Question 1

When making decisions on pricing and other behaviors,oligopolistic firms must take into account the actions of other firms.

Accepted Answer

A) True 
 B)False  True

Question 2

There are significant technological barriers to entry that help make the automobile industry oligopolistic.

Accepted Answer

A) True 
 B)False  True

Question 3

High barriers to entry are generally found in:

Accepted Answer

A)  monopolistically competitive markets. 
B)  oligopolistic markets. 
C)  monopolistic markets. 
D)  both (b) and (c). 
A)  monopolistically competitive markets. 
B)  oligopolistic markets. 
C)  monopolistic markets. 
D)  both (b) and (c). D

Question 4

Exhibit 15-6   Refer to Exhibit 15-6.In this situation:

Accepted Answer

A)  the interaction among firms resembles the "Prisoners' Dilemma." 
B)  neither firm as a dominant strategy. 
C)  Pepsi has a dominant strategy to introduce new ads, but Coca-Cola does not. 
D)  if Pepsi begins a new advertising campaign, Coca-Cola is better off not beginning their own advertising campaign. 
A)  the interaction among firms resembles the "Prisoners' Dilemma." 
B)  neither firm as a dominant strategy. 
C)  Pepsi has a dominant strategy to introduce new ads, but Coca-Cola does not. 
D)  if Pepsi begins a new advertising campaign, Coca-Cola is better off not beginning their own advertising campaign.

Question 5

Bert and Ernie are noncolluding oligopolists.If both choose a high price strategy,each makes $40 in profits; if both choose a low price strategy,each makes $30 in profits.If Bert chooses a high price strategy and Ernie chooses a low price strategy,Bert makes $20 in profits and Ernie makes $60 in profits,while if Bert chooses a low price strategy and Ernie chooses a high price strategy,Bert makes $60 in profits and Ernie makes $20 in profits.Which combination of pricing strategies would you expect Bert and Ernie to adopt if they act independently?

Accepted Answer

A)  Both choose a high price strategy. 
B)  Both choose a low price strategy. 
C)  Bert chooses a high price strategy and Ernie chooses a low price strategy. 
D)  Bert chooses a low price strategy and Ernie chooses a high price strategy. 
A)  Both choose a high price strategy. 
B)  Both choose a low price strategy. 
C)  Bert chooses a high price strategy and Ernie chooses a low price strategy. 
D)  Bert chooses a low price strategy and Ernie chooses a high price strategy.

Question 6

Interdependence among firms is characteristic of:

Accepted Answer

A)  perfectly competitive markets. 
B)  monopoly markets. 
C)  oligopoly markets. 
D)  monopolistically competitive markets. 
A)  perfectly competitive markets. 
B)  monopoly markets. 
C)  oligopoly markets. 
D)  monopolistically competitive markets.

Question 7

In which of the following industry models are the individual firms not price takers?

Accepted Answer

A)  oligopoly 
B)  monopolistic competition 
C)  perfect competition 
D)  (a) and (b) above only 
A)  oligopoly 
B)  monopolistic competition 
C)  perfect competition 
D)  (a) and (b) above only

Question 8

Exhibit 15-5   Refer to Exhibit 15-5.In the game:

Accepted Answer

A)  if General Mills prices high, Kellogg's is better off pricing high. 
B)  if General Mills prices high, Kellogg's is better off pricing low. 
C)  if Kellogg's prices high, General Mills is better off pricing high. 
D)  the Nash equilibrium is for both firms to price high. 
A)  if General Mills prices high, Kellogg's is better off pricing high. 
B)  if General Mills prices high, Kellogg's is better off pricing low. 
C)  if Kellogg's prices high, General Mills is better off pricing high. 
D)  the Nash equilibrium is for both firms to price high.

Question 9

An oligopoly firm is generally characterized by:

Accepted Answer

A)  its consideration of rivals' reactions. 
B)  the sale of standardized products. 
C)  the possibility of realizing profits in the long run. 
D)  both (a) and (c). 
A)  its consideration of rivals' reactions. 
B)  the sale of standardized products. 
C)  the possibility of realizing profits in the long run. 
D)  both (a) and (c).

Question 10

Cartels are thought to be inherently unstable because:

Accepted Answer

A)  the costs of enforcing cartel agreements are very low. 
B)  each cartel member can privately profit from increasing production beyond agreed-upon levels. 
C)  customers force cartel members to increase production and reduce prices. 
D)  cartel agreements are legally binding and can be upheld in court. 
A)  the costs of enforcing cartel agreements are very low. 
B)  each cartel member can privately profit from increasing production beyond agreed-upon levels. 
C)  customers force cartel members to increase production and reduce prices. 
D)  cartel agreements are legally binding and can be upheld in court.

Question 11

When oligopolists join together in a cartel,they:

Accepted Answer

A)  choose to ignore their mutual interdependence. 
B)  indicate awareness that their behavior is interdependent. 
C)  violate the law of supply and demand. 
D)  attempt to behave like perfect competitors. 
A)  choose to ignore their mutual interdependence. 
B)  indicate awareness that their behavior is interdependent. 
C)  violate the law of supply and demand. 
D)  attempt to behave like perfect competitors.

Question 12

A small number of firms competing with each other is characteristic of:

Accepted Answer

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

Question 13

Large oligopoly firms are often able to take advantage of significant economies of scale.As a result,they can often produce at a lower average total cost than can smaller firms.

Accepted Answer

A) True 
 B)False

Question 14

____ make(s)it difficult for an oligopoly to maintain a cooperative outcome with low production,high prices,and monopoly profits.

