Question 1

In an oligopoly market

Accepted Answer

A)  the pricing decisions of all other firms have no effect on an individual firm. 
B)  individual firms pay no attention to the behaviour of other firms. 
C)  advertising of one firm has no effect on all other firms. 
D)  one firm's pricing decision affects all the other firms. 
A)  the pricing decisions of all other firms have no effect on an individual firm. 
B)  individual firms pay no attention to the behaviour of other firms. 
C)  advertising of one firm has no effect on all other firms. 
D)  one firm's pricing decision affects all the other firms.

Question 2

The bargaining power of suppliers increases if

Accepted Answer

A)  the cost of switching suppliers is relatively low. 
B)  there are only a few competitors to the supplier. 
C)  the input in question is not a critical component of production. 
D)  the input supplied is relatively standardised. 
A)  the cost of switching suppliers is relatively low. 
B)  there are only a few competitors to the supplier. 
C)  the input in question is not a critical component of production. 
D)  the input supplied is relatively standardised.

Question 3

Which of the following is not one of the five competitive forces?

Accepted Answer

A)  the threat from potential entrants 
B)  the bargaining power of buyers 
C)  the firm's ability to differentiate its product 
D)  the bargaining power of suppliers 
A)  the threat from potential entrants 
B)  the bargaining power of buyers 
C)  the firm's ability to differentiate its product 
D)  the bargaining power of suppliers

Question 4

A cartel is

Accepted Answer

A)  a temporary storage facility for automobiles. 
B)  a group of firms that enter into an informal agreement to fix prices to maximise joint profits. 
C)  a group of firms that enter into a formal agreement to fix prices to maximise joint profits. 
D)  an example of a group of firms that collectively regulate a competitive industry. 
A)  a temporary storage facility for automobiles. 
B)  a group of firms that enter into an informal agreement to fix prices to maximise joint profits. 
C)  a group of firms that enter into a formal agreement to fix prices to maximise joint profits. 
D)  an example of a group of firms that collectively regulate a competitive industry.

Question 5

A supplier of paper napkins to the fast food industry is unlikely to have significant bargaining power.

Accepted Answer

A) True 
 B)False

Question 6

All of the following are examples of oligopolistic markets except

Accepted Answer

A)  the broadcasting industry 
B)  aircraft manufacture 
C)  university bookstores 
D)  seafood restaurant chains 
A)  the broadcasting industry 
B)  aircraft manufacture 
C)  university bookstores 
D)  seafood restaurant chains

Question 7

Collusion

Accepted Answer

A)  is rampant in perfect competition, as all firms charge the same price. 
B)  reduces market concentration in an industry. 
C)  among firms is difficult to maintain because it eliminates long-run economic profit. 
D)  is more difficult when there are many firms producing differentiated products in an industry. 
A)  is rampant in perfect competition, as all firms charge the same price. 
B)  reduces market concentration in an industry. 
C)  among firms is difficult to maintain because it eliminates long-run economic profit. 
D)  is more difficult when there are many firms producing differentiated products in an industry.

Question 8

Collusion between two firms occurs when

Accepted Answer

A)  the firms independently pursue strategies that could hurt each other. 
B)  the firms explicitly or implicitly agree to adopt a uniform business strategy. 
C)  the firms announce that each will match its rival's market price. 
D)  the firms act altruistically to bring about the economically efficient outcome. 
A)  the firms independently pursue strategies that could hurt each other. 
B)  the firms explicitly or implicitly agree to adopt a uniform business strategy. 
C)  the firms announce that each will match its rival's market price. 
D)  the firms act altruistically to bring about the economically efficient outcome.

Question 9

Price leadership is a form of explicit collusion where one firm in an oligopoly announces a price change and expects all other firms to follow suit.

Accepted Answer

A) True 
 B)False

Question 10

-Refer to Table 11-2. What is the Nash equilibrium in this game?

