Question 1

Two industries that have the same four-firm concentration ratio can have significantly different Herfindahl indexes.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following best describes the efficiency results in oligopoly?

Accepted Answer

A) P > MC and P = minimum ATC. 
B) P = MC and P > minimum ATC. 
C) P = MC and P = minimum ATC. 
D) P > MC and P > minimum ATC. 
A) P > MC and P = minimum ATC. 
B) P = MC and P > minimum ATC. 
C) P = MC and P = minimum ATC. 
D) P > MC and P > minimum ATC.

Question 3

Other things being equal, a firm in a cartel will most likely cheat on a price-fixing agreement by

Accepted Answer

A) increasing price and restricting its output. 
B) organizing promotions of the product. 
C) secretly increasing sales to a large number of small customers. 
D) secretly lowering price and increasing sales to a few customers. 
A) increasing price and restricting its output. 
B) organizing promotions of the product. 
C) secretly increasing sales to a large number of small customers. 
D) secretly lowering price and increasing sales to a few customers.

Question 4

Which statement concerning the kinked demand curve model of oligopoly is false?

Accepted Answer

A) It addresses the question of price "stickiness." 
B) It assumes when one oligopolist raises the price, all others will follow. 
C) The portion of the demand curve above the "kink" is more elastic than the portion below. 
D) The firm's marginal costs can sometimes shift without changing the profit-maximizing price and output. 
A) It addresses the question of price "stickiness." 
B) It assumes when one oligopolist raises the price, all others will follow. 
C) The portion of the demand curve above the "kink" is more elastic than the portion below. 
D) The firm's marginal costs can sometimes shift without changing the profit-maximizing price and output.

Question 5

A positive effect of advertising for society is that it

Accepted Answer

A) increases market share for the dominant firm in the industry. 
B) provides useful information to reduce search cost for consumers. 
C) raises barriers to entry into the industry and protects existing firms. 
D) creates price leadership and gives firms guidance in dealing with rivals. 
A) increases market share for the dominant firm in the industry. 
B) provides useful information to reduce search cost for consumers. 
C) raises barriers to entry into the industry and protects existing firms. 
D) creates price leadership and gives firms guidance in dealing with rivals.

Question 6

Price leadership in an oligopoly entails an implicit or tacit form of collusion.

Accepted Answer

A) True 
 B)False

Question 7

The larger the Herfindahl index, the

Accepted Answer

A) less the degree of import competition in an industry. 
B) greater the degree of import competition in an industry. 
C) less the degree of market power in an industry. 
D) greater the degree of market power in an industry. 
A) less the degree of import competition in an industry. 
B) greater the degree of import competition in an industry. 
C) less the degree of market power in an industry. 
D) greater the degree of market power in an industry.

Question 8

As a general rule, oligopoly exists when the four-firm concentration ratio

Accepted Answer

A) equals the Herfindahl index. 
B) yields a Herfindahl index below 500. 
C) is 40 percent or more. 
D) is 50 percent or more. 
A) equals the Herfindahl index. 
B) yields a Herfindahl index below 500. 
C) is 40 percent or more. 
D) is 50 percent or more.

Question 9

A zero-sum game is one where a player will always end up gaining nothing, regardless of his strategy.

Accepted Answer

A) True 
 B)False

Question 10

In an oligopoly, producers' agreements to restrict output tend to be unstable because each firm has an incentive to

Accepted Answer

A) produce more than its output quota. 
B) lower both its price and its output. 
C) raise its price above the cooperative price. 
D) establish competitive price and output levels. 
A) produce more than its output quota. 
B) lower both its price and its output. 
C) raise its price above the cooperative price. 
D) establish competitive price and output levels.

Question 11

The copper, aluminum, cement, and industrial alcohol industries are examples of

Accepted Answer

A) interproduct competition. 
B) homogeneous oligopoly. 
C) monopolistic competition. 
D) differentiated oligopoly. 
A) interproduct competition. 
B) homogeneous oligopoly. 
C) monopolistic competition. 
D) differentiated oligopoly.

Question 12

Industry Y is dominated by five large firms that hold market shares of 20, 25, 15, 10, and 25 percent.The four-firm concentration ratio for this industry is

Accepted Answer

A) 70 percent. 
B) 80 percent. 
C) 85 percent. 
D) 90 percent. 
A) 70 percent. 
B) 80 percent. 
C) 85 percent. 
D) 90 percent.

