Question 1

Which of the following statements is true?

Accepted Answer

A)  Nash equilibriums exist only in games with dominant strategies. 
B)  Dominant strategies do not exist in repeated games. 
C)  Collusive agreements will always break down in repeated games. 
D)  Games with a known ending date undermine reciprocity strategies. 
A)  Nash equilibriums exist only in games with dominant strategies. 
B)  Dominant strategies do not exist in repeated games. 
C)  Collusive agreements will always break down in repeated games. 
D)  Games with a known ending date undermine reciprocity strategies.

Question 2

One common factor that often weakens collusion among cartel members is the incentive to cheat.

Accepted Answer

A) True 
 B)False

Question 3

In repeated games, players may be willing to accept lower payoffs in the short run in exchange for greater net payoffs over the long run.

Accepted Answer

A) True 
 B)False

Question 4

The oligopolist's kinked-demand curve is highly elastic below and highly inelastic above the going product price.

Accepted Answer

A) True 
 B)False

Question 5

Mutual interdependence means that each oligopolistic firm

Accepted Answer

A)  faces a perfectly elastic demand for its product. 
B)  must consider the reactions of its rivals when it determines its price policy. 
C)  produces a product identical to those of its rivals. 
D)  produces a product similar but not identical to the products of its rivals. 
A)  faces a perfectly elastic demand for its product. 
B)  must consider the reactions of its rivals when it determines its price policy. 
C)  produces a product identical to those of its rivals. 
D)  produces a product similar but not identical to the products of its rivals.

Question 6

The highest possible value of the Herfindahl index is 1,000.

Accepted Answer

A) True 
 B)False

Question 7

In game theory, sequential games can be displayed or summarized in two forms,

Accepted Answer

A)  collusive form and strategic form. 
B)  strategic form and extensive form. 
C)  payoff matrix form and strategic form. 
D)  extensive form and game-tree form. 
A)  collusive form and strategic form. 
B)  strategic form and extensive form. 
C)  payoff matrix form and strategic form. 
D)  extensive form and game-tree form.

Question 8

Game theory can be used to demonstrate that oligopolists

Accepted Answer

A)  rarely consider the potential reactions of rivals. 
B)  experience economies of scale. 
C)  can increase their profits through collusion. 
D)  may be either homogeneous or differentiated. 
A)  rarely consider the potential reactions of rivals. 
B)  experience economies of scale. 
C)  can increase their profits through collusion. 
D)  may be either homogeneous or differentiated.

Question 9

The tablet-computer market is best characterized as a(n)

Accepted Answer

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

Question 10

Game-theory models analyze the interdependence of oligopolists' strategies.

Accepted Answer

A) True 
 B)False

Question 11

In the United States cartels are

Accepted Answer

A)  quite common in industries that produce nondurable goods. 
B)  in violation of the antitrust laws. 
C)  concentrated in monopolistically competitive industries. 
D)  encouraged by government policy so firms can achieve economies of scale. 
A)  quite common in industries that produce nondurable goods. 
B)  in violation of the antitrust laws. 
C)  concentrated in monopolistically competitive industries. 
D)  encouraged by government policy so firms can achieve economies of scale.

Question 12

Two important characteristics of oligopolists are that they have significant control over price and that there is mutual interdependence among them.

Accepted Answer

A) True 
 B)False

Question 13

A low concentration ratio means that

Accepted Answer

A)  there is a low probability of entering the industry. 
B)  there is a low probability of success in the industry. 
C)  each firm accounts for a small market share of the industry. 
D)  each firm accounts for a large market share of the industry. 
A)  there is a low probability of entering the industry. 
B)  there is a low probability of success in the industry. 
C)  each firm accounts for a small market share of the industry. 
D)  each firm accounts for a large market share of the industry.

Question 14

(Consider This) The prisoner's dilemma is generally demonstrated through

Accepted Answer

A)  the kinked-demand model. 
B)  game theory. 
C)  monopolistic competition. 
D)  a tightly knit cartel. 
A)  the kinked-demand model. 
B)  game theory. 
C)  monopolistic competition. 
D)  a tightly knit cartel.

Question 15

The U.S. breakfast cereal industry is an example of differentiated oligopoly.