Accepted Answer

A)  In the Nash equilibrium, both Saudi Arabia and Nigeria produce a low output and earn a profit of $100 million and $20 million respectively. 
B)  In the Nash equilibrium, both Saudi Arabia and Nigeria produce a high output and earn a profit of $60 million and $20 million respectively. 
C)  In the Nash equilibrium, Saudi Arabia produces a low output and earns a profit of $80 million, and Nigeria produces a high output and earns a profit of $30 million. 
D)  There is no Nash equilibrium. 
A)  In the Nash equilibrium, both Saudi Arabia and Nigeria produce a low output and earn a profit of $100 million and $20 million respectively. 
B)  In the Nash equilibrium, both Saudi Arabia and Nigeria produce a high output and earn a profit of $60 million and $20 million respectively. 
C)  In the Nash equilibrium, Saudi Arabia produces a low output and earns a profit of $80 million, and Nigeria produces a high output and earns a profit of $30 million. 
D)  There is no Nash equilibrium.

Question 11

-Refer to Table 11-1. Is there a dominant strategy for Godrickporter and, if so, what is it?

Accepted Answer

A)  No, its outcome depends on what Star Connections does. 
B)  Yes, Godrickporter should increase its advertising spending. 
C)  Yes, Godrickporter should reduce its advertising spending. 
D)  Yes, Godrickporter's dominant strategy is to collude with Star Connections. 
A)  No, its outcome depends on what Star Connections does. 
B)  Yes, Godrickporter should increase its advertising spending. 
C)  Yes, Godrickporter should reduce its advertising spending. 
D)  Yes, Godrickporter's dominant strategy is to collude with Star Connections.

Question 12

If economies of scale are relatively important in an industry, the typical firm's

Accepted Answer

A)  marginal cost curve will decline continuously until it reaches minimum efficient scale. 
B)  long-run average cost curve will begin rising before it reaches minimum efficient scale. 
C)  long-run average cost curve will reach a minimum at a level of output that leaves room for a large number of firms to enter the industry. 
D)  long-run average cost curve will reach a minimum at a level of output that is a relatively large fraction of total industry sales. 
A)  marginal cost curve will decline continuously until it reaches minimum efficient scale. 
B)  long-run average cost curve will begin rising before it reaches minimum efficient scale. 
C)  long-run average cost curve will reach a minimum at a level of output that leaves room for a large number of firms to enter the industry. 
D)  long-run average cost curve will reach a minimum at a level of output that is a relatively large fraction of total industry sales.

Question 13

By the 21st century few people purchased printed encyclopedias. Which of the following competitive forces best explains this?

Accepted Answer

A)  competition from substitutes 
B)  the bargaining power of buyers 
C)  the bargaining power of suppliers 
D)  the threat from potential entrants 
A)  competition from substitutes 
B)  the bargaining power of buyers 
C)  the bargaining power of suppliers 
D)  the threat from potential entrants

Question 14

Assume that two interior design companies, Alistair and Baine, are competing for customers, and if they both advertise, they would each earn $30 million in profits. If neither advertises, they each earn $50 million in profits. If one advertises and the other doesn't, the firm that advertises earns $40 million in profit while the other earns $20 million in profit.
a. Present the information above in the form of a payoff matrix. Let Baine be the row player and Alistair the column player.
b. Does each firm have a dominant strategy and if so what is it?
c. What is the Nash equilibrium?

Accepted Answer

a. See the table below.
 @#IMG-DLM& b. No, there i

Question 15

Economies of scale can lead to an oligopolistic market structure because

Accepted Answer

A)  if larger firms have lower costs, new small entrants will not be able to produce at the low costs achieved by the big established firms. 
B)  if economies of scale are insignificant, only a few firms are able to produce at the low costs achieved by the big established firms. 
C)  a few firms can force rivals to produce at low levels of output. 
D)  a few firms can use high profits to keep out new entrants. 
A)  if larger firms have lower costs, new small entrants will not be able to produce at the low costs achieved by the big established firms. 
B)  if economies of scale are insignificant, only a few firms are able to produce at the low costs achieved by the big established firms. 
C)  a few firms can force rivals to produce at low levels of output. 
D)  a few firms can use high profits to keep out new entrants.

Question 16

Which of the following is an example of implicit collusion?

Accepted Answer

A)  product differentiation 
B)  a retaliation strategy 
C)  a second-price auction 
D)  price leadership 
A)  product differentiation 
B)  a retaliation strategy 
C)  a second-price auction 
D)  price leadership

Question 17

How does the demand curve for an oligopoly firm differ from the demand curves for firms in competitive market structures?

