Question 1

If the four-firm concentration ratio for an industry is 84 percent, then

Accepted Answer

A)  each of the firms account for 21 percent of total sales. 
B)  the four largest firms in the industry account for 16 percent of the total sales. 
C)  the four largest firms in the industry account for 84 percent of the total sales. 
D)  the remaining firms in the industry accounts for 84 percent of the total sales. 
A)  each of the firms account for 21 percent of total sales. 
B)  the four largest firms in the industry account for 16 percent of the total sales. 
C)  the four largest firms in the industry account for 84 percent of the total sales. 
D)  the remaining firms in the industry accounts for 84 percent of the total sales.

Question 2

How can network effects lead an industry to become an oligopoly?

Accepted Answer

If a few firms selling products subject

Question 3

A situation where a consumer's willingness to use an item depends on how many others use it is

Accepted Answer

A)  a positive-sum game. 
B)  a network effect. 
C)  price-leadership. 
D)  a vertical merger. 
A)  a positive-sum game. 
B)  a network effect. 
C)  price-leadership. 
D)  a vertical merger.

Question 4

In an oligopolistic market, each firm

Accepted Answer

A)  has a constant marginal cost. 
B)  faces a perfectly elastic demand function. 
C)  must consider the reaction of rival firms when making a pricing or output decision. 
D)  produces at minimum average cost in the long run. 
A)  has a constant marginal cost. 
B)  faces a perfectly elastic demand function. 
C)  must consider the reaction of rival firms when making a pricing or output decision. 
D)  produces at minimum average cost in the long run.

Question 5

Economies of scale means that

Accepted Answer

A)  the average fixed cost curve slopes downward over its entire range. 
B)  the four-firm concentration ratio is below 80. 
C)  the long-run average total cost curve slopes downward over it entire range. 
D)  the long-run total cost curve slopes downward over it entire range. 
A)  the average fixed cost curve slopes downward over its entire range. 
B)  the four-firm concentration ratio is below 80. 
C)  the long-run average total cost curve slopes downward over it entire range. 
D)  the long-run total cost curve slopes downward over it entire range.

Question 6

A given industry, Z, is such that the 1-firm, 2-firm, 4-firm and 8-firm concentration ratios are the same. Based on this, we can conclude that Industry Z is

Accepted Answer

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

Question 7

The number of firms in an oligopolistic industry

Accepted Answer

A)  must be less than 10. 
B)  must be less than 20. 
C)  must be small enough that firms are interdependent. 
D)  must be large enough for firms to be independent. 
A)  must be less than 10. 
B)  must be less than 20. 
C)  must be small enough that firms are interdependent. 
D)  must be large enough for firms to be independent.

Question 8

All of the following are characteristics of an oligopoly EXCEPT

Accepted Answer

A)  diseconomies of scale over all ranges of output. 
B)  small number of firms. 
C)  high barriers to entry. 
D)  interdependence. 
A)  diseconomies of scale over all ranges of output. 
B)  small number of firms. 
C)  high barriers to entry. 
D)  interdependence.

Question 9

Economies of scale

Accepted Answer

A)  do not arise in oligopolistic industries. 
B)  can exist but are rare in oligopolistic industries. 
C)  can exist but fail to create barriers to entry in oligopolistic industries. 
D)  are commonplace and often a barrier to entry in oligopolistic industries. 
A)  do not arise in oligopolistic industries. 
B)  can exist but are rare in oligopolistic industries. 
C)  can exist but fail to create barriers to entry in oligopolistic industries. 
D)  are commonplace and often a barrier to entry in oligopolistic industries.

Question 10

A cartel most likely forms in

Accepted Answer

A)  an oligopolistic market. 
B)  a perfectly competitive market. 
C)  a monopolistically competitive market. 
D)  a heavily regulated industry. 
A)  an oligopolistic market. 
B)  a perfectly competitive market. 
C)  a monopolistically competitive market. 
D)  a heavily regulated industry.

Question 11

The dominant strategy allows a firm to

Accepted Answer

A)  obtain the highest benefit, regardless of its rivals' actions. 
B)  transform a negative-sum game into a positive-sum game. 
C)  transform a zero-sum game into a positive-sum game. 
D)  escape from a Prisoners' Dilemma situation. 
A)  obtain the highest benefit, regardless of its rivals' actions. 
B)  transform a negative-sum game into a positive-sum game. 
C)  transform a zero-sum game into a positive-sum game. 
D)  escape from a Prisoners' Dilemma situation.

