Question 1

In game theory, the credibility of a threat

Accepted Answer

A) determines whether or not a Nash equilibrium to a game exists. 
B) influences the degree of cooperation between two rivals. 
C) is relevant only in simultaneous games. 
D) determines whether or not a firm has a dominant strategy. 
A) determines whether or not a Nash equilibrium to a game exists. 
B) influences the degree of cooperation between two rivals. 
C) is relevant only in simultaneous games. 
D) determines whether or not a firm has a dominant strategy.

Question 2

Suppose that Firm B in this table was found guilty of antitrust violations and split into two firms with equal market share. This would cause the Herfindahl index to

Accepted Answer

A) rise to 2,500. 
B) fall to 2,500. 
C) fall to 2,450. 
D) rise to 2,450. 
A) rise to 2,500. 
B) fall to 2,500. 
C) fall to 2,450. 
D) rise to 2,450.

Question 3

Mergers of firms in an industry tend to

Accepted Answer

A) transform monopolistic competition into pure competition. 
B) transform monopolistic competition into oligopoly. 
C) reduce the Herfindahl index for the industry. 
D) break up an oligopoly. 
A) transform monopolistic competition into pure competition. 
B) transform monopolistic competition into oligopoly. 
C) reduce the Herfindahl index for the industry. 
D) break up an oligopoly.

Question 4

Use your basic knowledge and your understanding of market structures to answer this question. Which of the following companies most closely approximates a differentiated oligopolist in a highly concentrated industry?

Accepted Answer

A) Subway Sandwiches 
B) Pittsburgh Plate Glass 
C) Ford Motor Company 
D) Kaiser Aluminum 
A) Subway Sandwiches 
B) Pittsburgh Plate Glass 
C) Ford Motor Company 
D) Kaiser Aluminum

Question 5

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 6

When near-monopolies, like Google in Internet search and Amazon in online shopping, start infringing on each other's turf, what kind of competition results?

Accepted Answer

A) pure competition 
B) monopolistic competition 
C) oligopolistic competition 
D) legislated competition 
A) pure competition 
B) monopolistic competition 
C) oligopolistic competition 
D) legislated competition

Question 7

An industry having a four-firm concentration ratio of 32 percent

Accepted Answer

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

Question 8

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

Accepted Answer

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

Question 9

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 10

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 11

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

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

Informal collusion to restrict output and increase prices is sometimes referred to as a

Accepted Answer

A) merger. 
B) cartel. 
C) tacit understanding. 
D) kinked-demand oligopoly. 
A) merger. 
B) cartel. 
C) tacit understanding. 
D) kinked-demand oligopoly.

Question 14

If one player in a game has a dominant strategy, the other player must also have a dominant strategy.

Accepted Answer

A) True 
 B)False

Question 15

Concentration ratios measure the

Accepted Answer

A) geographic distribution of the largest corporations in each industry. 
B) degree to which a particular firm accounts for sales in a given metropolitan area. 
C) percentage of total industry sales accounted for by the largest firms in the industry. 
D) dependence of an industry on its resource suppliers. 
A) geographic distribution of the largest corporations in each industry. 
B) degree to which a particular firm accounts for sales in a given metropolitan area. 
C) percentage of total industry sales accounted for by the largest firms in the industry. 
D) dependence of an industry on its resource suppliers.

Question 16

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 17

In a zero-sum game, the gains by one player will be exactly offset by the losses of the other.

Accepted Answer

A) True 
 B)False

Question 18

The payoff matrix represents

Accepted Answer

A) a zero-sum game. 
B) a negative-sum game. 
C) a positive-sum game. 
D) a game that can only be played in a single time period. 
A) a zero-sum game. 
B) a negative-sum game. 
C) a positive-sum game. 
D) a game that can only be played in a single time period.

Question 19

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 20

What is the prisoner's dilemma?

Accepted Answer

The prisoner's dilemma is a famous game

Exam 14: Oligopoly and Strategic Behavior

In game theory, the credibility of a threat

Suppose that Firm B in this table was found guilty of antitrust violations and split into two firms with equal market share. This would cause the Herfindahl index to

Mergers of firms in an industry tend to

Use your basic knowledge and your understanding of market structures to answer this question. Which of the following companies most closely approximates a differentiated oligopolist in a highly concentrated industry?

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

When near-monopolies, like Google in Internet search and Amazon in online shopping, start infringing on each other's turf, what kind of competition results?

An industry having a four-firm concentration ratio of 32 percent

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

A unique feature of an oligopolistic industry is

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

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

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

Informal collusion to restrict output and increase prices is sometimes referred to as a

If one player in a game has a dominant strategy, the other player must also have a dominant strategy.

Concentration ratios measure the

In a Stackelberg duopoly,

In a zero-sum game, the gains by one player will be exactly offset by the losses of the other.

The payoff matrix represents

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

What is the prisoner's dilemma?

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

Health Care

Immigration

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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