Question 1

-According to the above table, if the fourth and fifth largest firms in the industry merge, the four-firm concentration ratio in the industry will be

Accepted Answer

A)  82.5 percent. 
B)  35.8 percent. 
C)  69.0 percent. 
D)  84.1 percent. 
A)  82.5 percent. 
B)  35.8 percent. 
C)  69.0 percent. 
D)  84.1 percent.

Question 2

The analytical framework in which two or more firms compete for certain payoffs that depend on the strategy that the others employ is

Accepted Answer

A)  game theory. 
B)  the concentration ratio. 
C)  a horizontal merger. 
D)  network effect. 
A)  game theory. 
B)  the concentration ratio. 
C)  a horizontal merger. 
D)  network effect.

Question 3

One of the fundamental problems a cartel faces is

Accepted Answer

A)  to determine how much each producer will decrease its output. 
B)  to determine how much each producer will increase its output. 
C)  to determine how much each producer will lower it price. 
D)  to determine how much each producer will lower its profit. 
A)  to determine how much each producer will decrease its output. 
B)  to determine how much each producer will increase its output. 
C)  to determine how much each producer will lower it price. 
D)  to determine how much each producer will lower its profit.

Question 4

A game in which players as a group lose at the end of the game is referred to as

Accepted Answer

A)  zero-sum game. 
B)  negative-sum game. 
C)  positive-sum game. 
D)  tit-for-tat game. 
A)  zero-sum game. 
B)  negative-sum game. 
C)  positive-sum game. 
D)  tit-for-tat game.

Question 5

The percentage of all sales contributed by the leading four or leading eight firms in an industry is known as

Accepted Answer

A)  a horizontal merger. 
B)  a vertical merger. 
C)  economies to scale. 
D)  the concentration ratio. 
A)  a horizontal merger. 
B)  a vertical merger. 
C)  economies to scale. 
D)  the concentration ratio.

Question 6

A market situation in which there are a few large firms is called

Accepted Answer

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

Question 7

If five firms of similar sizes join to form a cartel, then it is most likely that

Accepted Answer

A)  they will charge a common, lower market price. 
B)  they will collectively produce less than before. 
C)  all five firms will earn the same profits as before. 
D)  all five firms as a group will have falling profits, but increased output. 
A)  they will charge a common, lower market price. 
B)  they will collectively produce less than before. 
C)  all five firms will earn the same profits as before. 
D)  all five firms as a group will have falling profits, but increased output.

Question 8

Suppose an industry is composed of 10 firms. Each firm's share of total sales in the industry is 10 percent. If two of the firms merge, then the four-firm concentration ratio in the industry is

Accepted Answer

A)  40 percent. 
B)  45 percent. 
C)  50 percent. 
D)  unable to determine. 
A)  40 percent. 
B)  45 percent. 
C)  50 percent. 
D)  unable to determine.

Question 9

Based on the table below, the four-firm concentration ratio equals what percentage of annual sales?

Accepted Answer

A)  33 percent 
B)  40 percent 
C)  60 percent 
D)  100 percent 
A)  33 percent 
B)  40 percent 
C)  60 percent 
D)  100 percent

Question 10

In which market structures is there product differentiation?

Accepted Answer

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

Question 11

A market situation in which there are a few firms that recognize their mutual interdependence is

Accepted Answer

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

Question 12

Opportunistic behavior by oligopolies means

Accepted Answer

A)  that firms cooperate in both the long run and in the short run to prevent others from entering the industry. 
B)  that firms cooperate in the short run for current gains. 
C)  that firms refuse to cooperate in the short run. 
D)  that firms refuse to honor their product guarantees. 
A)  that firms cooperate in both the long run and in the short run to prevent others from entering the industry. 
B)  that firms cooperate in the short run for current gains. 
C)  that firms refuse to cooperate in the short run. 
D)  that firms refuse to honor their product guarantees.

Question 13

People's willingness to buy the PC or Mac format of computer software depends on how popular the software format is among other consumers. This is an example of

Accepted Answer

A)  a cartel. 
B)  an opportunity cost. 
C)  a network effect. 
D)  the prisoners' dilemma. 
A)  a cartel. 
B)  an opportunity cost. 
C)  a network effect. 
D)  the prisoners' dilemma.

