Question 1

Interdependence of firms is most common in

Accepted Answer

A) monopolistically competitive industries. 
B) monopolistic industries. 
C) monopolistically competitive and oligopolistic industries. 
D) oligopolistic industries. 
A) monopolistically competitive industries. 
B) monopolistic industries. 
C) monopolistically competitive and oligopolistic industries. 
D) oligopolistic industries.

Question 2

Table 14-7
   
The payoff matrix shown above assumes that Perfect Plants and Floribunda Florist must decide whether to offer same-day delivery for their products. The matrix shows how much profit each firm will earn if it does or does not offer same-day delivery. The amount of profit for one firm depends on whether the other firm offers same-day delivery.
-Refer to Table 14-7.Which of the following statements is true?

Accepted Answer

A) Neither Perfect nor Floribunda have a dominant strategy. 
B) Perfect's dominant strategy is to offer same-day delivery; Floribunda's dominant strategy is to not offer same-day delivery. 
C) Floribunda's dominant strategy is to offer same-day delivery; Perfect's dominant strategy is to not offer same-day delivery. 
D) The dominant strategy for both firms is to offer same-day delivery. 
A) Neither Perfect nor Floribunda have a dominant strategy. 
B) Perfect's dominant strategy is to offer same-day delivery; Floribunda's dominant strategy is to not offer same-day delivery. 
C) Floribunda's dominant strategy is to offer same-day delivery; Perfect's dominant strategy is to not offer same-day delivery. 
D) The dominant strategy for both firms is to offer same-day delivery.

Question 3

The profit-maximizing level of output and the profit-maximizing price for an oligopolist cannot be calculated when we don't know

Accepted Answer

A) what the concentration ratio for the oligopolist's industry is. 
B) what the minimum efficient scale in the oligopolist's industry is. 
C) the demand curve and the marginal revenue curve of the oligopolist. 
D) the type of barrier to entry that exists in the oligopolist's industry. 
A) what the concentration ratio for the oligopolist's industry is. 
B) what the minimum efficient scale in the oligopolist's industry is. 
C) the demand curve and the marginal revenue curve of the oligopolist. 
D) the type of barrier to entry that exists in the oligopolist's industry.

Question 4

In which of the following cartels is total cartel profit likely to be the highest?

Accepted Answer

A) a cartel made up of equal sized firms each producing different quantities of a differentiated product 
B) a cartel made up of firms of various sizes each producing different quantities of a homogeneous product 
C) a cartel made up of firms of various sizes each producing the same quantity of a differentiated product 
D) a cartel made up of identical firms each producing the same quantity of a homogeneous product 
A) a cartel made up of equal sized firms each producing different quantities of a differentiated product 
B) a cartel made up of firms of various sizes each producing different quantities of a homogeneous product 
C) a cartel made up of firms of various sizes each producing the same quantity of a differentiated product 
D) a cartel made up of identical firms each producing the same quantity of a homogeneous product

Question 5

Which of the following is not part of an oligopolist's business strategy?

Accepted Answer

A) meeting worker health and safety standards required of all firms 
B) deciding the level of total output of a new product 
C) determining the amount of advertising a new product needs 
D) setting the product's price after considering what rivals will do 
A) meeting worker health and safety standards required of all firms 
B) deciding the level of total output of a new product 
C) determining the amount of advertising a new product needs 
D) setting the product's price after considering what rivals will do

Question 6

Which of the following statements is generally true?

Accepted Answer

A) Rivalry is less the larger the number of firms in an industry. 
B) The smaller the number of firms in an industry, the greater the rivalry. 
C) The larger the number of firms in an industry, the greater the rivalry. 
D) The degree of rivalry in an industry is largely independent of the number of firms. 
A) Rivalry is less the larger the number of firms in an industry. 
B) The smaller the number of firms in an industry, the greater the rivalry. 
C) The larger the number of firms in an industry, the greater the rivalry. 
D) The degree of rivalry in an industry is largely independent of the number of firms.

