Question 1

In Porter's Five Competitive Forces model, "competition from substitute goods or services" refers to

Accepted Answer

A) substitute products that come from outside the industry. 
B) substitute products that come from domestic competitors in the same industry. 
C) substitute products that come from foreign competitors in the same industry. 
D) competition from producers of substitutes who outsource their production. 
A) substitute products that come from outside the industry. 
B) substitute products that come from domestic competitors in the same industry. 
C) substitute products that come from foreign competitors in the same industry. 
D) competition from producers of substitutes who outsource their production.

Question 2

Table 14-5
   
Martin and Lewis each run one of the two bingo parlors in Schenectady. Both consider offering free rides to and from the parlors. Table 14-5 shows the payoff matrix containing the expected weekly profits for each bingo parlor.
-Refer to Table 14-5.Does Lewis have a dominant strategy? If yes, what is it?

Accepted Answer

A) Yes, Lewis's dominant strategy is to not offer free rides. 
B) Yes, Lewis's dominant strategy is to offer free rides. 
C) No, Lewis does not have a dominant strategy-his best outcome depends on what Martin does. 
D) Yes, Lewis's dominant strategy is to wait and see what Martin does first. 
A) Yes, Lewis's dominant strategy is to not offer free rides. 
B) Yes, Lewis's dominant strategy is to offer free rides. 
C) No, Lewis does not have a dominant strategy-his best outcome depends on what Martin does. 
D) Yes, Lewis's dominant strategy is to wait and see what Martin does first.

Question 3

The bargaining power of suppliers increases if

Accepted Answer

A) the cost of switching suppliers is relatively low. 
B) there are only a few competitors to the supplier. 
C) the input in question is not a critical component of production. 
D) the input supplied is relatively standardized. 
A) the cost of switching suppliers is relatively low. 
B) there are only a few competitors to the supplier. 
C) the input in question is not a critical component of production. 
D) the input supplied is relatively standardized.

Question 4

Which of the following is not among Porter's competitive forces?

Accepted Answer

A) power of buyers 
B) power of suppliers 
C) threat of new entrants 
D) changing consumer tastes 
A) power of buyers 
B) power of suppliers 
C) threat of new entrants 
D) changing consumer tastes

Question 5

Producing a homogeneous product occurs in which of the following industries?

Accepted Answer

A) oligopoly, monopolistic competition, and perfect competition 
B) perfect competition only 
C) oligopoly and perfect competition 
D) monopolistic competition and perfect competition 
A) oligopoly, monopolistic competition, and perfect competition 
B) perfect competition only 
C) oligopoly and perfect competition 
D) monopolistic competition and perfect competition

Question 6

Table 14-1
   
LimoZeenz and AirPorter and are the only two airport shuttle and limousine rental service companies in the mid-sized town of Shady Shores. Each firm must decide on whether to offer its customers a mid-week discount for airport transportation. Table 14-1 shows the payoff matrix for profits earned by each company based on either offering or not offering the discount.
-Refer to Table 14-1.Is there a dominant strategy for AirPorter and if so, what is it?

Accepted Answer

A) No, its outcome depends on what LimoZeenz does. 
B) Yes, AirPorter should offer the mid-week discount. 
C) Yes, AirPorter should not offer the mid-week discount. 
D) Yes, AirPorter's dominant strategy is to collude with LimoZeenz. 
A) No, its outcome depends on what LimoZeenz does. 
B) Yes, AirPorter should offer the mid-week discount. 
C) Yes, AirPorter should not offer the mid-week discount. 
D) Yes, AirPorter's dominant strategy is to collude with LimoZeenz.

Question 7

The breakfast cereal industry has a four-firm concentration ratio of 80 percent.Is this enough information to classify the industry as an oligopoly? Is a high concentration ratio evidence that an industry is not competitive?

Accepted Answer

Most economists classify an industry wit

Question 8

Figure 14-6
  
-Refer to Figure 14-6 Use the decision tree to determine whether Pizza Hut should deter Domino's from entering the market for pasta salad.Assume that each firm must earn a 25% return on investment to break even.Explain Pizza Hut's decision process.

Accepted Answer

If Pizza Hut charges $7.49 for its pasta

Question 9

An oligopoly firm is similar to a monopolistically competitive firm in that

Accepted Answer

A) both firms face the prisoner's dilemma. 
B) both operate in a market in which there are significant entry barriers. 
C) both firms have market power. 
D) both firms are in industries characterized by interdependence of firms. 
A) both firms face the prisoner's dilemma. 
B) both operate in a market in which there are significant entry barriers. 
C) both firms have market power. 
D) both firms are in industries characterized by interdependence of firms.

