Question 1

The product in an oligopolistic market

Accepted Answer

A) is assumed to be homogeneous. 
B) is always differentiated from one firm to another. 
C) may be homogeneous or differentiated. 
D) has very many close substitutes. 
A) is assumed to be homogeneous. 
B) is always differentiated from one firm to another. 
C) may be homogeneous or differentiated. 
D) has very many close substitutes.

Question 2

The conclusion that oligopoly is inefficient relative to the competitive ideal must be qualified because

Accepted Answer

A) industry price leaders often select a price equal to marginal cost. 
B) over time oligopolistic industries may promote more rapid product development and greater improvement of production techniques than if they were purely competitive. 
C) increased output due to persuasive advertising may perfectly offset the restriction of output caused by monopoly power. 
D) many oligopolists sell their products in monopolistically competitive or even purely competitive industries. 
A) industry price leaders often select a price equal to marginal cost. 
B) over time oligopolistic industries may promote more rapid product development and greater improvement of production techniques than if they were purely competitive. 
C) increased output due to persuasive advertising may perfectly offset the restriction of output caused by monopoly power. 
D) many oligopolists sell their products in monopolistically competitive or even purely competitive industries.

Question 3

If advertising succeeds in enhancing brand loyalty among consumers, it tends to enhance the monopoly power of the seller.

Accepted Answer

A) True 
 B)False

Question 4

The mutual interdependence that characterizes oligopoly arises because

Accepted Answer

A) the products of various firms are homogeneous. 
B) the products of various firms are differentiated. 
C) each firm in an oligopoly depends on its own pricing strategy and that of its rivals. 
D) the demand curves of firms are kinked at the prevailing price. 
A) the products of various firms are homogeneous. 
B) the products of various firms are differentiated. 
C) each firm in an oligopoly depends on its own pricing strategy and that of its rivals. 
D) the demand curves of firms are kinked at the prevailing price.

Question 5

Suppose firms in a collusive oligopoly decide to establish their prices at a level that discourages new rivals from entering the industry. This is called

Accepted Answer

A) mutual interdependence. 
B) pricing the demand curve. 
C) limit pricing. 
D) price leadership. 
A) mutual interdependence. 
B) pricing the demand curve. 
C) limit pricing. 
D) price leadership.

Question 6

In the kinked-demand model of oligopoly, if one firm increases its price, the most likely reaction of the other firms will be to

Accepted Answer

A) decrease their prices. 
B) increase their prices. 
C) not change their prices. 
D) reduce their quantity. 
A) decrease their prices. 
B) increase their prices. 
C) not change their prices. 
D) reduce their quantity.

Question 7

List the four shortcomings of the four-firm concentration ratio.

Accepted Answer

The four shortcomings of the f

Question 8

Which of the following statements best describes the Internet market structure?

Accepted Answer

A) It is highly competitive, with many providers and no firms in a dominant position. 
B) There are a few large firms, such as Google, Facebook, and Amazon, but they each occupy their own niche and don't infringe on the others' territories. 
C) There are a few large firms, such as Google, Facebook, and Amazon, each dominating a particular sector but always trying to gain market share in another sector. 
D) It comprises firms that have been granted monopolies by the government and are highly regulated. 
A) It is highly competitive, with many providers and no firms in a dominant position. 
B) There are a few large firms, such as Google, Facebook, and Amazon, but they each occupy their own niche and don't infringe on the others' territories. 
C) There are a few large firms, such as Google, Facebook, and Amazon, each dominating a particular sector but always trying to gain market share in another sector. 
D) It comprises firms that have been granted monopolies by the government and are highly regulated.

Question 9

Define a simultaneous one-time game.

Accepted Answer

A simultaneous one-time game is a strate

Question 10

Both collusive and noncollusive oligopoly models suggest that price changes will be relatively infrequent in these types of industries.

Accepted Answer

A) True 
 B)False

Question 11

If neither player has an incentive to deviate from the outcome of a game, the outcome is a Nash equilibrium.

