Question 1

Competition from substitute goods is more of a threat when switching costs are high.

Accepted Answer

A) True 
 B)False

Question 2

If the industry is an oligopoly, the price charged and the quantity produced would be the same as if the industry was a monopoly if the

Accepted Answer

A) oligopolists face kinked demand curves. 
B) Cournot model applies. 
C) firms agree not to engage in non-price competition. 
D) oligopolists collude. 
A) oligopolists face kinked demand curves. 
B) Cournot model applies. 
C) firms agree not to engage in non-price competition. 
D) oligopolists collude.

Question 3

How can firms increase their market power in an oligopoly?

Accepted Answer

A) Selling to buyers who have market power. 
B) Pursuing dominant strategies. 
C) Colluding to set prices. 
D) Undertaking heavy advertising expenditure. 
A) Selling to buyers who have market power. 
B) Pursuing dominant strategies. 
C) Colluding to set prices. 
D) Undertaking heavy advertising expenditure.

Question 4

If firms are protected by substantial barriers to entry, short-run profits can turn into long-run profits.

Accepted Answer

A) True 
 B)False

Question 5

A member of a cartel like OPEC has an incentive to

Accepted Answer

A) argue for larger production quotas for each member of the cartel. 
B) agree to a low cartel production level and then produce more than its quota. 
C) abide by its individual production quota. 
D) support equal production quotas for each member. 
A) argue for larger production quotas for each member of the cartel. 
B) agree to a low cartel production level and then produce more than its quota. 
C) abide by its individual production quota. 
D) support equal production quotas for each member.

Question 6

Who won a Nobel Prize in economics for his work in the development of game theory?

Accepted Answer

A) John von Neuman 
B) Oskar Morgenstern 
C) John Nash 
D) Howard Schultz 
A) John von Neuman 
B) Oskar Morgenstern 
C) John Nash 
D) Howard Schultz

Question 7

A supplier of an input is unlikely to have bargaining power if

Accepted Answer

A) the input supplied is specialised. 
B) many firms can supply the input. 
C) it is the sole supplier of the input. 
D) it has a patent on the input. 
A) the input supplied is specialised. 
B) many firms can supply the input. 
C) it is the sole supplier of the input. 
D) it has a patent on the input.

Question 8

Figure 11.1   Assume that Lexus (L)is the first automobile company to produce a luxury class hybrid automobile and is the only such company for the past four years.BMW is now considering producing its own luxury hybrid automobile and Lexus must decide whether or not to lower the price of its luxury hybrid to counter BMW's entry into the luxury hybrid niche.
-Refer to Figure 11.1.Should Lexus lower its price in order to deter BMW's entry into the luxury hybrid automobile market?

Accepted Answer

A) In terms of profit earned, it makes no difference whether Lexus lowers its price or not; in either case it will make $280 million profit if BMW enters. 
B) No, it should keep the same price and work to capitalise on its brand loyalty. 
C) Yes, it will drive BMW out of the market. 
D) No, because BMW will enter the market regardless of Lexus' decision about its price. 
A) In terms of profit earned, it makes no difference whether Lexus lowers its price or not; in either case it will make $280 million profit if BMW enters. 
B) No, it should keep the same price and work to capitalise on its brand loyalty. 
C) Yes, it will drive BMW out of the market. 
D) No, because BMW will enter the market regardless of Lexus' decision about its price.

Question 9

What is an oligopoly? Give two examples of oligopolistic industries in Australia.
__________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

Oligopoly is a market structure in which

Question 10

List the competitive forces in the five competitive forces model.
__________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

The five competitive forces are 1)compet

Question 11

Sony, Microsoft, and Nintendo have in common that

Accepted Answer

A) each achieved a dominant position in its industry because it owned a key input in the production of its product. 
B) the industry in which each firm competes is an oligopoly because of government-imposed barriers to entry. 
C) each company was founded in the same state. 
D) the profitability of each firm depends on its interactions with other firms. 
A) each achieved a dominant position in its industry because it owned a key input in the production of its product. 
B) the industry in which each firm competes is an oligopoly because of government-imposed barriers to entry. 
C) each company was founded in the same state. 
D) the profitability of each firm depends on its interactions with other firms.