Question 7

A reason why there is more competition in the restaurant industry than in the music streaming industry is that restaurants

Accepted Answer

A) have to cater to a variety of consumer tastes while music streaming companies do not. 
B) unlike music streaming companies, have to abide by government sanitation rules. 
C) unlike music streaming companies, do not have significant economies of scale. 
D) have more elastic demand for their product compared to music streaming companies. 
A) have to cater to a variety of consumer tastes while music streaming companies do not. 
B) unlike music streaming companies, have to abide by government sanitation rules. 
C) unlike music streaming companies, do not have significant economies of scale. 
D) have more elastic demand for their product compared to music streaming companies.

Question 8

Selling baked goods out of your home or apartment is illegal in Wisconsin and New Jersey.In these states, baked goods must be prepared in commercial kitchens that are subject to state inspection if they are to be sold to the public.For home bakers in these two states, the barrier to entry they face is

Accepted Answer

A) due to economies of scale. 
B) due to ownership of a key resource. 
C) government imposed. 
D) self-imposed. 
A) due to economies of scale. 
B) due to ownership of a key resource. 
C) government imposed. 
D) self-imposed.

Question 9

An oligopolistic industry is characterized by all of the following except

Accepted Answer

A) existence of entry barriers. 
B) the possibility of reaping long-run economic profits. 
C) firms pursuing aggressive business strategies, independent of rivals' strategies. 
D) production of standardized or differentiated products. 
A) existence of entry barriers. 
B) the possibility of reaping long-run economic profits. 
C) firms pursuing aggressive business strategies, independent of rivals' strategies. 
D) production of standardized or differentiated products.

Question 10

Since 1972, the world price of oil has been largely determined by OPEC, which controls about 75 percent of the world's proven oil reserves.Since 1972 the price of oil has

Accepted Answer

A) fluctuated. OPEC's situation is an example of a prisoner's dilemma. 
B) risen slowly, but steadily. Members of OPEC fear that if they raise the price of oil too quickly this will lead oil-buying nations to accuse OPEC of price gouging, which is illegal under international law. 
C) steadily fallen through the 1970s, then risen continually in the years since then. OPEC's actions are an example of implicit collusion. 
D) been tied by OPEC to the rate of inflation in the United States. If, for example, the rate of inflation is 5 percent in one year, OPEC will raise the price of oil by 5 percent the next year. 
A) fluctuated. OPEC's situation is an example of a prisoner's dilemma. 
B) risen slowly, but steadily. Members of OPEC fear that if they raise the price of oil too quickly this will lead oil-buying nations to accuse OPEC of price gouging, which is illegal under international law. 
C) steadily fallen through the 1970s, then risen continually in the years since then. OPEC's actions are an example of implicit collusion. 
D) been tied by OPEC to the rate of inflation in the United States. If, for example, the rate of inflation is 5 percent in one year, OPEC will raise the price of oil by 5 percent the next year.

Question 11

The study of how people make decisions in situations in which attaining their goals depends on their interactions with others is called

Accepted Answer

A) game theory. 
B) oligopoly. 
C) competitive analysis. 
D) strategic analysis. 
A) game theory. 
B) oligopoly. 
C) competitive analysis. 
D) strategic analysis.

Question 12

Oligopolies exist and do not attract new rivals because

Accepted Answer

A) of competition. 
B) of barriers to entry. 
C) the firms keep profits and prices so low that no rivals are attracted. 
D) there can be no product differentiation. 
A) of competition. 
B) of barriers to entry. 
C) the firms keep profits and prices so low that no rivals are attracted. 
D) there can be no product differentiation.

Question 13

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 LimoZeenz and if so, what is it?

Accepted Answer

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

Question 14

Ocean Spray is considered to be an oligopoly firm because, until the 1990s, it faced little competition in the market for fresh and frozen cranberries.Why?