Question 14

In a two-sided market, an intermediary firm that links groups of producers and consumers is called

Accepted Answer

A)  an operator. 
B)  an oligopoly. 
C)  a platform. 
D)  an end user. 
A)  an operator. 
B)  an oligopoly. 
C)  a platform. 
D)  an end user.

Question 15

Which of the following is an example of a horizontal merger?

Accepted Answer

A)  Northeastern Illinois University merging with McDonald's. 
B)  Northeastern Illinois University merging with a training academy for new professors. 
C)  Northeastern Illinois University merging with Roosevelt University. 
D)  Northeastern Illinois University going from a public to a private university. 
A)  Northeastern Illinois University merging with McDonald's. 
B)  Northeastern Illinois University merging with a training academy for new professors. 
C)  Northeastern Illinois University merging with Roosevelt University. 
D)  Northeastern Illinois University going from a public to a private university.

Question 16

Which of the following is LEAST likely to be a reason for firms to form a cartel?

Accepted Answer

A)  to maximize profits of the cartel 
B)  to raise competition among firms in the cartel 
C)  to cut back output of the cartel 
D)  to set common prices among firms in the cartel 
A)  to maximize profits of the cartel 
B)  to raise competition among firms in the cartel 
C)  to cut back output of the cartel 
D)  to set common prices among firms in the cartel

Question 17

When Goodyear increases its production when Michelin reduces its production, Goodyear is playing a

Accepted Answer

A)  negative-sum game. 
B)  cooperative game. 
C)  non-cooperative game. 
D)  reaction function game. 
A)  negative-sum game. 
B)  cooperative game. 
C)  non-cooperative game. 
D)  reaction function game.

Question 18

In a cartel, firms jointly act as

Accepted Answer

A)  a monopolistic competitive firm. 
B)  a perfectly competitive firm. 
C)  a monopoly firm. 
D)  an oligopolistic firm. 
A)  a monopolistic competitive firm. 
B)  a perfectly competitive firm. 
C)  a monopoly firm. 
D)  an oligopolistic firm.

Question 19

Collusion always involves firms engaging in a

Accepted Answer

A)  vertical merger. 
B)  horizontal merger. 
C)  cooperative game. 
D)  noncooperative game. 
A)  vertical merger. 
B)  horizontal merger. 
C)  cooperative game. 
D)  noncooperative game.

Question 20

Suppose a firm can charge a relatively low price to try to compete actively with its rivals, or it can charge a relatively high, collusive price. If its strategy is to charge the low price regardless of the other firms' decisions, this low-price is the firm's

Accepted Answer

A)  dependent strategy. 
B)  independent strategy. 
C)  dominant strategy. 
D)  positive sum strategy. 
A)  dependent strategy. 
B)  independent strategy. 
C)  dominant strategy. 
D)  positive sum strategy.

Exam 26: Oligopoly and Strategic Behavior

-According to the above table, if the fourth and fifth largest firms in the industry merge, the four-firm concentration ratio in the industry will be

The analytical framework in which two or more firms compete for certain payoffs that depend on the strategy that the others employ is

One of the fundamental problems a cartel faces is

A game in which players as a group lose at the end of the game is referred to as

The percentage of all sales contributed by the leading four or leading eight firms in an industry is known as

A market situation in which there are a few large firms is called

If five firms of similar sizes join to form a cartel, then it is most likely that

Suppose an industry is composed of 10 firms. Each firm's share of total sales in the industry is 10 percent. If two of the firms merge, then the four-firm concentration ratio in the industry is

Based on the table below, the four-firm concentration ratio equals what percentage of annual sales?

In which market structures is there product differentiation?

A market situation in which there are a few firms that recognize their mutual interdependence is

Opportunistic behavior by oligopolies means

People's willingness to buy the PC or Mac format of computer software depends on how popular the software format is among other consumers. This is an example of

In a two-sided market, an intermediary firm that links groups of producers and consumers is called

Which of the following is an example of a horizontal merger?

Which of the following is LEAST likely to be a reason for firms to form a cartel?

When Goodyear increases its production when Michelin reduces its production, Goodyear is playing a

In a cartel, firms jointly act as

Collusion always involves firms engaging in a

Suppose a firm can charge a relatively low price to try to compete actively with its rivals, or it can charge a relatively high, collusive price. If its strategy is to charge the low price regardless of the other firms' decisions, this low-price is the firm's

The Nature of Economics

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The Firm: Cost and Output Determination

Perfect Competition

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