Question 1

In 2014, advertising expenditures in the United States were

Accepted Answer

A)  10 to 12 percent of GDP. 
B)  about $103 billion. 
C)  about $141 billion. 
D)  about $539 billion. 
A)  10 to 12 percent of GDP. 
B)  about $103 billion. 
C)  about $141 billion. 
D)  about $539 billion.

Question 2

A high concentration ratio indicates that

Accepted Answer

A)  the industry is highly profitable. 
B)  the industry is highly competitive. 
C)  many firms produce most of the output in an industry. 
D)  few firms produce most of the output in an industry. 
A)  the industry is highly profitable. 
B)  the industry is highly competitive. 
C)  many firms produce most of the output in an industry. 
D)  few firms produce most of the output in an industry.

Question 3

The kinked-demand curve model applies to a noncollusive oligopoly situation.

Accepted Answer

A) True 
 B)False

Question 4

Price leadership represents a situation where oligopolistic firms

Accepted Answer

A)  reduce their reliance on nonprice competition. 
B)  form a cartel. 
C)  face a kinked demand curve. 
D)  tacitly collude. 
A)  reduce their reliance on nonprice competition. 
B)  form a cartel. 
C)  face a kinked demand curve. 
D)  tacitly collude.

Question 5

Advertising can increase a firm's sales, thereby allowing the firm to gain economies of scale, and that would be good for efficiency.

Accepted Answer

A) True 
 B)False

Question 6

In competing with rivals, oligopolistic firms will tend to use

Accepted Answer

A)  price cuts because they do not add to costs like advertising. 
B)  advertising because it is less easily duplicated than price cuts. 
C)  collusion because it is a legal way to increase market share. 
D)  price wars because they will increase the profits of firms. 
A)  price cuts because they do not add to costs like advertising. 
B)  advertising because it is less easily duplicated than price cuts. 
C)  collusion because it is a legal way to increase market share. 
D)  price wars because they will increase the profits of firms.

Question 7

Which of the following is a unique feature of oligopoly?

Accepted Answer

A)  mutual interdependence 
B)  advertising expenditures 
C)  product differentiation 
D)  nonprice competition 
A)  mutual interdependence 
B)  advertising expenditures 
C)  product differentiation 
D)  nonprice competition

Question 8

Which cannot be a characteristic of an oligopolistic industry?

Accepted Answer

A)  differentiated products 
B)  a large number of consumers 
C)  significant barriers to entry 
D)  a perfectly elastic firm demand curve 
A)  differentiated products 
B)  a large number of consumers 
C)  significant barriers to entry 
D)  a perfectly elastic firm demand curve

Question 9

A game has a Nash equilibrium when the two players' dominant strategies

Accepted Answer

A)  depend on what the other player does. 
B)  intersect in a specific cell of the payoff matrix. 
C)  result in the largest total payoff for the two players combined. 
D)  result in no loss for either player. 
A)  depend on what the other player does. 
B)  intersect in a specific cell of the payoff matrix. 
C)  result in the largest total payoff for the two players combined. 
D)  result in no loss for either player.

Question 10

Which of the following is an illustration of differentiated oligopoly?

Accepted Answer

A)  the aluminum industry 
B)  the steel industry 
C)  the soft drink industry 
D)  retail stores in large cities 
A)  the aluminum industry 
B)  the steel industry 
C)  the soft drink industry 
D)  retail stores in large cities

Question 11

Obstacles to collusion among oligopolists include the following, except

Accepted Answer

A)  demand and costs differences among firms. 
B)  long-lasting economic recession and poor industry performance. 
C)  potential new entrants into the market. 
D)  "gentlemen's agreements" among the firms. 
A)  demand and costs differences among firms. 
B)  long-lasting economic recession and poor industry performance. 
C)  potential new entrants into the market. 
D)  "gentlemen's agreements" among the firms.

Question 12

A firm in a cartel typically cheats on its collusive agreement by raising its price and restricting output more than it agreed to with other cartel members.

Accepted Answer

A) True 
 B)False

Question 13

Two industries that have the same four-firm concentration ratio can have significantly different Herfindahl indexes.

