Question 1

The market structure of monopoly exists when

Accepted Answer

A)  there are a small number of interdependent firms that constitute the entire market. 
B)  there is a single producer of a product. 
C)  there are many producers of differentiated products. 
D)  there are many producers of a homogeneous product. 
A)  there are a small number of interdependent firms that constitute the entire market. 
B)  there is a single producer of a product. 
C)  there are many producers of differentiated products. 
D)  there are many producers of a homogeneous product.

Question 2

If we observe firms earning zero economic profits in the short run, we know that

Accepted Answer

A)  the industry must be perfectly competitive. 
B)  the industry must be either perfectly competitive or monopolistically competitive. 
C)  there must not be any barriers to entry. 
D)  any market structure is possible since firms under any market structure can earn zero profits at some time. 
A)  the industry must be perfectly competitive. 
B)  the industry must be either perfectly competitive or monopolistically competitive. 
C)  there must not be any barriers to entry. 
D)  any market structure is possible since firms under any market structure can earn zero profits at some time.

Question 3

Which of the following is NOT a common characteristic of oligopoly?

Accepted Answer

A)  strategic dependence among firms in the industry 
B)  product differentiation 
C)  barriers to entry 
D)  marginal cost pricing. 
A)  strategic dependence among firms in the industry 
B)  product differentiation 
C)  barriers to entry 
D)  marginal cost pricing.

Question 4

Credit card companies that operate as intermediary firms between credit card holders and business vendors are best described as

Accepted Answer

A)  platforms in a shared-input market. 
B)  end users in a shared-input market. 
C)  platforms in a transaction-based market. 
D)  end users in a transaction-based market. 
A)  platforms in a shared-input market. 
B)  end users in a shared-input market. 
C)  platforms in a transaction-based market. 
D)  end users in a transaction-based market.

Question 5

-Refer to the above figure. Ajax and Greenco are oligopolists. Above you are given the payoff matrix for the two firms giving the payoff associated with different pricing strategies. What is the best strategy for Greenco if Ajax decides on charging a high price?

Accepted Answer

A)  High price 
B)  Low price 
C)  There is no best strategy. 
D)  Not enough information is given to determine the best strategy. 
A)  High price 
B)  Low price 
C)  There is no best strategy. 
D)  Not enough information is given to determine the best strategy.

Question 6

Retail trade is an example of

Accepted Answer

A)  perfect competition. 
B)  oligopoly. 
C)  monopoly. 
D)  monopolistic competition. 
A)  perfect competition. 
B)  oligopoly. 
C)  monopoly. 
D)  monopolistic competition.

Question 7

In which market structures is the firm able to earn long-run economic profits?

Accepted Answer

A)  Perfect competition and monopolistic competition. 
B)  Monopolistic competition and oligopoly. 
C)  Oligopoly and monopoly. 
D)  Monopolistic competition, oligopoly and monopoly. 
A)  Perfect competition and monopolistic competition. 
B)  Monopolistic competition and oligopoly. 
C)  Oligopoly and monopoly. 
D)  Monopolistic competition, oligopoly and monopoly.

Question 8

Oligopolistic industries are characterized by a

Accepted Answer

A)  few large firms and no barriers to entry. 
B)  large number of firms and no barriers to entry. 
C)  few large firms and substantial barriers to entry. 
D)  large number of firms and substantial barriers to entry. 
A)  few large firms and no barriers to entry. 
B)  large number of firms and no barriers to entry. 
C)  few large firms and substantial barriers to entry. 
D)  large number of firms and substantial barriers to entry.

Question 9

The manner in which one oligopolist reacts to a change in price, output, or quality made by another oligopolist in the industry is

Accepted Answer

A)  a cooperative game. 
B)  the reaction function. 
C)  a zero-sum game. 
D)  the concentration ratio. 
A)  a cooperative game. 
B)  the reaction function. 
C)  a zero-sum game. 
D)  the concentration ratio.

Question 10

Firms faced with prisoners' dilemma can always make more profits by engaging in opportunistic behavior. Why is this type of behavior NOT commonly found even in oligopolistic markets?

Accepted Answer

The prisoners' dilemma describes noncoop

Question 11

What is oligopoly? How does oligopoly differ from the other kinds of market structure?

Accepted Answer

Oligopoly is an industry characterized b

Question 12

Which of the following statements about concentration ratios is correct?

Accepted Answer

A)  A high concentration ratio indicates that the industry is a monopoly. 
B)  A high concentration ratio indicates that the industry is monopolistically competitive. 
C)  A high concentration ratio suggests that the industry is characterized by strategic independence. 
D)  A high concentration ratio suggests that the industry is characterized by strategic dependence. 
A)  A high concentration ratio indicates that the industry is a monopoly. 
B)  A high concentration ratio indicates that the industry is monopolistically competitive. 
C)  A high concentration ratio suggests that the industry is characterized by strategic independence. 
D)  A high concentration ratio suggests that the industry is characterized by strategic dependence.

