Question 1

Which government agency publishes four-firm concentration ratios?

Accepted Answer

A)  the Economic Council 
B)  the Federal Reserve System 
C)  the U.S. Bureau of the Census 
D)  the Treasury Department 
A)  the Economic Council 
B)  the Federal Reserve System 
C)  the U.S. Bureau of the Census 
D)  the Treasury Department

Question 2

Consider two oligopolistic industries selling the same product in different locations.In the first industry,firms always match price changes by any other firm in the industry.In the second industry,firms always ignore price changes by any other firm.which of the following statements is true about these two industries,holding everything else constant?

Accepted Answer

A)  Market prices are likely to be higher in the first industry in which firms always match price changes by rival firms than in the second where firms ignore their rivals' price changes. 
B)  Market prices are likely to be lower in the first industry where firms always match price changes by rival firms than in the second where firms ignore their rivals' price changes. 
C)  Market prices are likely to be the same in both markets because they are both oligopolistic markets. 
D)  No conclusions can be drawn about the pricing behavior under these very different firm behaviors. 
A)  Market prices are likely to be higher in the first industry in which firms always match price changes by rival firms than in the second where firms ignore their rivals' price changes. 
B)  Market prices are likely to be lower in the first industry where firms always match price changes by rival firms than in the second where firms ignore their rivals' price changes. 
C)  Market prices are likely to be the same in both markets because they are both oligopolistic markets. 
D)  No conclusions can be drawn about the pricing behavior under these very different firm behaviors.

Question 3

A fundamental assumption in game theory is that players do not interact with each other.

Accepted Answer

A) True 
 B)False

Question 4

Producing a homogeneous product occurs in which of the following industries?

Accepted Answer

A)  oligopoly, monopolistic competition and perfect competition 
B)  perfect competition only 
C)  oligopoly and perfect competition 
D)  monopolistic competition and perfect competition 
A)  oligopoly, monopolistic competition and perfect competition 
B)  perfect competition only 
C)  oligopoly and perfect competition 
D)  monopolistic competition and perfect competition

Question 5

The De Beers Company blocked competition

Accepted Answer

A)  in the diamond market by controlling the output of most of the world's diamond mines. 
B)  by controlling the supply of most of the world's high-quality bauxite, the mineral used to produce aluminum. 
C)  in the market for fresh and frozen cranberries because it controls about 80 percent of the cranberry crop. 
D)  because it has lower costs of producing than other department stores due to economies of scale. 
A)  in the diamond market by controlling the output of most of the world's diamond mines. 
B)  by controlling the supply of most of the world's high-quality bauxite, the mineral used to produce aluminum. 
C)  in the market for fresh and frozen cranberries because it controls about 80 percent of the cranberry crop. 
D)  because it has lower costs of producing than other department stores due to economies of scale.

Question 6

What is the dominant strategy in a second-price auction?

Accepted Answer

A)  bidding below one's true value 
B)  bidding above one's true value 
C)  bidding one's true value 
D)  There is no dominant strategy. 
A)  bidding below one's true value 
B)  bidding above one's true value 
C)  bidding one's true value 
D)  There is no dominant strategy.

Question 7

A large majority of the personal computers (PCs)in the United States use an operating system purchased from Microsoft.Microsoft's relationship with PC manufacturers is an example of which of Porter's competitive forces?

Accepted Answer

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

Question 8

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 9

In an oligopoly,minimum efficient scale is likely to occur at a level of output that is a large fraction of industry sales.

Accepted Answer

A) True 
 B)False

Question 10

For years economists believed that market structure explained the ability of some firms to earn economic profits.Today,economists and business strategists put greater emphasis on

Accepted Answer

A)  the number of years a firm has been in business and the average price of the products sold by the firm. 
B)  the number of countries in which a firm conducts business and the number of employees the firm has in each country. 
C)  the characteristics of individual firms and the strategies their managements use to continue to earn economic profits. 
D)  the size of a firm relative to the industry average and the number of firms in the domestic industry. 
A)  the number of years a firm has been in business and the average price of the products sold by the firm. 
B)  the number of countries in which a firm conducts business and the number of employees the firm has in each country. 
C)  the characteristics of individual firms and the strategies their managements use to continue to earn economic profits. 
D)  the size of a firm relative to the industry average and the number of firms in the domestic industry.

