Question 1

Which of the following is the best example of an oligopolistic industry?

Accepted Answer

A)  the beef market 
B)  the pharmaceutical industry 
C)  public education 
D)  the beauty products industry 
A)  the beef market 
B)  the pharmaceutical industry 
C)  public education 
D)  the beauty products industry

Question 2

-Refer to Figure 11-2. If the government delays Gigacom's entry and Xenophone moves first, is a threat by Gigacom that it will provide DSL service if Gigacom provides cable service a credible threat?

Accepted Answer

A)  No, because Gigacom will lose $4.5 million in profits if it carries out its threat. 
B)  Yes, because Gigacom's DSL service will drive Xenophone out of business. 
C)  No, because as a second mover, it has no choice but to abide by the choices of the first mover. 
D)  Yes, Xenophone stands to lose $3 million in profit. 
A)  No, because Gigacom will lose $4.5 million in profits if it carries out its threat. 
B)  Yes, because Gigacom's DSL service will drive Xenophone out of business. 
C)  No, because as a second mover, it has no choice but to abide by the choices of the first mover. 
D)  Yes, Xenophone stands to lose $3 million in profit.

Question 3

An oligopolistic industry is characterised by all of the following except

Accepted Answer

A)  existence of entry barriers. 
B)  the possibility of reaping long-run economic profits. 
C)  firms pursuing aggressive business strategies, independent of rivals' strategies. 
D)  production of standardised products. 
A)  existence of entry barriers. 
B)  the possibility of reaping long-run economic profits. 
C)  firms pursuing aggressive business strategies, independent of rivals' strategies. 
D)  production of standardised products.

Question 4

Competition from substitute goods is more of a threat when switching costs are high.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is an example of a way in which a firm in oligopoly can escape the prisoner's dilemma?

Accepted Answer

A)  producing more of its product 
B)  advertising that it will match its rival's price 
C)  reneging on a previous tacit agreement with rival firms to charge identical high prices 
D)  ignoring the pricing decisions of the other firms 
A)  producing more of its product 
B)  advertising that it will match its rival's price 
C)  reneging on a previous tacit agreement with rival firms to charge identical high prices 
D)  ignoring the pricing decisions of the other firms

Question 6

-Refer to Figure 11-1. If Lexus lowers its price, will this deter BMW from entering the market?

Accepted Answer

A)  Yes, because BMW stands to lose $100 million if it competes with Lexus. 
B)  Yes, because BMW will make a smaller profit than Lexus if it chooses to compete. 
C)  No, because BMW will still make a profit of $120 million if it competes with Lexus. 
D)  No, because BMW will be able to break Lexus' first mover advantage. 
A)  Yes, because BMW stands to lose $100 million if it competes with Lexus. 
B)  Yes, because BMW will make a smaller profit than Lexus if it chooses to compete. 
C)  No, because BMW will still make a profit of $120 million if it competes with Lexus. 
D)  No, because BMW will be able to break Lexus' first mover advantage.

Question 7

What do Sony, Microsoft, and Nintendo have in common?

Accepted Answer

A)  Each achieved a dominant position in its industry because it owned a key input in the production of its product. 
B)  The industry in which each firm competes is an oligopoly because of government-imposed barriers to entry. 
C)  Each company was founded in the same state. 
D)  The profitability of each firm depends on its interactions with other firms. 
A)  Each achieved a dominant position in its industry because it owned a key input in the production of its product. 
B)  The industry in which each firm competes is an oligopoly because of government-imposed barriers to entry. 
C)  Each company was founded in the same state. 
D)  The profitability of each firm depends on its interactions with other firms.

Question 8

Two firms would sometimes be better off if they got together and agreed to charge a high price, rather than to compete and risk having to charge a lower, competitive price. What is the greatest deterrent to this strategy?

Accepted Answer

A)  The firms may find that the price they charge is greater than the price that would maximise their profits. 
B)  An agreement by firms to charge high prices is illegal. The government can fine the firms and send their managers to jail. 
C)  Consumers may resent having to pay high prices and not buy from either of the firms. 
D)  One of the firms may decide to lower its price and take business away from the firm that charged the high price. 
A)  The firms may find that the price they charge is greater than the price that would maximise their profits. 
B)  An agreement by firms to charge high prices is illegal. The government can fine the firms and send their managers to jail. 
C)  Consumers may resent having to pay high prices and not buy from either of the firms. 
D)  One of the firms may decide to lower its price and take business away from the firm that charged the high price.

Question 9

What is a subgame?

