Question 1

A horizontal merger involves

Accepted Answer

A)  the joining of two firms at different stages of the production process. 
B)  the separation of management from ownership. 
C)  the joining of two firms selling similar products. 
D)  the exchange of debt for stock. 
A)  the joining of two firms at different stages of the production process. 
B)  the separation of management from ownership. 
C)  the joining of two firms selling similar products. 
D)  the exchange of debt for stock.

Question 2

If an industry has 25 firms that collectively have $150 million in total sales and the top four firms in this industry account for $90 million in sales, what is the concentration ratio of the top four firms in this industry?

Accepted Answer

A)  42 percent 
B)  60 percent 
C)  70 percent 
D)  80 percent 
A)  42 percent 
B)  60 percent 
C)  70 percent 
D)  80 percent

Question 3

A tit-for-tat strategy is one in which oligopolies

Accepted Answer

A)  cooperate as long as other members cooperate, but if anyone cheats, they cut the price until the cheater reverts to cooperation. 
B)  cooperate almost all of the time, but occasionally do not cooperate in order to fool the antitrust authorities. 
C)  keep cutting prices to punish rivals until the competitive price is reached. 
D)  try to avoid the problems of the prisoners' dilemma, but actually make themselves worse off. 
A)  cooperate as long as other members cooperate, but if anyone cheats, they cut the price until the cheater reverts to cooperation. 
B)  cooperate almost all of the time, but occasionally do not cooperate in order to fool the antitrust authorities. 
C)  keep cutting prices to punish rivals until the competitive price is reached. 
D)  try to avoid the problems of the prisoners' dilemma, but actually make themselves worse off.

Question 4

Joe's hotdog stand merges with a company that supplies the condiments to Joe's. 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 5

When a player in a game adopts a strategy which always yields the highest benefit regardless of what the other player does, that player is using a(n)

Accepted Answer

A)  opportunistic strategy. 
B)  dominant strategy. 
C)  tit-for-tat strategy. 
D)  aggressive strategy. 
A)  opportunistic strategy. 
B)  dominant strategy. 
C)  tit-for-tat strategy. 
D)  aggressive strategy.

Question 6

A market with few sellers, some influence over price, high barriers to entry, a differentiated product, and non-price competition 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 7

Firms face downward sloping demand curves in

Accepted Answer

A)  monopolies only. 
B)  monopolies and oligopolies only. 
C)  monopolies and oligopolies that collude only. 
D)  all market structures except perfect competition. 
A)  monopolies only. 
B)  monopolies and oligopolies only. 
C)  monopolies and oligopolies that collude only. 
D)  all market structures except perfect competition.

Question 8

In a two-sided market, the platform may different prices to different group of end users due to

Accepted Answer

A)  the budget constraints of end users. 
B)  substitution effects between the end users and the platform. 
C)  different network effects between groups of end users. 
D)  a lack of product differentiation in the products sold. 
A)  the budget constraints of end users. 
B)  substitution effects between the end users and the platform. 
C)  different network effects between groups of end users. 
D)  a lack of product differentiation in the products sold.

Question 9

The most common reason for the existence of oligopolies is

Accepted Answer

A)  ease of entry. 
B)  economies of scale. 
C)  diseconomies of scale. 
D)  advertising. 
A)  ease of entry. 
B)  economies of scale. 
C)  diseconomies of scale. 
D)  advertising.

Question 10

In a zero-sum game

Accepted Answer

A)  both players are better off at the end of the game. 
B)  both players are worse off at the end of the game. 
C)  one player's losses are exactly offset by another player's gains. 
D)  both players collude to make both of them better off. 
A)  both players are better off at the end of the game. 
B)  both players are worse off at the end of the game. 
C)  one player's losses are exactly offset by another player's gains. 
D)  both players collude to make both of them better off.

Question 11

For which market structure do economists have the least precise model of price determination?

Accepted Answer

A)  Perfect competition in the short run 
B)  Perfect competition in the long run 
C)  Oligopoly 
D)  Monopoly 
A)  Perfect competition in the short run 
B)  Perfect competition in the long run 
C)  Oligopoly 
D)  Monopoly

Question 12

A cartel is a form of

Accepted Answer

A)  collusion. 
B)  vertical merger. 
C)  noncooperative competition. 
D)  negative sum game. 
A)  collusion. 
B)  vertical merger. 
C)  noncooperative competition. 
D)  negative sum game.