Question 10

A subgame-perfect equilibrium is a Nash equilibrium in which no player can make himself better off by changing his decision at any decision node.

Accepted Answer

A) True 
 B)False

Question 11

An oligopolist's demand curve is

Accepted Answer

A) identical to that of a perfectly competitive firm. 
B) identical to that of a monopolistically competitive firm. 
C) vertical on a price-quantity diagram. 
D) unknown because a response of firms to price changes by rivals is uncertain. 
A) identical to that of a perfectly competitive firm. 
B) identical to that of a monopolistically competitive firm. 
C) vertical on a price-quantity diagram. 
D) unknown because a response of firms to price changes by rivals is uncertain.

Question 12

A cartel is

Accepted Answer

A) a temporary storage facility for automobiles. 
B) a group of firms that enter into an informal agreement to fix prices to maximize joint profits. 
C) a group of firms that enter into a formal agreement to fix prices to maximize joint profits. 
D) an example of a group of firms that collectively regulate a competitive industry. 
A) a temporary storage facility for automobiles. 
B) a group of firms that enter into an informal agreement to fix prices to maximize joint profits. 
C) a group of firms that enter into a formal agreement to fix prices to maximize joint profits. 
D) an example of a group of firms that collectively regulate a competitive industry.

Question 13

A fundamental assumption in game theory is that players do not interact with each other.

Accepted Answer

A) True 
 B)False

Question 14

Producing a differentiated product occurs in which of the following industries?

Accepted Answer

A) oligopoly, monopolistic competition, and perfect competition 
B) monopolistic competition only 
C) oligopoly only 
D) monopolistic competition and oligopoly 
A) oligopoly, monopolistic competition, and perfect competition 
B) monopolistic competition only 
C) oligopoly only 
D) monopolistic competition and oligopoly

Question 15

A form of implicit collusion where one firm in an oligopoly announces a price change which is matched by other firms in the same industry is

Accepted Answer

A) "follow the leader" pricing. 
B) price leadership. 
C) retaliation pricing. 
D) "tit-for-tat" pricing. 
A) "follow the leader" pricing. 
B) price leadership. 
C) retaliation pricing. 
D) "tit-for-tat" pricing.

Question 16

The bargaining power of buyers of inputs increases if

Accepted Answer

A) there are many large buyers. 
B) the input in question has few substitutes. 
C) the input in question is not a critical component of production. 
D) there are wide variations in the quality of inputs from supplier to supplier. 
A) there are many large buyers. 
B) the input in question has few substitutes. 
C) the input in question is not a critical component of production. 
D) there are wide variations in the quality of inputs from supplier to supplier.

Question 17

Table 14-2
   
Table 14-2 shows the payoff matrix for Walmart and Target from every combination of pricing strategies for the popular PlayStation 4. At the start of the game each firm charges a low price and each earns a profit of $7,000.
-Refer to Table 14-2.For each firm, is there a better outcome than the current situation in which each firm charges the low price and earns a profit of $7,000?

Accepted Answer

A) Yes, the firms can implicitly collude and agree to charge a higher price. 
B) No, there is no incentive for each firm to consider any other strategy. 
C) No, any other strategy hurts consumers. 
D) Yes, each firm can implicitly agree to increase output and not to deviate from a low price. 
A) Yes, the firms can implicitly collude and agree to charge a higher price. 
B) No, there is no incentive for each firm to consider any other strategy. 
C) No, any other strategy hurts consumers. 
D) Yes, each firm can implicitly agree to increase output and not to deviate from a low price.

Question 18

Which of the following is most likely to exert the bargaining power of a buyer?

Accepted Answer

A) Barnes and Noble purchases books from publishers for sale in its online stores. 
B) Walmart, the world's largest discount store, seeks vendors to supply products made exclusively for its stores. 
C) Ground beef producers seek to purchase cattle from ranchers. 
D) Cowgirl Creamery, a small cheese producer, seeks a dairy farm for its organic milk supplies. 
A) Barnes and Noble purchases books from publishers for sale in its online stores. 
B) Walmart, the world's largest discount store, seeks vendors to supply products made exclusively for its stores. 
C) Ground beef producers seek to purchase cattle from ranchers. 
D) Cowgirl Creamery, a small cheese producer, seeks a dairy farm for its organic milk supplies.

