Question 1

People do not usually behave in a noncooperative fashion even when it is in their immediate interest to do so because

Accepted Answer

A)  they realize such behavior is immoral. 
B)  they know there can be 2 winners. 
C)  they know they will have repeated dealings with the other people. 
D)  they understand the difficulties with game theory. 
A)  they realize such behavior is immoral. 
B)  they know there can be 2 winners. 
C)  they know they will have repeated dealings with the other people. 
D)  they understand the difficulties with game theory.

Question 2

There are 30 firms in an industry. What happens to that industry's four-firm concentration when the third- and fourth-largest firms merge?

Accepted Answer

A)  Nothing, because their shares are already included in the concentration calculation. 
B)  The industry's concentration ratio will fall. 
C)  The industry's concentration ratio will increase. 
D)  It is impossible to know without more information. 
A)  Nothing, because their shares are already included in the concentration calculation. 
B)  The industry's concentration ratio will fall. 
C)  The industry's concentration ratio will increase. 
D)  It is impossible to know without more information.

Question 3

If Target were to merge with Wal-Mart, this would be referred to as a(n)

Accepted Answer

A)  horizontal merger. 
B)  vertical merger. 
C)  conglomerate merger. 
D)  anti-competitive merger. 
A)  horizontal merger. 
B)  vertical merger. 
C)  conglomerate merger. 
D)  anti-competitive merger.

Question 4

An example of a zero-sum game is

Accepted Answer

A)  exchange. 
B)  a consumer purchasing a used car from a used car dealer. 
C)  the prisoners' dilemma. 
D)  poker. 
A)  exchange. 
B)  a consumer purchasing a used car from a used car dealer. 
C)  the prisoners' dilemma. 
D)  poker.

Question 5

Product differentiation always exists in

Accepted Answer

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

Question 6

An association of producers in an industry that agree to set common prices and output quotas to prevent competition is

Accepted Answer

A)  an oligopolist. 
B)  a monopolistic competitor. 
C)  a constrained monopoly. 
D)  a cartel. 
A)  an oligopolist. 
B)  a monopolistic competitor. 
C)  a constrained monopoly. 
D)  a cartel.

Question 7

Strategic dependence is found in

Accepted Answer

A)  monopoly markets. 
B)  oligopolistic markets. 
C)  monopolistic competitive markets. 
D)  perfect competitive markets. 
A)  monopoly markets. 
B)  oligopolistic markets. 
C)  monopolistic competitive markets. 
D)  perfect competitive markets.

Question 8

A noncooperative game is

Accepted Answer

A)  companies colluding in order to make higher than competitive rates of return. 
B)  the manner in which one oligopolist reacts to a change in price made by another oligopolist in the industry. 
C)  a game in which firms will not negotiate in any way. 
D)  when plans made by firms are known as game strategies. 
A)  companies colluding in order to make higher than competitive rates of return. 
B)  the manner in which one oligopolist reacts to a change in price made by another oligopolist in the industry. 
C)  a game in which firms will not negotiate in any way. 
D)  when plans made by firms are known as game strategies.

Question 9

The payoff matrix shows all of the following EXCEPT

Accepted Answer

A)  if both oligopolists choose a high price, each makes $6 million. 
B)  if they both choose a low price, each makes $4 million. 
C)  if one chooses a low price and the other doesn't, the low priced firm will make $8 million. 
D)  if one oligopolist chooses a high price and the other doesn't, the high-priced firm makes $8 million. 
A)  if both oligopolists choose a high price, each makes $6 million. 
B)  if they both choose a low price, each makes $4 million. 
C)  if one chooses a low price and the other doesn't, the low priced firm will make $8 million. 
D)  if one oligopolist chooses a high price and the other doesn't, the high-priced firm makes $8 million.

Question 10

Explain how the prisoners' dilemma can be used to examine pricing strategies in an oligopoly.

Accepted Answer

The players can choose either a high-pri

Question 11

Which one of the following industries could be classified as an oligopoly?