Accepted Answer

A) True 
 B)False

Question 16

Two characteristics of oligopoly pricing that have frequently been observed are that

Accepted Answer

A)  oligopolistic prices tend to be "sticky" or inflexible, and when the firms do change their prices, they tend to do so together. 
B)  oligopolistic firms' prices tend to fluctuate a lot, and these prices tend to move together with each other. 
C)  oligopolists tend to practice a lot of price discrimination, and there tends to be a wide variance in oligopoly pricing. 
D)  oligopolistic firms' prices tend to fluctuate a lot, and there tends to be a wide variance in oligopoly pricing. 
A)  oligopolistic prices tend to be "sticky" or inflexible, and when the firms do change their prices, they tend to do so together. 
B)  oligopolistic firms' prices tend to fluctuate a lot, and these prices tend to move together with each other. 
C)  oligopolists tend to practice a lot of price discrimination, and there tends to be a wide variance in oligopoly pricing. 
D)  oligopolistic firms' prices tend to fluctuate a lot, and there tends to be a wide variance in oligopoly pricing.

Question 17

The kinked-demand curve model of oligopoly is useful in explaining

Accepted Answer

A)  the way that collusion works. 
B)  why oligopolistic prices and outputs are extremely sensitive to changes in marginal cost. 
C)  why oligopolistic prices might change infrequently. 
D)  the process by which oligopolists merge with one another. 
A)  the way that collusion works. 
B)  why oligopolistic prices and outputs are extremely sensitive to changes in marginal cost. 
C)  why oligopolistic prices might change infrequently. 
D)  the process by which oligopolists merge with one another.

Question 18

(Consider This) The Native American arts and crafts story illustrates the twin ideas of

Accepted Answer

A)  product differentiation and monopolistic competition. 
B)  excess capacity and monopolistic competition. 
C)  local oligopoly and strategic behavior. 
D)  pure monopoly and price discrimination. 
A)  product differentiation and monopolistic competition. 
B)  excess capacity and monopolistic competition. 
C)  local oligopoly and strategic behavior. 
D)  pure monopoly and price discrimination.

Question 19

The strategy of establishing a price that prevents the entry of new firms is called

Accepted Answer

A)  cartel pricing. 
B)  limit pricing. 
C)  price leadership. 
D)  profit maximizing price. 
A)  cartel pricing. 
B)  limit pricing. 
C)  price leadership. 
D)  profit maximizing price.

Question 20

The kinked-demand model of oligopoly assumes that

Accepted Answer

A)  rivals will ignore price increases but will match price cuts. 
B)  rivals will ignore price cuts but will match price increases. 
C)  the oligopolistic firms are colluding. 
D)  a firm faces a more elastic demand curve if it cuts its price, and less elastic if it raises its price. 
A)  rivals will ignore price increases but will match price cuts. 
B)  rivals will ignore price cuts but will match price increases. 
C)  the oligopolistic firms are colluding. 
D)  a firm faces a more elastic demand curve if it cuts its price, and less elastic if it raises its price.

Exam 14: Oligopoly and Strategic Behavior

Which of the following statements is true?

One common factor that often weakens collusion among cartel members is the incentive to cheat.

In repeated games, players may be willing to accept lower payoffs in the short run in exchange for greater net payoffs over the long run.

The oligopolist's kinked-demand curve is highly elastic below and highly inelastic above the going product price.

Mutual interdependence means that each oligopolistic firm

The highest possible value of the Herfindahl index is 1,000.

In game theory, sequential games can be displayed or summarized in two forms,

Game theory can be used to demonstrate that oligopolists

The tablet-computer market is best characterized as a(n)

Game-theory models analyze the interdependence of oligopolists' strategies.

In the United States cartels are

Two important characteristics of oligopolists are that they have significant control over price and that there is mutual interdependence among them.

A low concentration ratio means that

(Consider This) The prisoner's dilemma is generally demonstrated through

The U.S. breakfast cereal industry is an example of differentiated oligopoly.

Two characteristics of oligopoly pricing that have frequently been observed are that

The kinked-demand curve model of oligopoly is useful in explaining

(Consider This) The Native American arts and crafts story illustrates the twin ideas of

The strategy of establishing a price that prevents the entry of new firms is called

The kinked-demand model of oligopoly assumes that

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

Elasticity

Utility Maximization

Behavioral Economics

Businesses and the Costs of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition

Technology, Rd, and Efficiency

The Demand for Resources

Wage Determination

Rent, Interest, and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

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The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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