Question 1

A zero-sum game is one where a player will always end up gaining nothing, regardless of his strategy.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is the best example of oligopoly?

Accepted Answer

A)  women's dress manufacturing 
B)  automobile manufacturing 
C)  restaurants 
D)  cotton farming 
A)  women's dress manufacturing 
B)  automobile manufacturing 
C)  restaurants 
D)  cotton farming

Question 3

Mutually cancelling advertising by oligopolistic firms tends to improve economic efficiency in the industry.

Accepted Answer

A) True 
 B)False

Question 4

In game theory, a repeated game is one

Accepted Answer

A)  where a pair of players mimic the actions of another pair of players. 
B)  that recurs more than once between two players. 
C)  where the payoff matrix shows equal payoffs for two players. 
D)  that is replicated in other parts of the market. 
A)  where a pair of players mimic the actions of another pair of players. 
B)  that recurs more than once between two players. 
C)  where the payoff matrix shows equal payoffs for two players. 
D)  that is replicated in other parts of the market.

Question 5

First-mover advantage cannot happen in a one-time simultaneous game.

Accepted Answer

A) True 
 B)False

Question 6

Prices in oligopolistic industries are predicted to fluctuate widely and frequently compared to other market structures.

Accepted Answer

A) True 
 B)False

Question 7

Homogeneous oligopoly exists where a small number of firms are

Accepted Answer

A)  producing virtually identical products. 
B)  setting price and output independently. 
C)  setting price and output collusively. 
D)  producing differentiated products. 
A)  producing virtually identical products. 
B)  setting price and output independently. 
C)  setting price and output collusively. 
D)  producing differentiated products.

Question 8

A positive-sum game occurs

Accepted Answer

A)  when the sum of the two firms' outcomes is positive. 
B)  whenever any of the values in the payoff matrix are positive. 
C)  when the gains received by one player are exactly offset by the losses to the other. 
D)  whenever the payoffs to the two players are equal. 
A)  when the sum of the two firms' outcomes is positive. 
B)  whenever any of the values in the payoff matrix are positive. 
C)  when the gains received by one player are exactly offset by the losses to the other. 
D)  whenever the payoffs to the two players are equal.

Question 9

Limit pricing by a price leader in an oligopoly refers to the strategy of setting a price

Accepted Answer

A)  that blocks the entry of new firms. 
B)  that ensures profits for the least efficient existing firm in the oligopoly. 
C)  that maximizes profits for all firms in the oligopoly market. 
D)  that maximizes profits for the price leader, but not necessarily for the other firms. 
A)  that blocks the entry of new firms. 
B)  that ensures profits for the least efficient existing firm in the oligopoly. 
C)  that maximizes profits for all firms in the oligopoly market. 
D)  that maximizes profits for the price leader, but not necessarily for the other firms.

Question 10

In which set of market models are there the most significant barriers to entry?

Accepted Answer

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

Question 11

A defining characteristic of an oligopolistic market is that there are

Accepted Answer

A)  many buyers. 
B)  few buyers. 
C)  few sellers. 
D)  many sellers. 
A)  many buyers. 
B)  few buyers. 
C)  few sellers. 
D)  many sellers.

Question 12

In a repeated game with reciprocity, the two players

Accepted Answer

A)  could each earn a higher payoff than if they aggressively countered each other's single-period strategy. 
B)  tend to earn less than if they aggressively countered each other's single-period strategy. 
C)  will have less incentive to collude explicitly or tacitly. 
D)  often end up in a price war. 
A)  could each earn a higher payoff than if they aggressively countered each other's single-period strategy. 
B)  tend to earn less than if they aggressively countered each other's single-period strategy. 
C)  will have less incentive to collude explicitly or tacitly. 
D)  often end up in a price war.

Question 13

The adoption of a limit-pricing strategy by oligopolists would tend to make the price of the product closer to marginal cost.

Accepted Answer

A) True 
 B)False

Question 14

If advertising succeeds in enhancing brand loyalty among consumers, it tends to enhance the monopoly power of the seller.