Question 13

In an oligopolistic market,

Accepted Answer

A) one firm is always dominant. 
B) products may be standardized or differentiated. 
C) the four largest firms account for 20 percent or less of total sales. 
D) the industry is monopolistically competitive. 
A) one firm is always dominant. 
B) products may be standardized or differentiated. 
C) the four largest firms account for 20 percent or less of total sales. 
D) the industry is monopolistically competitive.

Question 14

This industry shown in this table illustrates

Accepted Answer

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

Question 15

The Herfindahl index for an industry is 2,550.Which of the following sets of market shares and industry with four firms would produce such an index?

Accepted Answer

A) 20, 20, 30, and 30 
B) 25, 25, 25, and 25 
C) 20, 25, 25, and 30 
D) 10, 20, 30, and 40 
A) 20, 20, 30, and 30 
B) 25, 25, 25, and 25 
C) 20, 25, 25, and 30 
D) 10, 20, 30, and 40

Question 16

Advertising can enhance economic efficiency when it

Accepted Answer

A) increases brand loyalty. 
B) raises entry barriers. 
C) increases consumer awareness of substitute products. 
D) boosts average total cost. 
A) increases brand loyalty. 
B) raises entry barriers. 
C) increases consumer awareness of substitute products. 
D) boosts average total cost.

Question 17

Advertising can impede economic efficiency when it

Accepted Answer

A) increases entry barriers. 
B) reduces brand loyalty. 
C) enables firms to achieve substantial economies of scale. 
D) increases consumer awareness of substitute products. 
A) increases entry barriers. 
B) reduces brand loyalty. 
C) enables firms to achieve substantial economies of scale. 
D) increases consumer awareness of substitute products.

Question 18

Which cannot be a characteristic of an oligopolistic industry?

Accepted Answer

A) differentiated products 
B) a large number of consumers 
C) significant barriers to entry 
D) a perfectly elastic firm demand curve 
A) differentiated products 
B) a large number of consumers 
C) significant barriers to entry 
D) a perfectly elastic firm demand curve

Question 19

Prices in oligopolistic industries are predicted to fluctuate widely and frequently compared to other market structures.

Accepted Answer

A) True 
 B)False

Question 20

In game theory, a repeated game is one

Accepted Answer

A) where a pair of players mimic the actions of another pair of players. 
B) that recurs more than once between two players. 
C) where the payoff matrix shows equal payoffs for two players. 
D) that is replicated in other parts of the market. 
A) where a pair of players mimic the actions of another pair of players. 
B) that recurs more than once between two players. 
C) where the payoff matrix shows equal payoffs for two players. 
D) that is replicated in other parts of the market.

Exam 14: Oligopoly and Strategic Behavior

Two industries that have the same four-firm concentration ratio can have significantly different Herfindahl indexes.

Which of the following best describes the efficiency results in oligopoly?

Other things being equal, a firm in a cartel will most likely cheat on a price-fixing agreement by

Which statement concerning the kinked demand curve model of oligopoly is false?

A positive effect of advertising for society is that it

Price leadership in an oligopoly entails an implicit or tacit form of collusion.

The larger the Herfindahl index, the

As a general rule, oligopoly exists when the four-firm concentration ratio

A zero-sum game is one where a player will always end up gaining nothing, regardless of his strategy.

In an oligopoly, producers' agreements to restrict output tend to be unstable because each firm has an incentive to

The copper, aluminum, cement, and industrial alcohol industries are examples of

Industry Y is dominated by five large firms that hold market shares of 20, 25, 15, 10, and 25 percent.The four-firm concentration ratio for this industry is

In an oligopolistic market,

This industry shown in this table illustrates

The Herfindahl index for an industry is 2,550.Which of the following sets of market shares and industry with four firms would produce such an index?

Advertising can enhance economic efficiency when it

Advertising can impede economic efficiency when it

Which cannot be a characteristic of an oligopolistic industry?

Prices in oligopolistic industries are predicted to fluctuate widely and frequently compared to other market structures.

In game theory, a repeated game is one

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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