Question 11

In a decision tree,the difference between a decision node and a terminal node is that

Accepted Answer

A)  at a decision node all participants are free to make individual decisions but at a terminal node they must agree on a collective decision. 
B)  at a decision node all participants make the same decision, while at a terminal node different players may make different decisions. 
C)  at a decision node, a decision must be made while a terminal node shows the payoff. 
D)  at a decision node a decision must be made, while at a terminal node the final decision must be made. 
A)  at a decision node all participants are free to make individual decisions but at a terminal node they must agree on a collective decision. 
B)  at a decision node all participants make the same decision, while at a terminal node different players may make different decisions. 
C)  at a decision node, a decision must be made while a terminal node shows the payoff. 
D)  at a decision node a decision must be made, while at a terminal node the final decision must be made.

Question 12

A study conducted by economists at the University of Chicago found that when Southwest Airlines begins flying a new route,ticket prices on other airlines for that route ________,indicating that airlines ________.

Accepted Answer

A)  stay relatively unchanged; may begin practicing implicit price collusion when Southwest enters a market 
B)  drop by an average of 29 percent; may have been practicing implicit price collusion before Southwest's entry into the market 
C)  rise by an average of 65 percent; know they can practice implicit price collusion once Southwest announces it is entering a market. 
D)  first drop and then rise back to their original levels; temporarily stop practicing implicit price collusion until Southwest becomes established, then return to their collusive pricing strategies 
A)  stay relatively unchanged; may begin practicing implicit price collusion when Southwest enters a market 
B)  drop by an average of 29 percent; may have been practicing implicit price collusion before Southwest's entry into the market 
C)  rise by an average of 65 percent; know they can practice implicit price collusion once Southwest announces it is entering a market. 
D)  first drop and then rise back to their original levels; temporarily stop practicing implicit price collusion until Southwest becomes established, then return to their collusive pricing strategies

Question 13

Table 14-4   Alistair Luggage and Baine Baggage are the only firms selling luggage in the upscale town of Montecito. Each firm must decide on whether to increase its advertising spending to compete for customers. If one firm increases its advertising budget but the other does not, then the firm with the higher advertising budget will increase its profit. Table 14-4 shows the payoff matrix for this advertising game.
-Refer to Table 14-4.Does Alistair have a dominant strategy and if so,what is it?

Accepted Answer

A)  Yes, Alistair should increase its advertising budget. 
B)  Yes, Alistair should keep its advertising budget as is. 
C)  There are two dominant strategies: if Baine increases its advertising budget, then Alistair's best bet is to keep its budget the same but if Baine does not increase its spending then Alistair should raise its advertising budget 
D)  No, there is no dominant strategy. 
A)  Yes, Alistair should increase its advertising budget. 
B)  Yes, Alistair should keep its advertising budget as is. 
C)  There are two dominant strategies: if Baine increases its advertising budget, then Alistair's best bet is to keep its budget the same but if Baine does not increase its spending then Alistair should raise its advertising budget 
D)  No, there is no dominant strategy.

Question 14

Marginal revenue for an oligopolist is

Accepted Answer

A)  identical to the demand for the firm's product. 
B)  difficult to determine because the firm's demand curve is typically unknown. 
C)  downward sloping beneath the firm's demand curve. 
D)  horizontal on a price-quantity diagram. 
A)  identical to the demand for the firm's product. 
B)  difficult to determine because the firm's demand curve is typically unknown. 
C)  downward sloping beneath the firm's demand curve. 
D)  horizontal on a price-quantity diagram.

Question 15

Which of the following is not a characteristic of oligopoly?

Accepted Answer

A)  the ability to influence price 
B)  a small number of firms 
C)  low barriers to entry 
D)  interdependent firms 
A)  the ability to influence price 
B)  a small number of firms 
C)  low barriers to entry 
D)  interdependent firms

Question 16

The approach economists use to analyze competition among oligopolists is called

Accepted Answer

A)  marginal analysis. 
B)  game theory. 
C)  oligopoly theory. 
D)  competition among the few. 
A)  marginal analysis. 
B)  game theory. 
C)  oligopoly theory. 
D)  competition among the few.

