Question 1

In repeated games, credible threats are necessary for the players to reach a Nash equilibrium.

Accepted Answer

A) True 
 B)False

Question 2

A major distinction between a monopolistically competitive firm and an oligopolistic firm is that

Accepted Answer

A)  one is a price taker and the other is a price maker. 
B)  a recognized interdependence exists between firms in one industry but not in the other. 
C)  one always produces differentiated products and the other always produces a homogeneous product. 
D)  one necessarily faces a downward-sloping demand curve and the other a horizontal demand curve. 
A)  one is a price taker and the other is a price maker. 
B)  a recognized interdependence exists between firms in one industry but not in the other. 
C)  one always produces differentiated products and the other always produces a homogeneous product. 
D)  one necessarily faces a downward-sloping demand curve and the other a horizontal demand curve.

Question 3

In some games, one firm may avoid taking advantage of another firm because it knows that the other firm can take advantage of it in subsequent games. This behavior is called

Accepted Answer

A)  the first-mover advantage. 
B)  reciprocity. 
C)  price leadership. 
D)  preemption of entry. 
A)  the first-mover advantage. 
B)  reciprocity. 
C)  price leadership. 
D)  preemption of entry.

Question 4

A dominant strategy is a player's move or action that

Accepted Answer

A)  is better than any alternative option, regardless of what the other player does. 
B)  yields her a higher payoff than the other player. 
C)  results in the highest possible payoff, assuming a specific action by the other player. 
D)  gives the largest total payoff for the two players combined. 
A)  is better than any alternative option, regardless of what the other player does. 
B)  yields her a higher payoff than the other player. 
C)  results in the highest possible payoff, assuming a specific action by the other player. 
D)  gives the largest total payoff for the two players combined.

Question 5

If a product such as cement or bricks is costly to ship and, therefore, markets are very localized, the national concentration ratio for that industry

Accepted Answer

A)  will be greater than 50 percent. 
B)  may understate the degree of monopoly. 
C)  may overstate the degree of monopoly. 
D)  will yield an accurate impression of the degree of monopoly. 
A)  will be greater than 50 percent. 
B)  may understate the degree of monopoly. 
C)  may overstate the degree of monopoly. 
D)  will yield an accurate impression of the degree of monopoly.

Question 6

A breakdown in price leadership leading to successive rounds of price cuts is known as

Accepted Answer

A)  limit pricing. 
B)  a price war. 
C)  informal pricing. 
D)  price discrimination. 
A)  limit pricing. 
B)  a price war. 
C)  informal pricing. 
D)  price discrimination.

Question 7

In some games, one player or firm moves first and commits to a strategy to which the rival player or firm will subsequently respond.Such games are called

Accepted Answer

A)  repeated games. 
B)  multi-period games. 
C)  sequential games. 
D)  credible games. 
A)  repeated games. 
B)  multi-period games. 
C)  sequential games. 
D)  credible games.

Question 8

Economic efficiency can suffer as a result of advertising, when it

Accepted Answer

A)  enhances competition among oligopolistic firms. 
B)  facilitates the introduction and success of new products to replace old one. 
C)  increases sales of firms and enhances their monopoly power. 
D)  increases brand loyalty, reducing buyers' elasticity of demand. 
A)  enhances competition among oligopolistic firms. 
B)  facilitates the introduction and success of new products to replace old one. 
C)  increases sales of firms and enhances their monopoly power. 
D)  increases brand loyalty, reducing buyers' elasticity of demand.

Question 9

Zippy's and Tony's are rival pizza restaurants in a small town. (Together they form a local duopoly.) Zippy's management determines that if it increases its advertising expenditures, it will increase profits regardless of whether Tony's increases its advertising budget. Based on this information, we can conclude that

Accepted Answer

A)  this is a one-time game. 
B)  Zippy's has a dominant strategy in this advertising game. 
C)  this advertising game will reach a Nash equilibrium. 
D)  Zippy's has first-mover advantages in this advertising game. 
A)  this is a one-time game. 
B)  Zippy's has a dominant strategy in this advertising game. 
C)  this advertising game will reach a Nash equilibrium. 
D)  Zippy's has first-mover advantages in this advertising game.

Question 10

Three major means of collusion by oligopolists are

Accepted Answer

A)  cartels, informal understandings, and price leadership. 
B)  market sharing, mutual interdependence, and product differentiation. 
C)  cartels, kinked-demand pricing, and product differentiation. 
D)  informal understandings, P = MC pricing, and mutual interdependence. 
A)  cartels, informal understandings, and price leadership. 
B)  market sharing, mutual interdependence, and product differentiation. 
C)  cartels, kinked-demand pricing, and product differentiation. 
D)  informal understandings, P = MC pricing, and mutual interdependence.

