Question 1

Managers in oligopoly firms must

Accepted Answer

A)  eliminate any barriers to entry if they hope to make short-run profits. 
B)  advertise heavily in order to differentiate their product. 
C)  anticipate the reaction of rival firms. 
D)  establish many varieties of their products to cover the spectrum of consumer tastes. 
A)  eliminate any barriers to entry if they hope to make short-run profits. 
B)  advertise heavily in order to differentiate their product. 
C)  anticipate the reaction of rival firms. 
D)  establish many varieties of their products to cover the spectrum of consumer tastes.

Question 2

The market structure of monopolistic competition 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 3

Why would a member of a cartel cheat?

Accepted Answer

After setting a common price or producti

Question 4

In the television broadcasting industry, __________ is an end user and __________ is a platform.

Accepted Answer

A)  an advertiser; a TV service provider 
B)  an advertiser; a TV regulatory agency 
C)  a TV service provider; a TV maker 
D)  a TV maker; TV audience 
A)  an advertiser; a TV service provider 
B)  an advertiser; a TV regulatory agency 
C)  a TV service provider; a TV maker 
D)  a TV maker; TV audience

Question 5

The success of a cartel rests upon

Accepted Answer

A)  inducing all members to limit their combined output and charge the same price. 
B)  inducing all members to differentiate their products and charge different prices. 
C)  making exit from the cartel as nearly costless as possible. 
D)  discouraging some firms in the market from joining. 
A)  inducing all members to limit their combined output and charge the same price. 
B)  inducing all members to differentiate their products and charge different prices. 
C)  making exit from the cartel as nearly costless as possible. 
D)  discouraging some firms in the market from joining.

Question 6

In a cartel, participating members can cheat by

Accepted Answer

A)  letting more entrants join the cartel. 
B)  leaving the industry. 
C)  producing a lower production level than the cartel quota. 
D)  charging a slightly lower price and raising production. 
A)  letting more entrants join the cartel. 
B)  leaving the industry. 
C)  producing a lower production level than the cartel quota. 
D)  charging a slightly lower price and raising production.

Question 7

Horizontal merger occurs when

Accepted Answer

A)  two firms merge where one had sold its output to the other as an input. 
B)  the merger moves the combined firm onto the horizontal portion of its long-run average cost curve. 
C)  two firms merge where each is about the same size. 
D)  two firms producing a similar product merge. 
A)  two firms merge where one had sold its output to the other as an input. 
B)  the merger moves the combined firm onto the horizontal portion of its long-run average cost curve. 
C)  two firms merge where each is about the same size. 
D)  two firms producing a similar product merge.

Question 8

Other things being equal, which market structure is most likely to yield the greatest industry long-run economic profit?

Accepted Answer

A)  Monopolistic competition 
B)  Oligopoly 
C)  Monopoly 
D)  Perfect competition 
A)  Monopolistic competition 
B)  Oligopoly 
C)  Monopoly 
D)  Perfect competition

Question 9

An oligopoly is a market situation in which

Accepted Answer

A)  there are many firms producing differentiated products. 
B)  there is a single firm producing several varieties of a product. 
C)  all the sellers act independently of the others. 
D)  there are very few sellers and they recognize their strategic dependence on one another. 
A)  there are many firms producing differentiated products. 
B)  there is a single firm producing several varieties of a product. 
C)  all the sellers act independently of the others. 
D)  there are very few sellers and they recognize their strategic dependence on one another.

Question 10

An online dating firm is

Accepted Answer

A)  a platform in a shared-input market. 
B)  an end user in a matchmaking market. 
C)  a platform in a matchmaking market. 
D)  an end user in a shared-input market. 
A)  a platform in a shared-input market. 
B)  an end user in a matchmaking market. 
C)  a platform in a matchmaking market. 
D)  an end user in a shared-input market.

Question 11

Product differentiation exists in

Accepted Answer

A)  oligopolies only. 
B)  monopolies only. 
C)  monopolistic competition only. 
D)  all market structures except perfect competition. 
A)  oligopolies only. 
B)  monopolies only. 
C)  monopolistic competition only. 
D)  all market structures except perfect competition.

Question 12

Which of the following is NOT a characteristic of pure monopoly?