Question 12

How does an oligopolist differ from a perfect competitor?

Accepted Answer

A) There is cutthroat competition in perfect competition but little competition in oligopoly because firms have significant market power. 
B) Firms in an oligopoly do not produce homogeneous products while firms in perfect competition do. 
C) The market demand curve for a perfectly competitive industry is perfectly elastic but it is downward sloping in an oligopolistic industry. 
D) There are no entry barriers in perfect competition but there are entry barriers in oligopoly. 
A) There is cutthroat competition in perfect competition but little competition in oligopoly because firms have significant market power. 
B) Firms in an oligopoly do not produce homogeneous products while firms in perfect competition do. 
C) The market demand curve for a perfectly competitive industry is perfectly elastic but it is downward sloping in an oligopolistic industry. 
D) There are no entry barriers in perfect competition but there are entry barriers in oligopoly.

Question 13

A table that shows the possible payoffs each firm earns from every combination of strategies by all firms is called

Accepted Answer

A) an earnings table. 
B) a payoff table. 
C) a payoff matrix. 
D) a strategic matrix. 
A) an earnings table. 
B) a payoff table. 
C) a payoff matrix. 
D) a strategic matrix.

Question 14

What happens when large firms in oligopoly markets cut their prices?

Accepted Answer

A) Rival firms will also cut their prices to avoid losing sales. 
B) Rival firms will not change their prices because most of their customers have signed contracts that commit them to doing business with the same firms for the life of their contracts. 
C) We don't know for sure how rival firms will respond. 
D) Rival firms will not cut their prices because they fear that the federal government will accuse them of collusion. 
A) Rival firms will also cut their prices to avoid losing sales. 
B) Rival firms will not change their prices because most of their customers have signed contracts that commit them to doing business with the same firms for the life of their contracts. 
C) We don't know for sure how rival firms will respond. 
D) Rival firms will not cut their prices because they fear that the federal government will accuse them of collusion.

Question 15

What are sequential games used to analyse?

Accepted Answer

A) Firms that are subject to the prisoner's dilemma. 
B) Cartels. 
C) Second-price auctions. 
D) Situations in which one firm acts and other firms respond. 
A) Firms that are subject to the prisoner's dilemma. 
B) Cartels. 
C) Second-price auctions. 
D) Situations in which one firm acts and other firms respond.

Question 16

Game theory was developed in the 1940s by John von Neuman, a mathematician, and an economist named

Accepted Answer

A) John Nash. 
B) John Maynard Keynes. 
C) Oskar Morgenstern. 
D) Milton Friedman. 
A) John Nash. 
B) John Maynard Keynes. 
C) Oskar Morgenstern. 
D) Milton Friedman.

Question 17

An entry barrier exists when firms in an industry charge the lowest price possible for their products.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is not a barrier to entry?

Accepted Answer

A) An inelastic demand curve 
B) Economies of scale 
C) Ownership of a key input 
D) A patent 
A) An inelastic demand curve 
B) Economies of scale 
C) Ownership of a key input 
D) A patent

Question 19

We can draw demand curves for firms in perfectly competitive and monopolistically competitive industries, but not for oligopoly firms.The reason for this is

Accepted Answer

A) there are no barriers to entry in perfectly competitive and monopolistically competitive industries.There are high barriers to entry in oligopoly industries. 
B) we can assume that the prices charged by perfectly competitive and monopolistically competitive firms have no impact on rival firms.For oligopoly this assumption is unrealistic. 
C) that perfectly competitive and monopolistically competitive firms are price takers.Oligopoly firms are price makers. 
D) perfectly competitive and monopolistically competitive firms sell standardised products.Oligopoly firms sell differentiated products. 
A) there are no barriers to entry in perfectly competitive and monopolistically competitive industries.There are high barriers to entry in oligopoly industries. 
B) we can assume that the prices charged by perfectly competitive and monopolistically competitive firms have no impact on rival firms.For oligopoly this assumption is unrealistic. 
C) that perfectly competitive and monopolistically competitive firms are price takers.Oligopoly firms are price makers. 
D) perfectly competitive and monopolistically competitive firms sell standardised products.Oligopoly firms sell differentiated products.