Question 13

The merger of two pizza restaurant chains would be an example of

Accepted Answer

A)  a horizontal merger. 
B)  a vertical merger. 
C)  a conglomerate merger. 
D)  an independent merger. 
A)  a horizontal merger. 
B)  a vertical merger. 
C)  a conglomerate merger. 
D)  an independent merger.

Question 14

A market situation in which there are very few sellers is

Accepted Answer

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

Question 15

In a two-sided market, a firm that provides services that link together groups of consumers and producers is called a(n)

Accepted Answer

A)  end user. 
B)  platform. 
C)  monopoly. 
D)  tit-tat. 
A)  end user. 
B)  platform. 
C)  monopoly. 
D)  tit-tat.

Question 16

When managers in oligopolistic firms make decisions that affect output or price, they must

Accepted Answer

A)  also be sure they erect barriers to entry to prevent new entrants from affecting their plans. 
B)  anticipate the reactions of their rivals and plan accordingly. 
C)  register with the Antitrust Division of the Department of Justice. 
D)  inform the regulators of their industry about their plans. 
A)  also be sure they erect barriers to entry to prevent new entrants from affecting their plans. 
B)  anticipate the reactions of their rivals and plan accordingly. 
C)  register with the Antitrust Division of the Department of Justice. 
D)  inform the regulators of their industry about their plans.

Question 17

In a 50-firm industry, two of the smallest firms merge. Yet the 4-firm concentration ratio and the 8-firm concentration ratio did not change. All things considered, we can say that the industry has

Accepted Answer

A)  moved closer to pure competition because the number of firms decreased. 
B)  moved farther away from competition because the number of firms decreased. 
C)  experienced no change in competition even though the number of firms decreased. 
D)  to be identified first; otherwise there is no way to tell. 
A)  moved closer to pure competition because the number of firms decreased. 
B)  moved farther away from competition because the number of firms decreased. 
C)  experienced no change in competition even though the number of firms decreased. 
D)  to be identified first; otherwise there is no way to tell.

Question 18

The joining of a firm with another to which it sells an output or from which it buys an input is known as

Accepted Answer

A)  a conglomerate merger. 
B)  a horizontal merger. 
C)  a vertical merger. 
D)  economies to scale. 
A)  a conglomerate merger. 
B)  a horizontal merger. 
C)  a vertical merger. 
D)  economies to scale.

Question 19

An action that is the best choice under all conditions is known as the

Accepted Answer

A)  profit-maximizing strategy. 
B)  prisoner's dilemma. 
C)  tit-for-tat strategy. 
D)  dominant strategy. 
A)  profit-maximizing strategy. 
B)  prisoner's dilemma. 
C)  tit-for-tat strategy. 
D)  dominant strategy.

Question 20

The market structure of oligopoly is 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 a differentiated product. 
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 a differentiated product. 
D)  there are many producers of a homogeneous product.

Exam 26: Oligopoly and Strategic Behavior

A horizontal merger involves

If an industry has 25 firms that collectively have $150 million in total sales and the top four firms in this industry account for $90 million in sales, what is the concentration ratio of the top four firms in this industry?

A tit-for-tat strategy is one in which oligopolies

Joe's hotdog stand merges with a company that supplies the condiments to Joe's. This is an example of

When a player in a game adopts a strategy which always yields the highest benefit regardless of what the other player does, that player is using a(n)

A market with few sellers, some influence over price, high barriers to entry, a differentiated product, and non-price competition is known as

Firms face downward sloping demand curves in

In a two-sided market, the platform may different prices to different group of end users due to

The most common reason for the existence of oligopolies is

In a zero-sum game

For which market structure do economists have the least precise model of price determination?

A cartel is a form of

The merger of two pizza restaurant chains would be an example of

A market situation in which there are very few sellers is

In a two-sided market, a firm that provides services that link together groups of consumers and producers is called a(n)

When managers in oligopolistic firms make decisions that affect output or price, they must

In a 50-firm industry, two of the smallest firms merge. Yet the 4-firm concentration ratio and the 8-firm concentration ratio did not change. All things considered, we can say that the industry has

The joining of a firm with another to which it sells an output or from which it buys an input is known as

An action that is the best choice under all conditions is known as the

The market structure of oligopoly is when

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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