Question 1

Other things equal, cartels and similar collusive arrangements are easier to establish and maintain

Accepted Answer

A) when there are ample opportunities for the firms to make secret price concessions to selected buyers. 
B) during periods of business-cycle stability and full employment. 
C) when the demand and cost conditions of the participating firms differ substantially. 
D) when the number of firms is relatively large. 
A) when there are ample opportunities for the firms to make secret price concessions to selected buyers. 
B) during periods of business-cycle stability and full employment. 
C) when the demand and cost conditions of the participating firms differ substantially. 
D) when the number of firms is relatively large.

Question 2

Prices are likely to be least flexible

Accepted Answer

A) in oligopoly. 
B) in monopolistic competition. 
C) where product demand is inelastic. 
D) in pure competition. 
A) in oligopoly. 
B) in monopolistic competition. 
C) where product demand is inelastic. 
D) in pure competition.

Question 3

If an oligopolist's competitors follow its price cuts but ignore its price increases, the oligopolist would end up holding its price constant even if its marginal cost changes.

Accepted Answer

A) True 
 B)False

Question 4

According to the definition of a positive-sum game, both players get positive payoffs.

Accepted Answer

A) True 
 B)False

Question 5

The increased use of plastic bags instead of paper bags in grocery stores and retail shops is an example of

Accepted Answer

A) overt collusion. 
B) covert collusion. 
C) import competition. 
D) interindustry competition. 
A) overt collusion. 
B) covert collusion. 
C) import competition. 
D) interindustry competition.

Question 6

One inherent factor that tends to destroy collusion among oligopolists is the

Accepted Answer

A) incentive to cheat. 
B) product differentiation. 
C) mutual interdependence. 
D) leadership of the dominant firm. 
A) incentive to cheat. 
B) product differentiation. 
C) mutual interdependence. 
D) leadership of the dominant firm.

Question 7

Game theory, which is used in studying oligopoly behavior, originated from the study of games such as the following, except

Accepted Answer

A) poker. 
B) solitaire. 
C) chess. 
D) bridge. 
A) poker. 
B) solitaire. 
C) chess. 
D) bridge.

Question 8

Game theory

Accepted Answer

A) is the analysis of how people (or firms) behave in strategic situations. 
B) is best suited for analyzing purely competitive markets. 
C) reveals that mergers between rival firms are self-defeating. 
D) reveals that price-fixing among firms reduces profits. 
A) is the analysis of how people (or firms) behave in strategic situations. 
B) is best suited for analyzing purely competitive markets. 
C) reveals that mergers between rival firms are self-defeating. 
D) reveals that price-fixing among firms reduces profits.

Question 9

Monopolistic competition and oligopoly are more common in the real world than pure competition and monopoly.

Accepted Answer

A) True 
 B)False

Question 10

We would expect a cartel to achieve

Accepted Answer

A) both allocative efficiency and productive efficiency. 
B) allocative efficiency but not productive efficiency. 
C) productive efficiency but not allocative efficiency. 
D) neither allocative efficiency nor productive efficiency. 
A) both allocative efficiency and productive efficiency. 
B) allocative efficiency but not productive efficiency. 
C) productive efficiency but not allocative efficiency. 
D) neither allocative efficiency nor productive efficiency.

Question 11

In competing with rivals, oligopolistic firms will tend to use

Accepted Answer

A) price cuts because they do not add to costs like advertising. 
B) advertising because it is less easily duplicated than price cuts. 
C) collusion because it is a legal way to increase market share. 
D) price wars because they will increase the profits of firms. 
A) price cuts because they do not add to costs like advertising. 
B) advertising because it is less easily duplicated than price cuts. 
C) collusion because it is a legal way to increase market share. 
D) price wars because they will increase the profits of firms.

Question 12

Mutual interdependence means that each oligopolistic firm

Accepted Answer

A) faces a perfectly elastic demand for its product. 
B) must consider the reactions of its rivals when it determines its price policy. 
C) produces a product identical to those of its rivals. 
D) produces a product similar but not identical to the products of its rivals. 
A) faces a perfectly elastic demand for its product. 
B) must consider the reactions of its rivals when it determines its price policy. 
C) produces a product identical to those of its rivals. 
D) produces a product similar but not identical to the products of its rivals.