Accepted Answer

A)  It is one that begins at any node of the tree, including the game itself. 
B)  It is one that begins at any decision node of the tree except the first decision node. 
C)  It is one that starts at the final decision node of the tree. 
D)  It is a simultaneous game embedded in a sequential game. 
A)  It is one that begins at any node of the tree, including the game itself. 
B)  It is one that begins at any decision node of the tree except the first decision node. 
C)  It is one that starts at the final decision node of the tree. 
D)  It is a simultaneous game embedded in a sequential game.

Question 10

For years economists believed that market structure explained the ability of some firms to earn economic profits. For example, firms in industries with little competition and high barriers to entry would earn higher profits than firms in competitive industries with low entry barriers. Which of the following has caused economists to question this explanation and seek other explanations for why firms are profitable?

Accepted Answer

A)  Studies have shown that, on average, firms in competitive industries earn higher profit rates than firms in industries with little competition. 
B)  In recent years new technologies have increased the potential entry of new firms in industries with high entry barriers. 
C)  Studies have shown that firms in industries that have little competition and high entry barriers are not very profitable. Economists conclude from this that some competition is necessary in order to force firms to lower their costs and develop products that satisfy new consumer demands. 
D)  The market structure explanation fails to explain how firms in the same industry can have very different levels of profit. 
A)  Studies have shown that, on average, firms in competitive industries earn higher profit rates than firms in industries with little competition. 
B)  In recent years new technologies have increased the potential entry of new firms in industries with high entry barriers. 
C)  Studies have shown that firms in industries that have little competition and high entry barriers are not very profitable. Economists conclude from this that some competition is necessary in order to force firms to lower their costs and develop products that satisfy new consumer demands. 
D)  The market structure explanation fails to explain how firms in the same industry can have very different levels of profit.

Question 11

The most important barrier to entry is economies of scale.

Accepted Answer

A) True 
 B)False

Question 12

Explain why OPEC is caught in a prisoner's dilemma?

Accepted Answer

If every member of OPEC cooperates and p

Question 13

The prisoner's dilemma illustrates

Accepted Answer

A)  how oligopolists engage in implicit collusion under strategic situations. 
B)  why firms will not cooperate if they behave strategically. 
C)  why firms have an incentive to cheat on agreements. 
D)  how cooperation in strategic situations leads to the economically efficient market outcome. 
A)  how oligopolists engage in implicit collusion under strategic situations. 
B)  why firms will not cooperate if they behave strategically. 
C)  why firms have an incentive to cheat on agreements. 
D)  how cooperation in strategic situations leads to the economically efficient market outcome.

Question 14

As word processing on personal computers expanded, sales of typewriters began to disappear. Which of Porter's competitive forces does this event demonstrate?

Accepted Answer

A)  the threat of competition from new entrants 
B)  bargaining power of suppliers 
C)  bargaining power of buyers 
D)  competition from substitute goods or services 
A)  the threat of competition from new entrants 
B)  bargaining power of suppliers 
C)  bargaining power of buyers 
D)  competition from substitute goods or services

Question 15

List the competitive forces in the five competitive forces model.

Accepted Answer

the bargai

Question 16

-Refer to Table 11-2. Is there a dominant strategy for Saudi Arabia and, if so, what is it?

Accepted Answer

A)  Yes, the dominant strategy is to produce a high output. 
B)  Yes, the dominant strategy is to produce a low output. 
C)  No, there is no dominant strategy. 
D)  Yes, it has a dominant strategy depending on what Nigeria does. 
A)  Yes, the dominant strategy is to produce a high output. 
B)  Yes, the dominant strategy is to produce a low output. 
C)  No, there is no dominant strategy. 
D)  Yes, it has a dominant strategy depending on what Nigeria does.

Question 17

-Refer to Table 11-1. What is the Nash equilibrium in this game?

Accepted Answer

A)  There is no Nash equilibrium. 
B)  Godrickporter increases its advertising budget, but Star Connections does not. 
C)  Star Connections increases its advertising budget, but Godrickporter does not. 
D)  Both Godrickporter and Star Connections increase their advertising budgets. 
A)  There is no Nash equilibrium. 
B)  Godrickporter increases its advertising budget, but Star Connections does not. 
C)  Star Connections increases its advertising budget, but Godrickporter does not. 
D)  Both Godrickporter and Star Connections increase their advertising budgets.

Question 18

Most economists are concerned about entry barriers. Why is this so important to them?

Accepted Answer

Entry barriers enable a firm to earn lon

Question 19

An example of a government-imposed barrier to entry gives a firm the exclusive right to a new product for a period of 20 years from the date the product is invented. This entry barrier is known as

Accepted Answer

A)  a copyright. 
B)  a patent. 
C)  an exclusive marketing agreement. 
D)  a tariff. 
A)  a copyright. 
B)  a patent. 
C)  an exclusive marketing agreement. 
D)  a tariff.