Accepted Answer

A)  Self-interest 
B)  Incentives to cheat 
C)  Government antitrust policy and regulation 
D)  All of the above 
A)  Self-interest 
B)  Incentives to cheat 
C)  Government antitrust policy and regulation 
D)  All of the above

Question 15

If an oligopolist reduces the price of its product relative to its competitors:

Accepted Answer

A)  some customers will switch to rival firms. 
B)  the number of customers it has will likely remain unchanged. 
C)  some customers will switch from rival firms to buy from him. 
D)  rival firms are unlikely to react. 
A)  some customers will switch to rival firms. 
B)  the number of customers it has will likely remain unchanged. 
C)  some customers will switch from rival firms to buy from him. 
D)  rival firms are unlikely to react.

Question 16

One of the most famous cartels is OPEC.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following would not be an example of an oligopolistic industry?

Accepted Answer

A)  light bulbs 
B)  convenience stores 
C)  aircraft 
D)  breweries 
A)  light bulbs 
B)  convenience stores 
C)  aircraft 
D)  breweries

Question 18

Exhibit 15-1 The following payoff matrix shows the possible sentences that two suspects,who are arrested on suspicion of car theft,could receive.The suspects are interrogated separately and are unable to communicate with one another.
  Refer to Exhibit 15-1.The game is called the "Prisoners' Dilemma" because:

Accepted Answer

A)  the Nash equilibrium of the game results in the lowest combined prison term. 
B)  the prisoners, by acting in their own private interests, end up worse off than otherwise could be the case. 
C)  when cooperation is not allowed, the prisoners each choose not to confess. 
D)  the prisoners always act in solidarity, when each could individually be better off. 
A)  the Nash equilibrium of the game results in the lowest combined prison term. 
B)  the prisoners, by acting in their own private interests, end up worse off than otherwise could be the case. 
C)  when cooperation is not allowed, the prisoners each choose not to confess. 
D)  the prisoners always act in solidarity, when each could individually be better off.

Question 19

Mutual interdependence means that:

Accepted Answer

A)  each firm faces a perfectly elastic demand curve. 
B)  each firm faces a perfectly inelastic demand curve. 
C)  firms choose price and output simultaneously. 
D)  firms must anticipate the possible reaction of rivals to their own economic behavior. 
A)  each firm faces a perfectly elastic demand curve. 
B)  each firm faces a perfectly inelastic demand curve. 
C)  firms choose price and output simultaneously. 
D)  firms must anticipate the possible reaction of rivals to their own economic behavior.

Question 20

Exhibit 15-1 The following payoff matrix shows the possible sentences that two suspects,who are arrested on suspicion of car theft,could receive.The suspects are interrogated separately and are unable to communicate with one another.
  Refer to Exhibit 15-1.Under the circumstances:

Accepted Answer

A)  if Suspect 1 confesses, Suspect 2 is better off not confessing. 
B)  if Suspect 2 confesses, Suspect 1 is better off not confessing. 
C)  if Suspect 1 confesses, Suspect 2 is better off confessing. 
D)  if Suspect 1 does not confess, Suspect 2 is better off not confessing. 
A)  if Suspect 1 confesses, Suspect 2 is better off not confessing. 
B)  if Suspect 2 confesses, Suspect 1 is better off not confessing. 
C)  if Suspect 1 confesses, Suspect 2 is better off confessing. 
D)  if Suspect 1 does not confess, Suspect 2 is better off not confessing.

Exam 15: Oligopoly and Strategic Behavior

When making decisions on pricing and other behaviors,oligopolistic firms must take into account the actions of other firms.

There are significant technological barriers to entry that help make the automobile industry oligopolistic.

High barriers to entry are generally found in:

Exhibit 15-6 Refer to Exhibit 15-6.In this situation:

Interdependence among firms is characteristic of:

In which of the following industry models are the individual firms not price takers?

Exhibit 15-5 Refer to Exhibit 15-5.In the game:

An oligopoly firm is generally characterized by:

Cartels are thought to be inherently unstable because:

When oligopolists join together in a cartel,they:

A small number of firms competing with each other is characteristic of:

Large oligopoly firms are often able to take advantage of significant economies of scale.As a result,they can often produce at a lower average total cost than can smaller firms.

____ make(s)it difficult for an oligopoly to maintain a cooperative outcome with low production,high prices,and monopoly profits.

If an oligopolist reduces the price of its product relative to its competitors:

One of the most famous cartels is OPEC.

Which of the following would not be an example of an oligopolistic industry?

Mutual interdependence means that:

Exhibit 15-1 The following payoff matrix shows the possible sentences that two suspects,who are arrested on suspicion of car theft,could receive.The suspects are interrogated separately and are unable to communicate with one another. Refer to Exhibit 15-1.Under the circumstances:

The Role and Method of Economics

Economics: Eight Powerful Ideas

Scarcity, Trade-Offs, and Production Possibilities

Demand, Supply, and Market Equilibrium

Markets in Motion and Price Controls

Elasticities

Market Efficiency and Welfare

Market Failure

Public Finance and Public Choice

Consumer Choice Theory

The Firm: Production and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Product Differentiation

The Markets for Labor, Capital, and Land

Income, Poverty, and Health Care

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Measuring Economic Performance

Economic Growth in the Global Economy

Financial Markets, Saving, and Investment

Aggregate Demand and Aggregate Supply

The Aggregate Expenditure Model

Monetary Institutions

The Federal Reserve System and Monetary Policy

Issues in Macroeconomic Theory and Policy

International Trade

International Finance

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