Question 13

Backward induction in an extensive form game

Accepted Answer

A) allows the players to alter their strategies as the game is being played. 
B) is used to determine the Nash equilibrium of a game. 
C) is used to identify the decision nodes of a repeated game. 
D) is used primarily to establish whether players should compete or cooperate. 
A) allows the players to alter their strategies as the game is being played. 
B) is used to determine the Nash equilibrium of a game. 
C) is used to identify the decision nodes of a repeated game. 
D) is used primarily to establish whether players should compete or cooperate.

Question 14

The four-firm concentration ratio for the national industry does not capture the effects of all of the following, except

Accepted Answer

A) localized markets when transportation costs are high. 
B) interindustry competition. 
C) import competition when there is world trade. 
D) market coverage of the four largest firms. 
A) localized markets when transportation costs are high. 
B) interindustry competition. 
C) import competition when there is world trade. 
D) market coverage of the four largest firms.

Question 15

A major prediction of the kinked demand curve model is

Accepted Answer

A) price stability in oligopolies. 
B) price instability in oligopolies. 
C) stability of production costs in oligopolies. 
D) instability of costs in oligopolies. 
A) price stability in oligopolies. 
B) price instability in oligopolies. 
C) stability of production costs in oligopolies. 
D) instability of costs in oligopolies.

Question 16

A unique feature of an oligopolistic industry is

Accepted Answer

A) low barriers to entry. 
B) standardized products. 
C) diminishing marginal returns. 
D) mutual interdependence. 
A) low barriers to entry. 
B) standardized products. 
C) diminishing marginal returns. 
D) mutual interdependence.

Question 17

If the several oligopolistic firms that compose an industry behave collusively, the resulting price and output will most likely resemble those of

Accepted Answer

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

Question 18

Suppose that an industry is characterized by a few firms and price leadership.We would expect that

Accepted Answer

A) price would equal marginal cost. 
B) price would equal average total cost. 
C) price would exceed both marginal cost and average total cost. 
D) marginal revenue would exceed marginal cost. 
A) price would equal marginal cost. 
B) price would equal average total cost. 
C) price would exceed both marginal cost and average total cost. 
D) marginal revenue would exceed marginal cost.

Question 19

The incentive to cheat within a cartel increases with an increase in the following factors, except

Accepted Answer

A) the number of firms in the cartel. 
B) economic performance and industry sales. 
C) the number of potential entrants into the industry. 
D) the cost differences among firms. 
A) the number of firms in the cartel. 
B) economic performance and industry sales. 
C) the number of potential entrants into the industry. 
D) the cost differences among firms.

Question 20

Which of the following companies was not fined in 2011 for attempting to run an international cartel and fix prices?

Accepted Answer

A) Intel 
B) Danfoss 
C) Panasonic 
D) Whirlpool 
A) Intel 
B) Danfoss 
C) Panasonic 
D) Whirlpool

Exam 14: Oligopoly and Strategic Behavior

Other things equal, cartels and similar collusive arrangements are easier to establish and maintain

Prices are likely to be least flexible

If an oligopolist's competitors follow its price cuts but ignore its price increases, the oligopolist would end up holding its price constant even if its marginal cost changes.

According to the definition of a positive-sum game, both players get positive payoffs.

The increased use of plastic bags instead of paper bags in grocery stores and retail shops is an example of

One inherent factor that tends to destroy collusion among oligopolists is the

Game theory, which is used in studying oligopoly behavior, originated from the study of games such as the following, except

Game theory

Monopolistic competition and oligopoly are more common in the real world than pure competition and monopoly.

We would expect a cartel to achieve

In competing with rivals, oligopolistic firms will tend to use

Mutual interdependence means that each oligopolistic firm

Backward induction in an extensive form game

The four-firm concentration ratio for the national industry does not capture the effects of all of the following, except

A major prediction of the kinked demand curve model is

A unique feature of an oligopolistic industry is

If the several oligopolistic firms that compose an industry behave collusively, the resulting price and output will most likely resemble those of

Suppose that an industry is characterized by a few firms and price leadership.We would expect that

The incentive to cheat within a cartel increases with an increase in the following factors, except

Which of the following companies was not fined in 2011 for attempting to run an international cartel and fix prices?

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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