Question 20

A member of a cartel earns more profits by producing more than its quota and selling at a price higher than the cartel's price.

Accepted Answer

A) True 
 B)False

Which of the following is the best example of an oligopolistic industry?

-Refer to Figure 11-2. If the government delays Gigacom's entry and Xenophone moves first, is a threat by Gigacom that it will provide DSL service if Gigacom provides cable service a credible threat?

An oligopolistic industry is characterised by all of the following except

Competition from substitute goods is more of a threat when switching costs are high.

Which of the following is an example of a way in which a firm in oligopoly can escape the prisoner's dilemma?

-Refer to Figure 11-1. If Lexus lowers its price, will this deter BMW from entering the market?

What do Sony, Microsoft, and Nintendo have in common?

Two firms would sometimes be better off if they got together and agreed to charge a high price, rather than to compete and risk having to charge a lower, competitive price. What is the greatest deterrent to this strategy?

What is a subgame?

The most important barrier to entry is economies of scale.

Explain why OPEC is caught in a prisoner's dilemma?

The prisoner's dilemma illustrates

As word processing on personal computers expanded, sales of typewriters began to disappear. Which of Porter's competitive forces does this event demonstrate?

List the competitive forces in the five competitive forces model.

-Refer to Table 11-2. Is there a dominant strategy for Saudi Arabia and, if so, what is it?

-Refer to Table 11-1. What is the Nash equilibrium in this game?

Most economists are concerned about entry barriers. Why is this so important to them?

An example of a government-imposed barrier to entry gives a firm the exclusive right to a new product for a period of 20 years from the date the product is invented. This entry barrier is known as

A member of a cartel earns more profits by producing more than its quota and selling at a price higher than the cartel's price.

Economics Foundations and Models

Choices and Trade - Offs in the Market

Where Prices Come Frome : The Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency , Government Price Setting and Taxes

Concumer Choice and Behavioural Economics

Technology , Production and Costs

Firms in Perfectly Compitive Markets

Monopoly Markets

Monopolistic Competition : The Competitive Model in More Realistic Setting

The Market for Labour and Other Factors of Production

International Trade

Government Intervention in the Market

Externalities , Environmental Policy and Public Goods

The Distribution of Income and Social Policy

Filters

Exam 11: Oligopoly : Firms in Less Competitve Markets

Which of the following is the best example of an oligopolistic industry?

-Refer to Figure 11-2. If the government delays Gigacom's entry and Xenophone moves first, is a threat by Gigacom that it will provide DSL service if Gigacom provides cable service a credible threat?

An oligopolistic industry is characterised by all of the following except

Competition from substitute goods is more of a threat when switching costs are high.

Which of the following is an example of a way in which a firm in oligopoly can escape the prisoner's dilemma?

-Refer to Figure 11-1. If Lexus lowers its price, will this deter BMW from entering the market?

What do Sony, Microsoft, and Nintendo have in common?

Two firms would sometimes be better off if they got together and agreed to charge a high price, rather than to compete and risk having to charge a lower, competitive price. What is the greatest deterrent to this strategy?

What is a subgame?

The most important barrier to entry is economies of scale.

Explain why OPEC is caught in a prisoner's dilemma?

The prisoner's dilemma illustrates

As word processing on personal computers expanded, sales of typewriters began to disappear. Which of Porter's competitive forces does this event demonstrate?

List the competitive forces in the five competitive forces model.

-Refer to Table 11-2. Is there a dominant strategy for Saudi Arabia and, if so, what is it?

-Refer to Table 11-1. What is the Nash equilibrium in this game?

Most economists are concerned about entry barriers. Why is this so important to them?

An example of a government-imposed barrier to entry gives a firm the exclusive right to a new product for a period of 20 years from the date the product is invented. This entry barrier is known as

A member of a cartel earns more profits by producing more than its quota and selling at a price higher than the cartel's price.

Economics Foundations and Models

Choices and Trade - Offs in the Market

Where Prices Come Frome : The Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency , Government Price Setting and Taxes

Concumer Choice and Behavioural Economics

Technology , Production and Costs

Firms in Perfectly Compitive Markets

Monopoly Markets

Monopolistic Competition : The Competitive Model in More Realistic Setting

The Market for Labour and Other Factors of Production

International Trade

Government Intervention in the Market

Externalities , Environmental Policy and Public Goods

The Distribution of Income and Social Policy

Filters