Accepted Answer

A) Ocean Spray had a patent on the production of cranberries that gave the company the exclusive right to market its product for 20 years. The 20-year period ended in the 1990s. 
B) Until the 1990s, Ocean Spray controlled almost the entire supply of cranberries. 
C) Ocean Spray was able to achieve significant economies of scale in the production of cranberries. Beginning in the 1990s, other firms finally achieved economies of scale as well, but Ocean Spray still controls about 80 percent of the cranberry market. 
D) The federal government imposed a high tariff on cranberry imports. During the 1990s the tariff was eliminated, but Ocean Spray still controls about 80 percent of the cranberry market. 
A) Ocean Spray had a patent on the production of cranberries that gave the company the exclusive right to market its product for 20 years. The 20-year period ended in the 1990s. 
B) Until the 1990s, Ocean Spray controlled almost the entire supply of cranberries. 
C) Ocean Spray was able to achieve significant economies of scale in the production of cranberries. Beginning in the 1990s, other firms finally achieved economies of scale as well, but Ocean Spray still controls about 80 percent of the cranberry market. 
D) The federal government imposed a high tariff on cranberry imports. During the 1990s the tariff was eliminated, but Ocean Spray still controls about 80 percent of the cranberry market.

Question 15

If firms are protected by substantial barriers to entry, short-run profits can turn into long-run profits.

Accepted Answer

A) True 
 B)False

Question 16

The prisoner's dilemma illustrates

Accepted Answer

A) how oligopolists engage in implicit collusion under strategic situations. 
B) why firms will not cooperate if they behave strategically. 
C) why firms have an incentive to cheat on agreements. 
D) how cooperation in strategic situations leads to the economically efficient market outcome. 
A) how oligopolists engage in implicit collusion under strategic situations. 
B) why firms will not cooperate if they behave strategically. 
C) why firms have an incentive to cheat on agreements. 
D) how cooperation in strategic situations leads to the economically efficient market outcome.

Question 17

The Brooks Appliance Store and the Lefingwell Appliance Store (both are located in the same city)each sell an identical washer-dryer pair.The owner of each store considered offering the washer-dryer pair for $700, but decided on a price of $500.If this is a Nash equilibrium we can conclude that

Accepted Answer

A) each store owner feared charging the higher price would result in being undercut by the other store charging the lower price. 
B) the owners of the stores feared that charging $700 could be used as evidence of collusion. 
C) charging $500 was the most profitable strategy for each store, regardless of what price was charged by the other store. 
D) the stores were less concerned about making a profit from the washer-dryer pair than they were with attracting customers who would also buy other appliances. 
A) each store owner feared charging the higher price would result in being undercut by the other store charging the lower price. 
B) the owners of the stores feared that charging $700 could be used as evidence of collusion. 
C) charging $500 was the most profitable strategy for each store, regardless of what price was charged by the other store. 
D) the stores were less concerned about making a profit from the washer-dryer pair than they were with attracting customers who would also buy other appliances.

Question 18

Table 14-8
   
Two rival oligopolists in the coffee industry, Wide Awake and Zuma, have to decide on their pricing strategy. Each can choose either a high price or a low price. Table 14-8 shows the payoff matrix with the profits that each firm can expect to earn depending on the pricing strategy it adopts.
-Refer to Table 14-8.If Zuma selects a high price, what is Wide Awake's best strategy and what will Wide Awake earn as a result of this strategy?

Accepted Answer

A) Wide Awake will select a low price and earn $2 million. 
B) Wide Awake will select a low price and earn $4 million. 
C) Wide Awake will select a high price and earn $3 million. 
D) Wide Awake will select a high price and earn $4 million. 
A) Wide Awake will select a low price and earn $2 million. 
B) Wide Awake will select a low price and earn $4 million. 
C) Wide Awake will select a high price and earn $3 million. 
D) Wide Awake will select a high price and earn $4 million.

