Question 1

A noncooperative game situation may occur when

Accepted Answer

A)  firms collude. 
B)  firms find collusion too costly. 
C)  firms merge. 
D)  firms agree to price fixing. 
A)  firms collude. 
B)  firms find collusion too costly. 
C)  firms merge. 
D)  firms agree to price fixing.

Question 2

As the definition of products narrows (i.e., becomes more specific), the concentration ratio

Accepted Answer

A)  is not valid. 
B)  tends to decrease. 
C)  tends to increase. 
D)  does not change in any predictable manner. 
A)  is not valid. 
B)  tends to decrease. 
C)  tends to increase. 
D)  does not change in any predictable manner.

Question 3

Which of the following would be the best example of an oligopolistic industry?

Accepted Answer

A)  agriculture 
B)  large aircraft manufacturing 
C)  confections 
D)  retail convenience stores 
A)  agriculture 
B)  large aircraft manufacturing 
C)  confections 
D)  retail convenience stores

Question 4

-Refer to the above figure. The figure gives the payoff matrix for two individuals who are being accused of robbing a bank together. If Bob confesses, what is the best strategy for Harry?

Accepted Answer

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

Question 5

The market power of a firm refers to its ability to

Accepted Answer

A)  erect entry barriers in the industry. 
B)  make a profit even when other firms in the industry are making losses. 
C)  control its own output level while keeping its price the same as the prices charged by other firms. 
D)  affect the market price for its industry's output. 
A)  erect entry barriers in the industry. 
B)  make a profit even when other firms in the industry are making losses. 
C)  control its own output level while keeping its price the same as the prices charged by other firms. 
D)  affect the market price for its industry's output.

Question 6

The main objective of the members of a cartel is to

Accepted Answer

A)  earn economic profits. 
B)  produce efficiently. 
C)  make the industry more competitive. 
D)  obtain a patent. 
A)  earn economic profits. 
B)  produce efficiently. 
C)  make the industry more competitive. 
D)  obtain a patent.

Question 7

All of the following can create an oligopolistic structure EXCEPT

Accepted Answer

A)  low barriers to entry. 
B)  economies of scale. 
C)  government licensing rules. 
D)  mergers. 
A)  low barriers to entry. 
B)  economies of scale. 
C)  government licensing rules. 
D)  mergers.

Question 8

Which of the following does NOT help explain why oligopolies exist?

Accepted Answer

A)  Economies of scale 
B)  Mergers 
C)  Product homogeneity 
D)  Barriers to entry 
A)  Economies of scale 
B)  Mergers 
C)  Product homogeneity 
D)  Barriers to entry

Question 9

How does the presence of network effects in a two-sided market affects the pricing behavior in the market?

Accepted Answer

In a two-sided market, platform firms ma

Question 10

When a new product is introduced in the market, Lenny always wants to see how popular the item becomes before he purchases it. Lenny's behavior is known as

Accepted Answer

A)  overt collusion. 
B)  limit-pricing. 
C)  a network effect. 
D)  price leadership. 
A)  overt collusion. 
B)  limit-pricing. 
C)  a network effect. 
D)  price leadership.

Question 11

A market with many sellers, some influence over price, low barriers to entry, a differentiated product, and non-price competition often taking the form of advertising 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 12

The industry concentration ratio measures the

Accepted Answer

A)  value of the assets owned by the largest corporations in the market. 
B)  percentage of industry sales accounted for by the top four or eight firms. 
C)  difference between price and marginal cost for the largest firms in the industry. 
D)  degree of product differentiation in the market. 
A)  value of the assets owned by the largest corporations in the market. 
B)  percentage of industry sales accounted for by the top four or eight firms. 
C)  difference between price and marginal cost for the largest firms in the industry. 
D)  degree of product differentiation in the market.

Question 13

-Use the above table. If firms 4 and 5 merge, the four-firm concentration ratio will be

Accepted Answer

A)  80 percent. 
B)  75 percent. 
C)  64 percent. 
D)  50 percent. 
A)  80 percent. 
B)  75 percent. 
C)  64 percent. 
D)  50 percent.

Question 14

When a consumer's willingness to buy a good or service is influenced by the number of people who have purchased that good or service, this is called

Accepted Answer

A)  a switching cost. 
B)  an opportunity cost. 
C)  a network effect. 
D)  an advertising gimmick. 
A)  a switching cost. 
B)  an opportunity cost. 
C)  a network effect. 
D)  an advertising gimmick.