Question 17

The prisoner's dilemma is used to analyze business situations in which one firm acts first and then other firms respond.

Accepted Answer

A) True 
 B)False

Question 18

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 19

A supplier of an input is unlikely to have bargaining power if

Accepted Answer

A)  the input supplied is specialized. 
B)  many firms can supply the input. 
C)  it is the sole supplier of the input. 
D)  it has a patent on the input. 
A)  the input supplied is specialized. 
B)  many firms can supply the input. 
C)  it is the sole supplier of the input. 
D)  it has a patent on the input.

Question 20

Table 14-2   Table 14-2 shows the payoff matrix for Wal-Mart and Target from every combination of pricing strategies for the popular PlayStation 3. At the start of the game each firm charges a low price and each earns a profit of $7,000.
-Refer to Table 14-2.For each firm,is there a better outcome than the current situation in which each firm charges the low price and earns a profit of $7,000?

Accepted Answer

A)  Yes, the firms can implicitly collude and agree to charge a higher price. 
B)  No, there is no incentive for each firm to consider any other strategy. 
C)  No, any other strategy hurts consumers. 
D)  Yes, each firm can implicitly agree to increase output and not to deviate from a low price. 
A)  Yes, the firms can implicitly collude and agree to charge a higher price. 
B)  No, there is no incentive for each firm to consider any other strategy. 
C)  No, any other strategy hurts consumers. 
D)  Yes, each firm can implicitly agree to increase output and not to deviate from a low price.

Which government agency publishes four-firm concentration ratios?

A fundamental assumption in game theory is that players do not interact with each other.

Producing a homogeneous product occurs in which of the following industries?

The De Beers Company blocked competition

What is the dominant strategy in a second-price auction?

A large majority of the personal computers (PCs)in the United States use an operating system purchased from Microsoft.Microsoft's relationship with PC manufacturers is an example of which of Porter's competitive forces?

Collusion

In an oligopoly,minimum efficient scale is likely to occur at a level of output that is a large fraction of industry sales.

For years economists believed that market structure explained the ability of some firms to earn economic profits.Today,economists and business strategists put greater emphasis on

In a decision tree,the difference between a decision node and a terminal node is that

A study conducted by economists at the University of Chicago found that when Southwest Airlines begins flying a new route,ticket prices on other airlines for that route ,indicating that airlines .

Marginal revenue for an oligopolist is

Which of the following is not a characteristic of oligopoly?

The approach economists use to analyze competition among oligopolists is called

The prisoner's dilemma is used to analyze business situations in which one firm acts first and then other firms respond.

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

A supplier of an input is unlikely to have bargaining power if

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

Externalities, environmental Policy, and Public Goods

Elasticity: The Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice,taxes,and the Distribution of Income

Filters

Exam 14: Oligopoly: Firms in Less Competitive Markets

Which government agency publishes four-firm concentration ratios?

A fundamental assumption in game theory is that players do not interact with each other.

Producing a homogeneous product occurs in which of the following industries?

The De Beers Company blocked competition

What is the dominant strategy in a second-price auction?

A large majority of the personal computers (PCs)in the United States use an operating system purchased from Microsoft.Microsoft's relationship with PC manufacturers is an example of which of Porter's competitive forces?

Collusion

In an oligopoly,minimum efficient scale is likely to occur at a level of output that is a large fraction of industry sales.

For years economists believed that market structure explained the ability of some firms to earn economic profits.Today,economists and business strategists put greater emphasis on

In a decision tree,the difference between a decision node and a terminal node is that

A study conducted by economists at the University of Chicago found that when Southwest Airlines begins flying a new route,ticket prices on other airlines for that route ________,indicating that airlines ________.

Marginal revenue for an oligopolist is

Which of the following is not a characteristic of oligopoly?

The approach economists use to analyze competition among oligopolists is called

The prisoner's dilemma is used to analyze business situations in which one firm acts first and then other firms respond.

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

A supplier of an input is unlikely to have bargaining power if

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

Externalities, environmental Policy, and Public Goods

Elasticity: The Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice,taxes,and the Distribution of Income

Filters

A study conducted by economists at the University of Chicago found that when Southwest Airlines begins flying a new route,ticket prices on other airlines for that route ,indicating that airlines .