Accepted Answer

A) True 
 B)False

Question 14

In a duopoly, if one firm increases its price, then the other firm can

Accepted Answer

A)  keep its price constant and thus increase its market share. 
B)  keep its price constant and thus decrease its market share. 
C)  increase its price and thus increase its market share. 
D)  decrease its price and thus decrease its market share. 
A)  keep its price constant and thus increase its market share. 
B)  keep its price constant and thus decrease its market share. 
C)  increase its price and thus increase its market share. 
D)  decrease its price and thus decrease its market share.

Question 15

Advertising can enhance economic efficiency when it

Accepted Answer

A)  increases brand loyalty. 
B)  expands sales such that firms achieve substantial economies of scale. 
C)  keeps new firms from entering profitable industries. 
D)  is undertaken by pure competitors. 
A)  increases brand loyalty. 
B)  expands sales such that firms achieve substantial economies of scale. 
C)  keeps new firms from entering profitable industries. 
D)  is undertaken by pure competitors.

Question 16

All other things equal, the larger the number of firms in an oligopolistic industry, the more difficult it is for those firms to collude.

Accepted Answer

A) True 
 B)False

Question 17

The primary advantage of displaying a game in extensive form instead of strategic form is that extensive form allows one to

Accepted Answer

A)  display the order in which decisions are made; strategic form does not. 
B)  analyze repeated games; strategic form does not. 
C)  determine the existence of a Nash equilibrium; strategic form does not. 
D)  determine whether credible threats are possible; strategic form does not. 
A)  display the order in which decisions are made; strategic form does not. 
B)  analyze repeated games; strategic form does not. 
C)  determine the existence of a Nash equilibrium; strategic form does not. 
D)  determine whether credible threats are possible; strategic form does not.

Question 18

One shortcoming of the kinked demand curve model of oligopoly is that it does not explain

Accepted Answer

A)  why the marginal revenue curve is kinked. 
B)  how the current price gets determined. 
C)  what the level of profits is for the firm. 
D)  why the firm is a least-cost producer. 
A)  why the marginal revenue curve is kinked. 
B)  how the current price gets determined. 
C)  what the level of profits is for the firm. 
D)  why the firm is a least-cost producer.

Question 19

Game theory, which is used in studying oligopoly behavior, originated from the study of games such as the following, except

Accepted Answer

A)  poker. 
B)  solitaire. 
C)  chess. 
D)  bridge. 
A)  poker. 
B)  solitaire. 
C)  chess. 
D)  bridge.

Question 20

A major prediction of the kinked demand curve model is

Accepted Answer

A)  price stability in oligopolies. 
B)  price instability in oligopolies. 
C)  stability of production costs in oligopolies. 
D)  instability of costs in oligopolies. 
A)  price stability in oligopolies. 
B)  price instability in oligopolies. 
C)  stability of production costs in oligopolies. 
D)  instability of costs in oligopolies.

Exam 14: Oligopoly and Strategic Behavior

In 2014, advertising expenditures in the United States were

A high concentration ratio indicates that

The kinked-demand curve model applies to a noncollusive oligopoly situation.

Price leadership represents a situation where oligopolistic firms

Advertising can increase a firm's sales, thereby allowing the firm to gain economies of scale, and that would be good for efficiency.

In competing with rivals, oligopolistic firms will tend to use

Which of the following is a unique feature of oligopoly?

Which cannot be a characteristic of an oligopolistic industry?

A game has a Nash equilibrium when the two players' dominant strategies

Which of the following is an illustration of differentiated oligopoly?

Obstacles to collusion among oligopolists include the following, except

A firm in a cartel typically cheats on its collusive agreement by raising its price and restricting output more than it agreed to with other cartel members.

Two industries that have the same four-firm concentration ratio can have significantly different Herfindahl indexes.

In a duopoly, if one firm increases its price, then the other firm can

Advertising can enhance economic efficiency when it

All other things equal, the larger the number of firms in an oligopolistic industry, the more difficult it is for those firms to collude.

The primary advantage of displaying a game in extensive form instead of strategic form is that extensive form allows one to

One shortcoming of the kinked demand curve model of oligopoly is that it does not explain

Game theory, which is used in studying oligopoly behavior, originated from the study of games such as the following, except

A major prediction of the kinked demand curve model is

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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