Question 15

Monopolistically competitive markets and oligopolies are similar in that

Accepted Answer

A)  the number of firms is identical. 
B)  the kinked demand curve can be used to analyze the firms' pricing decisions. 
C)  there is mutual interdependence amongst the firms. 
D)  nonprice competition is a tool used. 
A)  the number of firms is identical. 
B)  the kinked demand curve can be used to analyze the firms' pricing decisions. 
C)  there is mutual interdependence amongst the firms. 
D)  nonprice competition is a tool used.

Question 16

Suppose Nabisco merges with both a wheat firm and milling firm. This is an example of a

Accepted Answer

A)  vertical merger. 
B)  horizontal merger. 
C)  parallel merger. 
D)  diagonal merger. 
A)  vertical merger. 
B)  horizontal merger. 
C)  parallel merger. 
D)  diagonal merger.

Question 17

-Refer to the above figure. Ajax and Greenco are oligopolists. Above you are given the payoff matrix for the two firms giving the payoff associated with different pricing strategies. What is the best strategy for Greenco if Ajax decides on charging a low price?

Accepted Answer

A)  High price. 
B)  Low price. 
C)  There is no best strategy. 
D)  Not enough information is given to determine the best strategy. 
A)  High price. 
B)  Low price. 
C)  There is no best strategy. 
D)  Not enough information is given to determine the best strategy.

Question 18

Actions that ignore the possible long-run benefits of cooperation and focus solely on short-run gains are

Accepted Answer

A)  a zero-sum game. 
B)  a negative-sum game. 
C)  tit-for-tat strategic behavior. 
D)  opportunistic behavior. 
A)  a zero-sum game. 
B)  a negative-sum game. 
C)  tit-for-tat strategic behavior. 
D)  opportunistic behavior.

Question 19

The network effect in the TV broadcasting industry results in

Accepted Answer

A)  a positive market feedback between the number of advertisers and the size of TV audience. 
B)  a negative market feedback between the number of advertisers and the size of TV audience. 
C)  a positive market feedback between the number of advertisers and the number of TV channels. 
D)  a negative market feedback between the number of advertisers and the number of TV channels. 
A)  a positive market feedback between the number of advertisers and the size of TV audience. 
B)  a negative market feedback between the number of advertisers and the size of TV audience. 
C)  a positive market feedback between the number of advertisers and the number of TV channels. 
D)  a negative market feedback between the number of advertisers and the number of TV channels.

Question 20

A merger between firms in which one firm purchases an input from the other is called a

Accepted Answer

A)  conglomerate merger. 
B)  horizontal merger. 
C)  vertical merger. 
D)  none of the above. 
A)  conglomerate merger. 
B)  horizontal merger. 
C)  vertical merger. 
D)  none of the above.

Exam 26: Oligopoly and Strategic Behavior

A noncooperative game situation may occur when

As the definition of products narrows (i.e., becomes more specific), the concentration ratio

Which of the following would be the best example of an oligopolistic industry?

-Refer to the above figure. The figure gives the payoff matrix for two individuals who are being accused of robbing a bank together. If Bob confesses, what is the best strategy for Harry?

The market power of a firm refers to its ability to

The main objective of the members of a cartel is to

All of the following can create an oligopolistic structure EXCEPT

Which of the following does NOT help explain why oligopolies exist?

How does the presence of network effects in a two-sided market affects the pricing behavior in the market?

When a new product is introduced in the market, Lenny always wants to see how popular the item becomes before he purchases it. Lenny's behavior is known as

A market with many sellers, some influence over price, low barriers to entry, a differentiated product, and non-price competition often taking the form of advertising is known as

The industry concentration ratio measures the

-Use the above table. If firms 4 and 5 merge, the four-firm concentration ratio will be

When a consumer's willingness to buy a good or service is influenced by the number of people who have purchased that good or service, this is called

Monopolistically competitive markets and oligopolies are similar in that

Suppose Nabisco merges with both a wheat firm and milling firm. This is an example of a

-Refer to the above figure. Ajax and Greenco are oligopolists. Above you are given the payoff matrix for the two firms giving the payoff associated with different pricing strategies. What is the best strategy for Greenco if Ajax decides on charging a low price?

Actions that ignore the possible long-run benefits of cooperation and focus solely on short-run gains are

The network effect in the TV broadcasting industry results in

A merger between firms in which one firm purchases an input from the other is called a

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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