Question 1

The economic inefficiency in an oligopoly may be reduced by the following, except

Accepted Answer

A)  increased competition from foreign producers. 
B)  limit pricing due to potential entrants. 
C)  economic profits used to fund technological advance. 
D)  aggressive advertising by rivals. 
A)  increased competition from foreign producers. 
B)  limit pricing due to potential entrants. 
C)  economic profits used to fund technological advance. 
D)  aggressive advertising by rivals.

Question 2

The increased use of plastic bags instead of paper bags in grocery stores and retail shops is an example of

Accepted Answer

A)  overt collusion. 
B)  covert collusion. 
C)  import competition. 
D)  interindustry competition. 
A)  overt collusion. 
B)  covert collusion. 
C)  import competition. 
D)  interindustry competition.

Question 3

A homogeneous oligopoly means that the few firms in the industry have identical cost and demand curves.

Accepted Answer

A) True 
 B)False

Question 4

When firms in an industry reach an agreement to fix prices, divide up market share, or otherwise restrict competition, they are practicing the strategy of

Accepted Answer

A)  interindustry competition. 
B)  limit pricing. 
C)  price leadership. 
D)  collusion. 
A)  interindustry competition. 
B)  limit pricing. 
C)  price leadership. 
D)  collusion.

Question 5

Which of the following industries is an illustration of homogeneous oligopoly?

Accepted Answer

A)  household laundry products 
B)  personal computers 
C)  aluminum 
D)  the auto industry 
A)  household laundry products 
B)  personal computers 
C)  aluminum 
D)  the auto industry

Question 6

Answer the question based on the payoff matrices for a repeated game involving two firms that are considering introducing new products to the market. The numbers indicate the profit from following either a strategy to introduce a new product or a strategy to not introduce a new product. First game.   Second game.   In the first game, if firm B doesn't introduce a new product and firm A does, then firm A would be better off if

Accepted Answer

A)  both firms introduce new products in game 2. 
B)  neither firm introduces new products in game 2. 
C)  firm B reciprocates in game 2. 
D)  game 2 reaches a Nash equilibrium. 
A)  both firms introduce new products in game 2. 
B)  neither firm introduces new products in game 2. 
C)  firm B reciprocates in game 2. 
D)  game 2 reaches a Nash equilibrium.

Question 7

In the US market, people often refer to the "Big Three" in autos and the "Big Four" in accounting.These terms suggest that these two industries are

Accepted Answer

A)  purely competitive. 
B)  monopolistically competitive. 
C)  monopolies. 
D)  oligopolies. 
A)  purely competitive. 
B)  monopolistically competitive. 
C)  monopolies. 
D)  oligopolies.

Question 8

In game theory, the credibility of a threat

Accepted Answer

A)  determines whether or not a Nash equilibrium to a game exists. 
B)  influences the degree of cooperation between two rivals. 
C)  is relevant only in simultaneous games. 
D)  determines whether or not a firm has a dominant strategy. 
A)  determines whether or not a Nash equilibrium to a game exists. 
B)  influences the degree of cooperation between two rivals. 
C)  is relevant only in simultaneous games. 
D)  determines whether or not a firm has a dominant strategy.

Question 9

Other things being equal, a firm in a cartel will most likely cheat on a price-fixing agreement by

Accepted Answer

A)  increasing price and restricting its output. 
B)  organizing promotions of the product. 
C)  secretly increasing sales to a large number of small customers. 
D)  secretly lowering price and increasing sales to a few customers. 
A)  increasing price and restricting its output. 
B)  organizing promotions of the product. 
C)  secretly increasing sales to a large number of small customers. 
D)  secretly lowering price and increasing sales to a few customers.

Question 10

In a zero-sum game, the gains by one player will be exactly offset by the losses of the other.

Accepted Answer

A) True 
 B)False

Question 11

Price wars among oligopolists tend to

Accepted Answer

A)  strengthen the price leadership model. 
B)  reduce profits for the firms. 
C)  hurt the buyers of the product. 
D)  occur when sales growth in the industry is strong. 
A)  strengthen the price leadership model. 
B)  reduce profits for the firms. 
C)  hurt the buyers of the product. 
D)  occur when sales growth in the industry is strong.

Question 12

Advertising can impede economic efficiency when it

Accepted Answer

A)  increases entry barriers. 
B)  reduces brand loyalty. 
C)  enables firms to achieve substantial economies of scale. 
D)  increases consumer awareness of substitute products. 
A)  increases entry barriers. 
B)  reduces brand loyalty. 
C)  enables firms to achieve substantial economies of scale. 
D)  increases consumer awareness of substitute products.

Question 13

A two-player game in which one player's gain is not completely offset by the other player's loss is called a

Accepted Answer

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

Question 14

One would expect that collusion among oligopolistic producers would be easiest to achieve in which of the following cases?