Question 20

A fundamental assumption in game theory is that players do not interact with each other.

Accepted Answer

A) True 
 B)False

Competition from substitute goods is more of a threat when switching costs are high.

If the industry is an oligopoly, the price charged and the quantity produced would be the same as if the industry was a monopoly if the

How can firms increase their market power in an oligopoly?

If firms are protected by substantial barriers to entry, short-run profits can turn into long-run profits.

A member of a cartel like OPEC has an incentive to

Who won a Nobel Prize in economics for his work in the development of game theory?

A supplier of an input is unlikely to have bargaining power if

What is an oligopoly? Give two examples of oligopolistic industries in Australia. __________________________________________________________________________________________________________________________________________________________________________________________

List the competitive forces in the five competitive forces model. __________________________________________________________________________________________________________________________________________________________________________________________

Sony, Microsoft, and Nintendo have in common that

How does an oligopolist differ from a perfect competitor?

A table that shows the possible payoffs each firm earns from every combination of strategies by all firms is called

What happens when large firms in oligopoly markets cut their prices?

What are sequential games used to analyse?

Game theory was developed in the 1940s by John von Neuman, a mathematician, and an economist named

An entry barrier exists when firms in an industry charge the lowest price possible for their products.

Which of the following is not a barrier to entry?

We can draw demand curves for firms in perfectly competitive and monopolistically competitive industries, but not for oligopoly firms.The reason for this is

A fundamental assumption in game theory is that players do not interact with each other.

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: The Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency, Government Price Setting and Taxes

Consumer Choice and Behavioural Economics

Technology Production and Costs

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition: The Competitive Model in a More Realistic

The Markets for Labour and Other Factors of Production

Comparative Advantage and the Gains From International Trade

Government Intervention in the Market

Externalities, Environmental Policy and Public Goods

The Distribution of Income and Social Policy

Filters

Exam 11: Oligopoly: Markets With Few Competitors

Competition from substitute goods is more of a threat when switching costs are high.

If the industry is an oligopoly, the price charged and the quantity produced would be the same as if the industry was a monopoly if the

How can firms increase their market power in an oligopoly?

If firms are protected by substantial barriers to entry, short-run profits can turn into long-run profits.

A member of a cartel like OPEC has an incentive to

Who won a Nobel Prize in economics for his work in the development of game theory?

A supplier of an input is unlikely to have bargaining power if

What is an oligopoly? Give two examples of oligopolistic industries in Australia. __________________________________________________________________________________________________________________________________________________________________________________________

List the competitive forces in the five competitive forces model. __________________________________________________________________________________________________________________________________________________________________________________________

Sony, Microsoft, and Nintendo have in common that

How does an oligopolist differ from a perfect competitor?

A table that shows the possible payoffs each firm earns from every combination of strategies by all firms is called

What happens when large firms in oligopoly markets cut their prices?

What are sequential games used to analyse?

Game theory was developed in the 1940s by John von Neuman, a mathematician, and an economist named

An entry barrier exists when firms in an industry charge the lowest price possible for their products.

Which of the following is not a barrier to entry?

We can draw demand curves for firms in perfectly competitive and monopolistically competitive industries, but not for oligopoly firms.The reason for this is

A fundamental assumption in game theory is that players do not interact with each other.

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: The Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency, Government Price Setting and Taxes

Consumer Choice and Behavioural Economics

Technology Production and Costs

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition: The Competitive Model in a More Realistic

The Markets for Labour and Other Factors of Production

Comparative Advantage and the Gains From International Trade

Government Intervention in the Market

Externalities, Environmental Policy and Public Goods

The Distribution of Income and Social Policy

Filters