Question 13

Refer to the above payoff matrix for the profits (in $ millions) of two firms (A and

Accepted Answer

A)  Both firm A and firm B choose not to advertise. 
B)  Both firm A and firm B choose to advertise. 
B)  making a decision to advertise or not. Which of the following is the outcome of the dominant strategy without cooperation? 
C)  Firm A chooses to advertise while firm B chooses not to advertise. 
D)  Firm A chooses not to advertise while firm B chooses to advertise. 
A)  Both firm A and firm B choose not to advertise. 
B)  Both firm A and firm B choose to advertise. 
B)  making a decision to advertise or not. Which of the following is the outcome of the dominant strategy without cooperation? 
C)  Firm A chooses to advertise while firm B chooses not to advertise. 
D)  Firm A chooses not to advertise while firm B chooses to advertise.

Question 14

Which of the following statements concerning the prisoner's dilemma is true?

Accepted Answer

A)  The player who moves last will always win. 
B)  Confessing is the dominant strategy for both players. 
C)  Neither player will pick the dominant strategy. 
D)  The player who moves first will always win. 
A)  The player who moves last will always win. 
B)  Confessing is the dominant strategy for both players. 
C)  Neither player will pick the dominant strategy. 
D)  The player who moves first will always win.

Question 15

Which of the following is not true of an oligopoly?

Accepted Answer

A)  They advertise their product. 
B)  The firms recognize their interdependence. 
C)  A few firm account for a large portion of the total output. 
D)  Firms are price takers. 
A)  They advertise their product. 
B)  The firms recognize their interdependence. 
C)  A few firm account for a large portion of the total output. 
D)  Firms are price takers.

Question 16

The combining of First Union National Bank and The National Bank of Memphis is an example of

Accepted Answer

A)  a vertical merger. 
B)  a horizontal merger. 
C)  a downstream formation. 
D)  a conglomerate merger. 
A)  a vertical merger. 
B)  a horizontal merger. 
C)  a downstream formation. 
D)  a conglomerate merger.

Question 17

All of the following are reasons for an oligopoly to occur EXCEPT

Accepted Answer

A)  economies to scale. 
B)  barriers to entry. 
C)  independence among firms. 
D)  merger. 
A)  economies to scale. 
B)  barriers to entry. 
C)  independence among firms. 
D)  merger.

Question 18

When decisions are guided strictly by short-run gains, this is known as

Accepted Answer

A)  opportunistic behavior. 
B)  the prisoners' dilemma. 
C)  tit-for-tat strategy. 
D)  a positive-sum game. 
A)  opportunistic behavior. 
B)  the prisoners' dilemma. 
C)  tit-for-tat strategy. 
D)  a positive-sum game.

Question 19

The mutual interdependence of oligopolists ensures that each oligopolist has

Accepted Answer

A)  a unique demand curve. 
B)  a perfectly elastic demand curve. 
C)  a reaction function. 
D)  a fundamental dilemma about whether to collude or not. 
A)  a unique demand curve. 
B)  a perfectly elastic demand curve. 
C)  a reaction function. 
D)  a fundamental dilemma about whether to collude or not.

Question 20

-Refer to the above figure. Ajax and Greenco are oligopolists. Above you are given the payoff matrix for the two firms giving the payoff associated with different pricing strategies. What is the dominant strategy for Greenco?

Accepted Answer

A)  High price. 
B)  Low price. 
C)  There is no best strategy. 
D)  Not enough information is given to determine the best strategy. 
A)  High price. 
B)  Low price. 
C)  There is no best strategy. 
D)  Not enough information is given to determine the best strategy.

Exam 26: Oligopoly and Strategic Behavior

The market structure of monopoly exists when

If we observe firms earning zero economic profits in the short run, we know that

Which of the following is NOT a common characteristic of oligopoly?

Credit card companies that operate as intermediary firms between credit card holders and business vendors are best described as

-Refer to the above figure. Ajax and Greenco are oligopolists. Above you are given the payoff matrix for the two firms giving the payoff associated with different pricing strategies. What is the best strategy for Greenco if Ajax decides on charging a high price?

Retail trade is an example of

In which market structures is the firm able to earn long-run economic profits?

Oligopolistic industries are characterized by a

The manner in which one oligopolist reacts to a change in price, output, or quality made by another oligopolist in the industry is

Firms faced with prisoners' dilemma can always make more profits by engaging in opportunistic behavior. Why is this type of behavior NOT commonly found even in oligopolistic markets?

What is oligopoly? How does oligopoly differ from the other kinds of market structure?

Which of the following statements about concentration ratios is correct?

Refer to the above payoff matrix for the profits (in $ millions) of two firms (A and

Which of the following statements concerning the prisoner's dilemma is true?

Which of the following is not true of an oligopoly?

The combining of First Union National Bank and The National Bank of Memphis is an example of

All of the following are reasons for an oligopoly to occur EXCEPT

When decisions are guided strictly by short-run gains, this is known as

The mutual interdependence of oligopolists ensures that each oligopolist has

-Refer to the above figure. Ajax and Greenco are oligopolists. Above you are given the payoff matrix for the two firms giving the payoff associated with different pricing strategies. What is the dominant strategy for Greenco?

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, Banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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