Accepted Answer

The demand curve facing a perfectly comp

Question 18

Suppose we want to use game theory to analyse how an oligopolist selects its optimal price. The cells of the payoff matrix show

Accepted Answer

A)  the profit that each producer can expect to earn by pursuing a single strategy. 
B)  the profit that each producer can expect to earn from every combination of strategies by the firms in the market. 
C)  the strategy that a firm must pursue to earn various levels of profit. 
D)  the expected profits of rival firms. 
A)  the profit that each producer can expect to earn by pursuing a single strategy. 
B)  the profit that each producer can expect to earn from every combination of strategies by the firms in the market. 
C)  the strategy that a firm must pursue to earn various levels of profit. 
D)  the expected profits of rival firms.

Question 19

Natural resource cartels such as OPEC are inherently unstable because their members operate with excess capacity and have an incentive to cheat on their output quotas.

Accepted Answer

A) True 
 B)False

Question 20

When large firms in oligopoly markets cut their prices,

Accepted Answer

A)  rival firms will also cut their prices to avoid losing sales. 
B)  rival firms will not change their prices because most of their customers have signed contracts that commit them to doing business with the same firms for the life of their contracts. 
C)  we don't know for sure how rival firms will respond. 
D)  rival firms will not cut their prices because they fear that the federal government will accuse them of collusion. 
A)  rival firms will also cut their prices to avoid losing sales. 
B)  rival firms will not change their prices because most of their customers have signed contracts that commit them to doing business with the same firms for the life of their contracts. 
C)  we don't know for sure how rival firms will respond. 
D)  rival firms will not cut their prices because they fear that the federal government will accuse them of collusion.

In an oligopoly market

The bargaining power of suppliers increases if

Which of the following is not one of the five competitive forces?

A cartel is

A supplier of paper napkins to the fast food industry is unlikely to have significant bargaining power.

All of the following are examples of oligopolistic markets except

Collusion

Collusion between two firms occurs when

Price leadership is a form of explicit collusion where one firm in an oligopoly announces a price change and expects all other firms to follow suit.

-Refer to Table 11-2. What is the Nash equilibrium in this game?

-Refer to Table 11-1. Is there a dominant strategy for Godrickporter and, if so, what is it?

If economies of scale are relatively important in an industry, the typical firm's

By the 21st century few people purchased printed encyclopedias. Which of the following competitive forces best explains this?

Economies of scale can lead to an oligopolistic market structure because

Which of the following is an example of implicit collusion?

How does the demand curve for an oligopoly firm differ from the demand curves for firms in competitive market structures?

Suppose we want to use game theory to analyse how an oligopolist selects its optimal price. The cells of the payoff matrix show

Natural resource cartels such as OPEC are inherently unstable because their members operate with excess capacity and have an incentive to cheat on their output quotas.

When large firms in oligopoly markets cut their prices,

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

In an oligopoly market

The bargaining power of suppliers increases if

Which of the following is not one of the five competitive forces?

A cartel is

A supplier of paper napkins to the fast food industry is unlikely to have significant bargaining power.

All of the following are examples of oligopolistic markets except

Collusion

Collusion between two firms occurs when

Price leadership is a form of explicit collusion where one firm in an oligopoly announces a price change and expects all other firms to follow suit.

-Refer to Table 11-2. What is the Nash equilibrium in this game?

-Refer to Table 11-1. Is there a dominant strategy for Godrickporter and, if so, what is it?

If economies of scale are relatively important in an industry, the typical firm's

By the 21st century few people purchased printed encyclopedias. Which of the following competitive forces best explains this?

Economies of scale can lead to an oligopolistic market structure because

Which of the following is an example of implicit collusion?

How does the demand curve for an oligopoly firm differ from the demand curves for firms in competitive market structures?

Suppose we want to use game theory to analyse how an oligopolist selects its optimal price. The cells of the payoff matrix show

Natural resource cartels such as OPEC are inherently unstable because their members operate with excess capacity and have an incentive to cheat on their output quotas.

When large firms in oligopoly markets cut their prices,

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