Question 12

A game in which any gains by the group are exactly offset by equal losses by the end of the game is called the

Accepted Answer

A)  negative-sum game. 
B)  zero-sum game. 
C)  positive-sum game. 
D)  cooperative game. 
A)  negative-sum game. 
B)  zero-sum game. 
C)  positive-sum game. 
D)  cooperative game.

Question 13

Cartel agreements are more likely to break down when

Accepted Answer

A)  there are few variations in market demand. 
B)  new firms enter the market. 
C)  participating firms earn huge profits. 
D)  none of the above 
A)  there are few variations in market demand. 
B)  new firms enter the market. 
C)  participating firms earn huge profits. 
D)  none of the above

Question 14

Which of the following is true of an oligopoly?

Accepted Answer

A)  They engage in nonprice competition. 
B)  They do not react to actions of their competitors. 
C)  Each firm produces a small portion of the total output. 
D)  Firms do not care what their competitors do. 
A)  They engage in nonprice competition. 
B)  They do not react to actions of their competitors. 
C)  Each firm produces a small portion of the total output. 
D)  Firms do not care what their competitors do.

Question 15

How do economies of scale contribute to the development of an oligopoly?

Accepted Answer

A)  Economies of scale make it legally difficult for new firms to enter. 
B)  Economies of scale make small-scale producers inefficient. 
C)  Economies of scale are based on control of a key resource, without which other firms cannot enter an industry. 
D)  Economies of scale are guaranteed when a patent is granted. 
A)  Economies of scale make it legally difficult for new firms to enter. 
B)  Economies of scale make small-scale producers inefficient. 
C)  Economies of scale are based on control of a key resource, without which other firms cannot enter an industry. 
D)  Economies of scale are guaranteed when a patent is granted.

Question 16

A market with one seller, considerable influence over price, high barriers to entry, a homogeneous product, and non-price competition to allow for price discrimination is known as

Accepted Answer

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

Question 17

A realtor in the real estate market is an example of

Accepted Answer

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

Question 18

Which is FALSE about perfect competition?

Accepted Answer

A)  There are numerous sellers. 
B)  Market entry and exit is unrestricted. 
C)  There is no ability to set price. 
D)  There is considerable product differentiation. 
A)  There are numerous sellers. 
B)  Market entry and exit is unrestricted. 
C)  There is no ability to set price. 
D)  There is considerable product differentiation.

Question 19

A concentration ratio gives

Accepted Answer

A)  the average size of the firms in an industry. 
B)  the total sales of four or eight of the mid-sized firms in the industry. 
C)  the percentage of all sales contributed by the four or eight largest firms in the industry. 
D)  the sales of the four largest firms in the industry divided by the sales of the eight largest firms in the industry. 
A)  the average size of the firms in an industry. 
B)  the total sales of four or eight of the mid-sized firms in the industry. 
C)  the percentage of all sales contributed by the four or eight largest firms in the industry. 
D)  the sales of the four largest firms in the industry divided by the sales of the eight largest firms in the industry.

Question 20

The goal of a cartel is to

Accepted Answer

A)  increase competition among members. 
B)  maximize industry profits. 
C)  increase industry production. 
D)  all of the above 
A)  increase competition among members. 
B)  maximize industry profits. 
C)  increase industry production. 
D)  all of the above

Exam 26: Oligopoly and Strategic Behavior

If the four-firm concentration ratio for an industry is 84 percent, then

How can network effects lead an industry to become an oligopoly?

A situation where a consumer's willingness to use an item depends on how many others use it is

In an oligopolistic market, each firm

Economies of scale means that

A given industry, Z, is such that the 1-firm, 2-firm, 4-firm and 8-firm concentration ratios are the same. Based on this, we can conclude that Industry Z is

The number of firms in an oligopolistic industry

All of the following are characteristics of an oligopoly EXCEPT

Economies of scale

A cartel most likely forms in

The dominant strategy allows a firm to

A game in which any gains by the group are exactly offset by equal losses by the end of the game is called the

Cartel agreements are more likely to break down when

Which of the following is true of an oligopoly?

How do economies of scale contribute to the development of an oligopoly?

A market with one seller, considerable influence over price, high barriers to entry, a homogeneous product, and non-price competition to allow for price discrimination is known as

A realtor in the real estate market is an example of

Which is FALSE about perfect competition?

A concentration ratio gives

The goal of a cartel is to

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