Accepted Answer

A)  Tobacco production 
B)  Retailing 
C)  Farming 
D)  Fast food restaurants 
A)  Tobacco production 
B)  Retailing 
C)  Farming 
D)  Fast food restaurants

Question 12

After participating members of a cartel form an agreement on common prices and output quotas, then an individual firm can increase its own profits by

Accepted Answer

A)  decreasing production. 
B)  decreasing prices. 
C)  advertising. 
D)  paying its employees higher wages. 
A)  decreasing production. 
B)  decreasing prices. 
C)  advertising. 
D)  paying its employees higher wages.

Question 13

Which of the following is most likely to be sold in an oligopoly market?

Accepted Answer

A)  Pizza 
B)  Cell phone service 
C)  Electricity 
D)  Computer software 
A)  Pizza 
B)  Cell phone service 
C)  Electricity 
D)  Computer software

Question 14

Agriculture 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 15

All of the following are true regarding oligopoly EXCEPT

Accepted Answer

A)  there are few sellers. 
B)  there is some ability to set price. 
C)  there is no competition. 
D)  entry and exit is partially restricted. 
A)  there are few sellers. 
B)  there is some ability to set price. 
C)  there is no competition. 
D)  entry and exit is partially restricted.

Question 16

Straight Cut beauty salon merges with Clean-Cut beauty salon. This is an example of

Accepted Answer

A)  conglomerate merger. 
B)  concentration ratio. 
C)  vertical merger. 
D)  horizontal merger. 
A)  conglomerate merger. 
B)  concentration ratio. 
C)  vertical merger. 
D)  horizontal merger.

Question 17

-Refer to the above figure. The figure gives the payoff matrix for two individuals who are being accused of robbing a bank together. What is dominant strategy for Bob?

Accepted Answer

A)  Confess. 
B)  Don't confess. 
C)  Flip a coin to decide what to do. 
D)  There is no dominant strategy. 
A)  Confess. 
B)  Don't confess. 
C)  Flip a coin to decide what to do. 
D)  There is no dominant strategy.

Question 18

Unrestricted entry and exit into the market is found in

Accepted Answer

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

Question 19

When a falloff in usage of a product by some consumers causes others to stop purchasing the item there is

Accepted Answer

A)  price leadership. 
B)  negative-sum game. 
C)  positive market feedback. 
D)  negative market feedback. 
A)  price leadership. 
B)  negative-sum game. 
C)  positive market feedback. 
D)  negative market feedback.

Question 20

In an industry with network effects and differentiated products, it is possible for the industry to become an oligopoly if

Accepted Answer

A)  they engage in a zero-sum game. 
B)  they use a price-leadership model. 
C)  they use a kinked demand curve model. 
D)  a few firms reap most of the sales gains resulting from positive market feedback. 
A)  they engage in a zero-sum game. 
B)  they use a price-leadership model. 
C)  they use a kinked demand curve model. 
D)  a few firms reap most of the sales gains resulting from positive market feedback.

Exam 26: Oligopoly and Strategic Behavior

People do not usually behave in a noncooperative fashion even when it is in their immediate interest to do so because

There are 30 firms in an industry. What happens to that industry's four-firm concentration when the third- and fourth-largest firms merge?

If Target were to merge with Wal-Mart, this would be referred to as a(n)

An example of a zero-sum game is

Product differentiation always exists in

An association of producers in an industry that agree to set common prices and output quotas to prevent competition is

Strategic dependence is found in

A noncooperative game is

The payoff matrix shows all of the following EXCEPT

Explain how the prisoners' dilemma can be used to examine pricing strategies in an oligopoly.

Which one of the following industries could be classified as an oligopoly?

After participating members of a cartel form an agreement on common prices and output quotas, then an individual firm can increase its own profits by

Which of the following is most likely to be sold in an oligopoly market?

Agriculture is an example of

All of the following are true regarding oligopoly EXCEPT

Straight Cut beauty salon merges with Clean-Cut beauty salon. This is an example of

-Refer to the above figure. The figure gives the payoff matrix for two individuals who are being accused of robbing a bank together. What is dominant strategy for Bob?

Unrestricted entry and exit into the market is found in

When a falloff in usage of a product by some consumers causes others to stop purchasing the item there is

In an industry with network effects and differentiated products, it is possible for the industry to become an oligopoly 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

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