Question 11

A unique feature of an oligopolistic industry is

Accepted Answer

A)  low barriers to entry. 
B)  standardized products. 
C)  diminishing marginal returns. 
D)  mutual interdependence. 
A)  low barriers to entry. 
B)  standardized products. 
C)  diminishing marginal returns. 
D)  mutual interdependence.

Question 12

As it relates to oligopoly, game theory focuses on the strategic behavior of rival firms.

Accepted Answer

A) True 
 B)False

Question 13

The effects of advertising on a firm's profits and efficiency

Accepted Answer

A)  are definitely positive. 
B)  are definitely negative. 
C)  may be positive or negative. 
D)  are only observed in oligopoly. 
A)  are definitely positive. 
B)  are definitely negative. 
C)  may be positive or negative. 
D)  are only observed in oligopoly.

Question 14

One characteristic of sequential games is that they all have first-mover advantages.

Accepted Answer

A) True 
 B)False

Question 15

Industries X and Y both have four-firm concentration ratios of 70 percent, but the Herfindahl index for X is 2,500, while that for Y is 2,000. These data suggest

Accepted Answer

A)  greater market power in Y than in X. 
B)  greater market power in X than in Y. 
C)  that X is more technologically progressive than Y. 
D)  that price competition is stronger in X than in Y. 
A)  greater market power in Y than in X. 
B)  greater market power in X than in Y. 
C)  that X is more technologically progressive than Y. 
D)  that price competition is stronger in X than in Y.

Question 16

Monopolistic competition and oligopoly are more common in the real world than pure competition and monopoly.

Accepted Answer

A) True 
 B)False

Question 17

Mutual interdependence does not refer to which of the following?

Accepted Answer

A)  A firm must consider how rival firms would respond to its own decisions and actions. 
B)  A firm's profit depends not just on its own decisions and actions but also on those of other firms. 
C)  Entry by new firms into the industry tends to shrink existing firms' profits. 
D)  Competing firms respond to one another's pricing, production, or marketing decisions. 
A)  A firm must consider how rival firms would respond to its own decisions and actions. 
B)  A firm's profit depends not just on its own decisions and actions but also on those of other firms. 
C)  Entry by new firms into the industry tends to shrink existing firms' profits. 
D)  Competing firms respond to one another's pricing, production, or marketing decisions.

Question 18

Which would be a qualification to the view that oligopoly is allocatively and productively inefficient?

Accepted Answer

A)  Less foreign competition has stimulated more price competition in oligopolies. 
B)  Oligopolies are less technologically competitive, so they lose market share. 
C)  Oligopolies may purposely keep prices below short-run profit-maximizing levels to bolster barriers to entry. 
D)  The more collusive practices of oligopolies lead to more profit-sharing among firms in the industry. 
A)  Less foreign competition has stimulated more price competition in oligopolies. 
B)  Oligopolies are less technologically competitive, so they lose market share. 
C)  Oligopolies may purposely keep prices below short-run profit-maximizing levels to bolster barriers to entry. 
D)  The more collusive practices of oligopolies lead to more profit-sharing among firms in the industry.

Question 19

A game where players choose their strategies at the same time 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 20

Game-theory analyzes oligopoly behavior by using concepts derived from the study of games-of-chance such as dice games, solitaire, and roulette.

Accepted Answer

A) True 
 B)False

Exam 14: Oligopoly and Strategic Behavior

In repeated games, credible threats are necessary for the players to reach a Nash equilibrium.

A major distinction between a monopolistically competitive firm and an oligopolistic firm is that

In some games, one firm may avoid taking advantage of another firm because it knows that the other firm can take advantage of it in subsequent games. This behavior is called

A dominant strategy is a player's move or action that

If a product such as cement or bricks is costly to ship and, therefore, markets are very localized, the national concentration ratio for that industry

A breakdown in price leadership leading to successive rounds of price cuts is known as

In some games, one player or firm moves first and commits to a strategy to which the rival player or firm will subsequently respond.Such games are called

Economic efficiency can suffer as a result of advertising, when it

Three major means of collusion by oligopolists are

A unique feature of an oligopolistic industry is

As it relates to oligopoly, game theory focuses on the strategic behavior of rival firms.

The effects of advertising on a firm's profits and efficiency

One characteristic of sequential games is that they all have first-mover advantages.

Industries X and Y both have four-firm concentration ratios of 70 percent, but the Herfindahl index for X is 2,500, while that for Y is 2,000. These data suggest

Monopolistic competition and oligopoly are more common in the real world than pure competition and monopoly.

Mutual interdependence does not refer to which of the following?

Which would be a qualification to the view that oligopoly is allocatively and productively inefficient?

A game where players choose their strategies at the same time is called a

Game-theory analyzes oligopoly behavior by using concepts derived from the study of games-of-chance such as dice games, solitaire, and roulette.

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

Health Care

Immigration

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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