Accepted Answer

A)  a rather large number of firms producing a differentiated product 
B)  a very small number of firms producing a differentiated product 
C)  a rather large number of firms producing a homogeneous product 
D)  a very small number of firms producing a homogeneous product 
A)  a rather large number of firms producing a differentiated product 
B)  a very small number of firms producing a differentiated product 
C)  a rather large number of firms producing a homogeneous product 
D)  a very small number of firms producing a homogeneous product

Question 15

Interindustry competition means that

Accepted Answer

A)  in oligopolistic industries, a few large firms compete with one another in bidding down product price. 
B)  in some markets, the producers of a particular product might face competition from products produced by other industries. 
C)  firms that sell a product at one stage of production are faced with firms that buy the product at the next stage of production. 
D)  in most industries, there are usually a number of firms producing identical products. 
A)  in oligopolistic industries, a few large firms compete with one another in bidding down product price. 
B)  in some markets, the producers of a particular product might face competition from products produced by other industries. 
C)  firms that sell a product at one stage of production are faced with firms that buy the product at the next stage of production. 
D)  in most industries, there are usually a number of firms producing identical products.

Question 16

Use your basic knowledge and your understanding of market structures to answer this question. Which of the following companies most closely approximates a homogeneous oligopolist in a highly concentrated industry?

Accepted Answer

A)  Kellogg's 
B)  Pittsburgh Plate Glass 
C)  Ford Motor Company 
D)  Starbucks Coffee 
A)  Kellogg's 
B)  Pittsburgh Plate Glass 
C)  Ford Motor Company 
D)  Starbucks Coffee

Question 17

A positive effect of advertising for society is that it

Accepted Answer

A)  increases market share for the dominant firm in the industry. 
B)  provides useful information to reduce search cost for consumers. 
C)  raises barriers to entry into the industry and protects existing firms. 
D)  creates price leadership and gives firms guidance in dealing with rivals. 
A)  increases market share for the dominant firm in the industry. 
B)  provides useful information to reduce search cost for consumers. 
C)  raises barriers to entry into the industry and protects existing firms. 
D)  creates price leadership and gives firms guidance in dealing with rivals.

Question 18

Collusion among firms always involves formal agreements.

Accepted Answer

A) True 
 B)False

Question 19

A potential negative effect of advertising for society is that it can

Accepted Answer

A)  be the major cause of price wars among firms in the industry. 
B)  reduce mutual interdependence and increase competition. 
C)  be self-canceling and contribute to economic inefficiency. 
D)  lower barriers to entry and undermine profits in the industry. 
A)  be the major cause of price wars among firms in the industry. 
B)  reduce mutual interdependence and increase competition. 
C)  be self-canceling and contribute to economic inefficiency. 
D)  lower barriers to entry and undermine profits in the industry.

Question 20

Which of the following is not a reason for there being no single standard model of oligopoly?

Accepted Answer

A)  There is great diversity of situations in oligopoly markets. 
B)  The products of oligopolistic firms cannot be standardized. 
C)  Mutual interdependence complicates the analysis of firm behavior and results. 
D)  Firms cannot predict what their rivals' actions and reactions might be. 
A)  There is great diversity of situations in oligopoly markets. 
B)  The products of oligopolistic firms cannot be standardized. 
C)  Mutual interdependence complicates the analysis of firm behavior and results. 
D)  Firms cannot predict what their rivals' actions and reactions might be.

Exam 14: Oligopoly and Strategic Behavior

The economic inefficiency in an oligopoly may be reduced by the following, except

The increased use of plastic bags instead of paper bags in grocery stores and retail shops is an example of

A homogeneous oligopoly means that the few firms in the industry have identical cost and demand curves.

When firms in an industry reach an agreement to fix prices, divide up market share, or otherwise restrict competition, they are practicing the strategy of

Which of the following industries is an illustration of homogeneous oligopoly?

In the US market, people often refer to the "Big Three" in autos and the "Big Four" in accounting.These terms suggest that these two industries are

In game theory, the credibility of a threat

Other things being equal, a firm in a cartel will most likely cheat on a price-fixing agreement by

In a zero-sum game, the gains by one player will be exactly offset by the losses of the other.

Price wars among oligopolists tend to

Advertising can impede economic efficiency when it

A two-player game in which one player's gain is not completely offset by the other player's loss is called a

One would expect that collusion among oligopolistic producers would be easiest to achieve in which of the following cases?

Interindustry competition means that

Use your basic knowledge and your understanding of market structures to answer this question. Which of the following companies most closely approximates a homogeneous oligopolist in a highly concentrated industry?

A positive effect of advertising for society is that it

Collusion among firms always involves formal agreements.

A potential negative effect of advertising for society is that it can

Which of the following is not a reason for there being no single standard model of oligopoly?

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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