Question 19

The justification for occupational licensing laws is that they protect the public from incompetent practitioners (for example, lawyers and medical doctors), but the laws also result in

Accepted Answer

A) higher prices and restrictions on the number of people who can enter the professions affected by the laws. 
B) economies of scale. 
C) ownership of a key input. 
D) an increase in the amount of output required to achieve minimum efficient scale. 
A) higher prices and restrictions on the number of people who can enter the professions affected by the laws. 
B) economies of scale. 
C) ownership of a key input. 
D) an increase in the amount of output required to achieve minimum efficient scale.

Question 20

The fraction of an industry's sales that are accounted for by the four largest firms is called

Accepted Answer

A) the four-firm competition ratio. 
B) the four-firm concentration ratio. 
C) the four-firm industry ratio. 
D) the four-firm oligopoly ratio. 
A) the four-firm competition ratio. 
B) the four-firm concentration ratio. 
C) the four-firm industry ratio. 
D) the four-firm oligopoly ratio.

Interdependence of firms is most common in

The profit-maximizing level of output and the profit-maximizing price for an oligopolist cannot be calculated when we don't know

In which of the following cartels is total cartel profit likely to be the highest?

Which of the following is not part of an oligopolist's business strategy?

Which of the following statements is generally true?

A reason why there is more competition in the restaurant industry than in the music streaming industry is that restaurants

An oligopolistic industry is characterized by all of the following except

Since 1972, the world price of oil has been largely determined by OPEC, which controls about 75 percent of the world's proven oil reserves.Since 1972 the price of oil has

The study of how people make decisions in situations in which attaining their goals depends on their interactions with others is called

Oligopolies exist and do not attract new rivals because

Ocean Spray is considered to be an oligopoly firm because, until the 1990s, it faced little competition in the market for fresh and frozen cranberries.Why?

If firms are protected by substantial barriers to entry, short-run profits can turn into long-run profits.

The prisoner's dilemma illustrates

The Brooks Appliance Store and the Lefingwell Appliance Store (both are located in the same city)each sell an identical washer-dryer pair.The owner of each store considered offering the washer-dryer pair for $700, but decided on a price of $500.If this is a Nash equilibrium we can conclude that

The justification for occupational licensing laws is that they protect the public from incompetent practitioners (for example, lawyers and medical doctors), but the laws also result in

The fraction of an industry's sales that are accounted for by the four largest firms is called

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

Exam 14: Oligopoly: Firms in Less Competitive Markets

Interdependence of firms is most common in

The profit-maximizing level of output and the profit-maximizing price for an oligopolist cannot be calculated when we don't know

In which of the following cartels is total cartel profit likely to be the highest?

Which of the following is not part of an oligopolist's business strategy?

Which of the following statements is generally true?

A reason why there is more competition in the restaurant industry than in the music streaming industry is that restaurants

An oligopolistic industry is characterized by all of the following except

Since 1972, the world price of oil has been largely determined by OPEC, which controls about 75 percent of the world's proven oil reserves.Since 1972 the price of oil has

The study of how people make decisions in situations in which attaining their goals depends on their interactions with others is called

Oligopolies exist and do not attract new rivals because

Ocean Spray is considered to be an oligopoly firm because, until the 1990s, it faced little competition in the market for fresh and frozen cranberries.Why?

If firms are protected by substantial barriers to entry, short-run profits can turn into long-run profits.

The prisoner's dilemma illustrates

The Brooks Appliance Store and the Lefingwell Appliance Store (both are located in the same city)each sell an identical washer-dryer pair.The owner of each store considered offering the washer-dryer pair for $700, but decided on a price of $500.If this is a Nash equilibrium we can conclude that

The justification for occupational licensing laws is that they protect the public from incompetent practitioners (for example, lawyers and medical doctors), but the laws also result in

The fraction of an industry's sales that are accounted for by the four largest firms is called

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