Accepted Answer

A) True 
 B)False

Question 15

Advertising can impede economic efficiency when it

Accepted Answer

A)  reduces entry barriers. 
B)  reduces brand loyalty. 
C)  leads to greater monopoly power. 
D)  provides consumers with useful information about product quality. 
A)  reduces entry barriers. 
B)  reduces brand loyalty. 
C)  leads to greater monopoly power. 
D)  provides consumers with useful information about product quality.

Question 16

In an oligopolistic market,

Accepted Answer

A)  one firm is always dominant. 
B)  products may be standardized or differentiated. 
C)  the four largest firms account for 20 percent or less of total sales. 
D)  the industry is monopolistically competitive. 
A)  one firm is always dominant. 
B)  products may be standardized or differentiated. 
C)  the four largest firms account for 20 percent or less of total sales. 
D)  the industry is monopolistically competitive.

Question 17

A game where players or firms select their optimal strategies for a single time period without regard for possible interactions in subsequent periods is called a

Accepted Answer

A)  positive-sum game. 
B)  zero-sum game. 
C)  simultaneous game. 
D)  one-time game. 
A)  positive-sum game. 
B)  zero-sum game. 
C)  simultaneous game. 
D)  one-time game.

Question 18

Suppose that an industry is characterized by a few firms and price leadership. We would expect that

Accepted Answer

A)  price would equal marginal cost. 
B)  price would equal average total cost. 
C)  price would exceed both marginal cost and average total cost. 
D)  marginal revenue would exceed marginal cost. 
A)  price would equal marginal cost. 
B)  price would equal average total cost. 
C)  price would exceed both marginal cost and average total cost. 
D)  marginal revenue would exceed marginal cost.

Question 19

Generally speaking, oligopolistic industries producing raw materials and semifinished goods usually offer differentiated products, while oligopolists producing consumer goods usually offer standardized products.

Accepted Answer

A) True 
 B)False

Question 20

If competing oligopolists completely ignore oligopolist X's price changes, then X's

Accepted Answer

A)  demand curve will be less elastic than if the other oligopolists matched X's price changes. 
B)  demand curve will be more elastic than if the other oligopolists matched X's price changes. 
C)  marginal revenue curve will have a vertical gap. 
D)  demand and marginal revenue curves will coincide. 
A)  demand curve will be less elastic than if the other oligopolists matched X's price changes. 
B)  demand curve will be more elastic than if the other oligopolists matched X's price changes. 
C)  marginal revenue curve will have a vertical gap. 
D)  demand and marginal revenue curves will coincide.

Exam 14: Oligopoly and Strategic Behavior

A zero-sum game is one where a player will always end up gaining nothing, regardless of his strategy.

Which of the following is the best example of oligopoly?

Mutually cancelling advertising by oligopolistic firms tends to improve economic efficiency in the industry.

In game theory, a repeated game is one

First-mover advantage cannot happen in a one-time simultaneous game.

Prices in oligopolistic industries are predicted to fluctuate widely and frequently compared to other market structures.

Homogeneous oligopoly exists where a small number of firms are

A positive-sum game occurs

Limit pricing by a price leader in an oligopoly refers to the strategy of setting a price

In which set of market models are there the most significant barriers to entry?

A defining characteristic of an oligopolistic market is that there are

In a repeated game with reciprocity, the two players

The adoption of a limit-pricing strategy by oligopolists would tend to make the price of the product closer to marginal cost.

If advertising succeeds in enhancing brand loyalty among consumers, it tends to enhance the monopoly power of the seller.

Advertising can impede economic efficiency when it

In an oligopolistic market,

A game where players or firms select their optimal strategies for a single time period without regard for possible interactions in subsequent periods is called a

Suppose that an industry is characterized by a few firms and price leadership. We would expect that

Generally speaking, oligopolistic industries producing raw materials and semifinished goods usually offer differentiated products, while oligopolists producing consumer goods usually offer standardized products.

If competing oligopolists completely ignore oligopolist X's price changes, then X's

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

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Pure Monopoly

Monopolistic Competition

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The Demand for Resources

Wage Determination

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