Accepted Answer

A) True 
 B)False

Question 12

If there are significant economies of scale in an industry, then

Accepted Answer

A) a firm that is large may be able to produce at a lower unit cost than can a small firm. 
B) a firm that is large will have to charge a higher price than will a small firm. 
C) entry to that industry will be easy. 
D) firms must differentiate their products to earn economic profits. 
A) a firm that is large may be able to produce at a lower unit cost than can a small firm. 
B) a firm that is large will have to charge a higher price than will a small firm. 
C) entry to that industry will be easy. 
D) firms must differentiate their products to earn economic profits.

Question 13

Concentration ratios may be inaccurate indicators of the degree of monopoly power in an industry because

Accepted Answer

A) they include interindustry competition. 
B) foreign competition is not considered. 
C) they are only calculated for local and regional markets. 
D) they do not distinguish between normal and economic profit. 
A) they include interindustry competition. 
B) foreign competition is not considered. 
C) they are only calculated for local and regional markets. 
D) they do not distinguish between normal and economic profit.

Question 14

The diagram shows the extensive form version of a strategic game between the two nationally dominant coffee sellers, Corporate Coffee and Jumbo Java, both of whom are considering opening coffee shops in a new town. The payoffs represent, in thousands per month, the profit (or loss)the firm will realize from its decision. Assuming the two firms have perfect information about this game, what can we conclude about the existence of a Nash equilibrium?

Accepted Answer

A) There is a Nash equilibrium, but it occurs at a different outcome than the solution to the game. 
B) There is no Nash equilibrium for this game. 
C) The solution to the game is a Nash equilibrium. 
D) There are multiple Nash equilibriums for this game 
A) There is a Nash equilibrium, but it occurs at a different outcome than the solution to the game. 
B) There is no Nash equilibrium for this game. 
C) The solution to the game is a Nash equilibrium. 
D) There are multiple Nash equilibriums for this game

Question 15

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 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

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

Accepted Answer

A) True 
 B)False

Question 18

Repeated games with reciprocity tend to reduce the payoffs for both players, as compared to a one-time game with a similar payoff matrix.

Accepted Answer

A) True 
 B)False

Question 19

Refer to the payoff matrix. Suppose that Speedy Bike and Power Bike are the only two bicycle manufacturing firms serving the market. Both can choose large or small advertising budgets. If this is a repeated game with no cooperation or reciprocity, which cell represents the final outcome we would expect to occur?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
A) A 
B) B 
C) C 
D) D

Question 20

The four-firm concentration ratio for the industry described in this table is

Accepted Answer

A) 100 percent. 
B) indeterminate since we don't know which four firms are included. 
C) 70 percent. 
D) 30 percent. 
A) 100 percent. 
B) indeterminate since we don't know which four firms are included. 
C) 70 percent. 
D) 30 percent.

Exam 14: Oligopoly and Strategic Behavior

The product in an oligopolistic market

The conclusion that oligopoly is inefficient relative to the competitive ideal must be qualified because

If advertising succeeds in enhancing brand loyalty among consumers, it tends to enhance the monopoly power of the seller.

The mutual interdependence that characterizes oligopoly arises because

Suppose firms in a collusive oligopoly decide to establish their prices at a level that discourages new rivals from entering the industry. This is called

In the kinked-demand model of oligopoly, if one firm increases its price, the most likely reaction of the other firms will be to

List the four shortcomings of the four-firm concentration ratio.

Which of the following statements best describes the Internet market structure?

Define a simultaneous one-time game.

Both collusive and noncollusive oligopoly models suggest that price changes will be relatively infrequent in these types of industries.

If neither player has an incentive to deviate from the outcome of a game, the outcome is a Nash equilibrium.

If there are significant economies of scale in an industry, then

Concentration ratios may be inaccurate indicators of the degree of monopoly power in an industry because

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

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

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

Repeated games with reciprocity tend to reduce the payoffs for both players, as compared to a one-time game with a similar payoff matrix.

The four-firm concentration ratio for the industry described in this table is

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures Caused by Externalities Asymmetric Information

Public Goods, Public Choice, 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

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The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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