Question 19

Economies of scale can lead to an oligopolistic market structure because

Accepted Answer

A) if larger firms have lower costs, new small entrants will not be able to produce at the low costs achieved by the big established firms. 
B) if economies of scale are insignificant, only a few firms are able to produce at the low costs achieved by the big established firms. 
C) a few firms can force rivals to produce at low levels of output. 
D) a few firms can use high profits to keep out new entrants. 
A) if larger firms have lower costs, new small entrants will not be able to produce at the low costs achieved by the big established firms. 
B) if economies of scale are insignificant, only a few firms are able to produce at the low costs achieved by the big established firms. 
C) a few firms can force rivals to produce at low levels of output. 
D) a few firms can use high profits to keep out new entrants.

Question 20

Consider two craft bourbons distilled in Brooklyn, New York: Kings County and Stillhouse.If the distilleries advertise, they can both sell more bourbon and increase their revenue.However, the cost of advertising more than offsets the increased revenue so that each distillery ends up with a lower profit than if they do not advertise.On the other hand, if only one advertises, that distillery increases its market share and also its profit.
a.Construct a payoff matrix using the following hypothetical information: If neither distillery advertises, each earns a profit of $500,000 per month.If both advertise, each earns a profit of $250,000 per month.If one advertises and the other does not, the distillery that advertises earns a profit of $750,000 and the distillery that does not advertise earns a profit of $125,000.
b.If Kings County wants to maximize profit, will it advertise? Briefly explain.
c.If Stillhouse wants to maximize profit, will it advertise? Briefly explain.
d.Is there a dominant strategy for each distiller? Briefly explain.

Accepted Answer

a.The payoff matrix:
 @#IMG-DLM& 
b.If Kings Count

In Porter's Five Competitive Forces model, "competition from substitute goods or services" refers to

The bargaining power of suppliers increases if

Which of the following is not among Porter's competitive forces?

Producing a homogeneous product occurs in which of the following industries?

The breakfast cereal industry has a four-firm concentration ratio of 80 percent.Is this enough information to classify the industry as an oligopoly? Is a high concentration ratio evidence that an industry is not competitive?

Figure 14-6 -Refer to Figure 14-6 Use the decision tree to determine whether Pizza Hut should deter Domino's from entering the market for pasta salad.Assume that each firm must earn a 25% return on investment to break even.Explain Pizza Hut's decision process.

An oligopoly firm is similar to a monopolistically competitive firm in that

A subgame-perfect equilibrium is a Nash equilibrium in which no player can make himself better off by changing his decision at any decision node.

An oligopolist's demand curve is

A cartel is

A fundamental assumption in game theory is that players do not interact with each other.

Producing a differentiated product occurs in which of the following industries?

A form of implicit collusion where one firm in an oligopoly announces a price change which is matched by other firms in the same industry is

The bargaining power of buyers of inputs increases if

Which of the following is most likely to exert the bargaining power of a buyer?

Economies of scale can lead to an oligopolistic market structure because

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

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Exam 14: Oligopoly: Firms in Less Competitive Markets

In Porter's Five Competitive Forces model, "competition from substitute goods or services" refers to

The bargaining power of suppliers increases if

Which of the following is not among Porter's competitive forces?

Producing a homogeneous product occurs in which of the following industries?

The breakfast cereal industry has a four-firm concentration ratio of 80 percent.Is this enough information to classify the industry as an oligopoly? Is a high concentration ratio evidence that an industry is not competitive?

Figure 14-6 -Refer to Figure 14-6 Use the decision tree to determine whether Pizza Hut should deter Domino's from entering the market for pasta salad.Assume that each firm must earn a 25% return on investment to break even.Explain Pizza Hut's decision process.

An oligopoly firm is similar to a monopolistically competitive firm in that

A subgame-perfect equilibrium is a Nash equilibrium in which no player can make himself better off by changing his decision at any decision node.

An oligopolist's demand curve is

A cartel is

A fundamental assumption in game theory is that players do not interact with each other.

Producing a differentiated product occurs in which of the following industries?

A form of implicit collusion where one firm in an oligopoly announces a price change which is matched by other firms in the same industry is

The bargaining power of buyers of inputs increases if

Which of the following is most likely to exert the bargaining power of a buyer?

Economies of scale can lead to an oligopolistic market structure because

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Filters