Accepted Answer

A)  many sellers 
B)  considerable price setting ability 
C)  restricted ability to enter market 
D)  long-run economic profits are possible 
A)  many sellers 
B)  considerable price setting ability 
C)  restricted ability to enter market 
D)  long-run economic profits are possible

Question 13

Which of the following combinations would constitute a vertical merger?

Accepted Answer

A)  General Motors and Bridgestone Tire Company 
B)  General Motors and Ford Motor Company 
C)  Philip Morris and RJ Reynolds 
D)  Philip Morris and Barnes & Nobles Booksellers 
A)  General Motors and Bridgestone Tire Company 
B)  General Motors and Ford Motor Company 
C)  Philip Morris and RJ Reynolds 
D)  Philip Morris and Barnes & Nobles Booksellers

Question 14

When oligopolistic companies engage in collusion, the companies are involved in a

Accepted Answer

A)  noncooperative game. 
B)  negative-sum game. 
C)  competitive game. 
D)  cooperative game. 
A)  noncooperative game. 
B)  negative-sum game. 
C)  competitive game. 
D)  cooperative game.

Question 15

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 the high price. 
B)  Both firm A and firm B choose the low price. 
B)  and two pricing strategies (high and low). Which of the following is the outcome of the dominant strategy without cooperation? 
C)  Firm A chooses the low price while firm B chooses the high price. 
D)  Firm A chooses the high price while firm B chooses the low price. 
A)  Both firm A and firm B choose the high price. 
B)  Both firm A and firm B choose the low price. 
B)  and two pricing strategies (high and low). Which of the following is the outcome of the dominant strategy without cooperation? 
C)  Firm A chooses the low price while firm B chooses the high price. 
D)  Firm A chooses the high price while firm B chooses the low price.

Question 16

When U.S. Steel, a steel producer, bought control of iron ore companies at the beginning of the 20th century, the company was initiating

Accepted Answer

A)  a horizontal merger. 
B)  a vertical merger. 
C)  a cartel. 
D)  an expropriation. 
A)  a horizontal merger. 
B)  a vertical merger. 
C)  a cartel. 
D)  an expropriation.

Question 17

The dominant strategy in the prisoners' dilemma is for

Accepted Answer

A)  neither player to confess. 
B)  both players to confess. 
C)  only the dominant player to confess. 
D)  the dominant player not to confess. 
A)  neither player to confess. 
B)  both players to confess. 
C)  only the dominant player to confess. 
D)  the dominant player not to confess.

Question 18

When a cartel breaks down and its members start cheating, the behavior in the industry becomes a

Accepted Answer

A)  noncooperative game. 
B)  zero-sum game. 
C)  high stakes game. 
D)  positive sum game. 
A)  noncooperative game. 
B)  zero-sum game. 
C)  high stakes game. 
D)  positive sum game.

Question 19

Game theory is used to explain the pricing behavior of

Accepted Answer

A)  monopolies. 
B)  perfect competition. 
C)  monopolistic competition. 
D)  oligopolies. 
A)  monopolies. 
B)  perfect competition. 
C)  monopolistic competition. 
D)  oligopolies.

Question 20

A cartel will break down more easily if

Accepted Answer

A)  there are only a few members. 
B)  industry demand is very stable. 
C)  market prices can be observed easily. 
D)  there are many entrants in the industry. 
A)  there are only a few members. 
B)  industry demand is very stable. 
C)  market prices can be observed easily. 
D)  there are many entrants in the industry.

Exam 26: Oligopoly and Strategic Behavior

Managers in oligopoly firms must

The market structure of monopolistic competition exists when

Why would a member of a cartel cheat?

In the television broadcasting industry, __________ is an end user and __________ is a platform.

The success of a cartel rests upon

In a cartel, participating members can cheat by

Horizontal merger occurs when

Other things being equal, which market structure is most likely to yield the greatest industry long-run economic profit?

An oligopoly is a market situation in which

An online dating firm is

Product differentiation exists in

Which of the following is NOT a characteristic of pure monopoly?

Which of the following combinations would constitute a vertical merger?

When oligopolistic companies engage in collusion, the companies are involved in a

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

When U.S. Steel, a steel producer, bought control of iron ore companies at the beginning of the 20th century, the company was initiating

The dominant strategy in the prisoners' dilemma is for

When a cartel breaks down and its members start cheating, the behavior in the industry becomes a

Game theory is used to explain the pricing behavior of

A cartel will break down more easily if

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

Filters

In the television broadcasting industry, is an end user and is a platform.