leader; the other is the follower. 
A) leader firms are always dominant. 
B) no Nash equilibrium is possible. 
C) the two firms move simultaneously. 
D) one firm is the leader; the other is the follower.

Question 4

Potential entry by new firms and competition from imports tend to worsen the economic inefficiency in an oligopoly.

Accepted Answer

A) True 
 B)False

Question 5

Industry Y is dominated by five large firms that hold market shares of 20, 20, 25, 25, and 10.The Herfindahl index for this industry is

Accepted Answer

A) 1,560. 
B) 2,150. 
C) 2,340. 
D) 3,500. 
A) 1,560. 
B) 2,150. 
C) 2,340. 
D) 3,500.

Question 6

An empty threat is a statement of coercion that is not believed by the threatened firm.

Accepted Answer

A) True 
 B)False

Question 7

The term oligopoly indicates

Accepted Answer

A) a one-firm industry. 
B) many producers of a differentiated product. 
C) a few firms producing either a differentiated or a homogeneous product. 
D) an industry whose four-firm concentration ratio is low. 
A) a one-firm industry. 
B) many producers of a differentiated product. 
C) a few firms producing either a differentiated or a homogeneous product. 
D) an industry whose four-firm concentration ratio is low.

Question 8

A Nash equilibrium can only occur in repeated games.

Accepted Answer

A) True 
 B)False

Question 9

Which two market structures tend to be more commonly observed in the real world?

Accepted Answer

A) pure competition and pure monopoly 
B) pure competition and monopolistic competition 
C) pure monopoly and monopolistic competition 
D) monopolistic competition and oligopoly 
A) pure competition and pure monopoly 
B) pure competition and monopolistic competition 
C) pure monopoly and monopolistic competition 
D) monopolistic competition and oligopoly

Question 10

All other things equal, the larger the number of firms in an oligopolistic industry, the more difficult it is for those firms to collude.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following industries is an illustration of homogeneous oligopoly?

Accepted Answer

A) household laundry products 
B) personal computers 
C) aluminum 
D) the auto industry 
A) household laundry products 
B) personal computers 
C) aluminum 
D) the auto industry

Question 12

Assume that an industry is significantly affected by import competition from foreign suppliers.Taking this factor into account, it would mean that

Accepted Answer

A) the Herfindahl index would be significantly higher in that industry because there are more firms in the industry. 
B) the industry is less concentrated than suggested by domestic concentration ratios. 
C) there is a high degree of interindustry competition. 
D) there is a low degree of interindustry competition. 
A) the Herfindahl index would be significantly higher in that industry because there are more firms in the industry. 
B) the industry is less concentrated than suggested by domestic concentration ratios. 
C) there is a high degree of interindustry competition. 
D) there is a low degree of interindustry competition.

Question 13

In the United States cartels are

Accepted Answer

A) quite common in industries that produce nondurable goods. 
B) in violation of the antitrust laws. 
C) concentrated in monopolistically competitive industries. 
D) encouraged by government policy so firms can achieve economies of scale. 
A) quite common in industries that produce nondurable goods. 
B) in violation of the antitrust laws. 
C) concentrated in monopolistically competitive industries. 
D) encouraged by government policy so firms can achieve economies of scale.

Question 14

Homogeneous oligopoly exists where a small number of firms are

Accepted Answer

A) producing virtually identical products. 
B) setting price and output independently. 
C) setting price and output collusively. 
D) producing differentiated products. 
A) producing virtually identical products. 
B) setting price and output independently. 
C) setting price and output collusively. 
D) producing differentiated products.

Question 15

One characteristic of sequential games is that they all have first-mover advantages.

Accepted Answer

A) True 
 B)False

Question 16

Generally speaking, oligopolistic industries producing raw materials and semifinished goods usually offer differentiated products, while oligopolists producing consumer goods usually offer standardized products.

Accepted Answer

A) True 
 B)False

Question 17

Suppose an oligopolistic producer assumes its rivals will ignore a price increase but match a price cut.In this case the firm perceives its

Accepted Answer

A) demand curve as being of unit elasticity throughout. 
B) supply curve as kinked, being steeper below the going price than above. 
C) demand curve as kinked, being steeper below the going price than above. 
D) demand curve as kinked, being steeper above the going price than below. 
A) demand curve as being of unit elasticity throughout. 
B) supply curve as kinked, being steeper below the going price than above. 
C) demand curve as kinked, being steeper below the going price than above. 
D) demand curve as kinked, being steeper above the going price than below.

Question 18

Interindustry competition refers to the fact that

Accepted Answer

A) oligopolistic producers establish a common price for their products. 
B) products are identical in a purely competitive industry. 
C) firms that sell a product at one stage of production buy materials and parts from other firms at prior stages of production. 
D) in some markets, the producers of a certain commodity might face competition from products of other industries. 
A) oligopolistic producers establish a common price for their products. 
B) products are identical in a purely competitive industry. 
C) firms that sell a product at one stage of production buy materials and parts from other firms at prior stages of production. 
D) in some markets, the producers of a certain commodity might face competition from products of other industries.

Question 19

One major problem with four-firm concentration ratios is that they fail to take into account

Accepted Answer

A) the localized market for products. 
B) excess capacity in production. 
C) price leadership. 
D) mutual interdependence. 
A) the localized market for products. 
B) excess capacity in production. 
C) price leadership. 
D) mutual interdependence.

Question 20

The U.S.steel industry is an example of homogeneous oligopoly.

Accepted Answer

A) True 
 B)False

Exam 14: Oligopoly and Strategic Behavior

In which set of market models are there the most significant barriers to entry?

Mutual interdependence means that each firm in an oligopoly

In a Stackelberg duopoly,

Potential entry by new firms and competition from imports tend to worsen the economic inefficiency in an oligopoly.

Industry Y is dominated by five large firms that hold market shares of 20, 20, 25, 25, and 10.The Herfindahl index for this industry is

An empty threat is a statement of coercion that is not believed by the threatened firm.

The term oligopoly indicates

A Nash equilibrium can only occur in repeated games.

Which two market structures tend to be more commonly observed in the real world?

All other things equal, the larger the number of firms in an oligopolistic industry, the more difficult it is for those firms to collude.

Which of the following industries is an illustration of homogeneous oligopoly?

Assume that an industry is significantly affected by import competition from foreign suppliers.Taking this factor into account, it would mean that

In the United States cartels are

Homogeneous oligopoly exists where a small number of firms are

One characteristic of sequential games is that they all have first-mover advantages.

Generally speaking, oligopolistic industries producing raw materials and semifinished goods usually offer differentiated products, while oligopolists producing consumer goods usually offer standardized products.

Suppose an oligopolistic producer assumes its rivals will ignore a price increase but match a price cut.In this case the firm perceives its

Interindustry competition refers to the fact that

One major problem with four-firm concentration ratios is that they fail to take into account

The U.S.steel industry is an example of homogeneous oligopoly.

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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