Question 1

An example of a barrier to entry is

Accepted Answer

A)  product differentiation. 
B)  high profits. 
C)  superior technological knowledge. 
D)  increasing marginal costs 
A)  product differentiation. 
B)  high profits. 
C)  superior technological knowledge. 
D)  increasing marginal costs

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

A market comprised of only two firms is called a

Accepted Answer

A)  competitive market. 
B)  duopoly. 
C)  monopoly. 
D)  monopolistically competitive market. 
A)  competitive market. 
B)  duopoly. 
C)  monopoly. 
D)  monopolistically competitive market.

Question 4

Table 14-1   Godrickporter and Star Connections are the only two airport shuttle and limousine rental service companies in the mid-sized town of Godrick Hollow. Each firm must decide on whether to increase its advertising spending to compete for customers. Table 14-1 shows the payoff matrix for this advertising game.
-Refer to Table 14-1.Let's suppose the game starts with each firm adhering to its original budget so that Godrickporter earns a profit of $6,000 and Star Connections earns a profit of $12,000.Is there an incentive for any one firm to increase its advertising budget?

Accepted Answer

A)  No, neither firm has an incentive to raise its advertising spending. 
B)  Yes, both firms have an incentive to raise their advertising budgets. 
C)  Yes, Star Connections has an incentive to increase its advertising budget, but Godrickporter does not. 
D)  Yes, Godrickporter has an incentive to increase its advertising budget, but Star Connections does not. 
A)  No, neither firm has an incentive to raise its advertising spending. 
B)  Yes, both firms have an incentive to raise their advertising budgets. 
C)  Yes, Star Connections has an incentive to increase its advertising budget, but Godrickporter does not. 
D)  Yes, Godrickporter has an incentive to increase its advertising budget, but Star Connections does not.

Question 5

The four-firm concentration ratio of the aircraft industry is over 80 percent.Most economists would consider this industry an oligopoly.

Accepted Answer

A) True 
 B)False

Question 6

In most business situations where firms compete,often they can escape the prisoner's dilemma and reach the most profitable outcome.Which of the following is a reason for this?

Accepted Answer

A)  Firms engage in aggressive advertising to overcome the barriers to loyalty. 
B)  Most games are one-shot games so firms learn from their mistakes. 
C)  Most games are repeated games and firms can employ retaliation strategies against those who do not cooperate. 
D)  Firms are constantly improving their products and anticipating changing consumer tastes. 
A)  Firms engage in aggressive advertising to overcome the barriers to loyalty. 
B)  Most games are one-shot games so firms learn from their mistakes. 
C)  Most games are repeated games and firms can employ retaliation strategies against those who do not cooperate. 
D)  Firms are constantly improving their products and anticipating changing consumer tastes.

Question 7

Because of the flaws of the concentration ratio as a measure of the extent of competition in an industry,some economists prefer another measure of competition,the Herfindahl-Hirschman Index.

Accepted Answer

A) True 
 B)False

Question 8

Collusion would be common in an oligopoly and a monopolistically competitive industry.

Accepted Answer

A) True 
 B)False

Question 9

List the competitive forces in the five competitive forces model.

Accepted Answer

The five competitive forces are 1)compet

Question 10

What is a second-price auction?

Accepted Answer

A)  An auction in which the bidder who submitted the highest bid is awarded the object being sold and pays a price equal to the second highest amount bid. 
B)  An auction in which the bidder who submitted the second highest bid is awarded the object being sold. 
C)  An auction in which the bidder who submitted the highest bid is awarded the object being sold and pays a price equal to the average of the highest and second highest amount bid. 
D)  An auction in which the bidder who submitted the second highest bid is awarded the object being sold and pays a price equal to the average of the highest and second highest amount bid. 
A)  An auction in which the bidder who submitted the highest bid is awarded the object being sold and pays a price equal to the second highest amount bid. 
B)  An auction in which the bidder who submitted the second highest bid is awarded the object being sold. 
C)  An auction in which the bidder who submitted the highest bid is awarded the object being sold and pays a price equal to the average of the highest and second highest amount bid. 
D)  An auction in which the bidder who submitted the second highest bid is awarded the object being sold and pays a price equal to the average of the highest and second highest amount bid.

Question 11

The four-firm concentration ratio in the breakfast cereal industry is 78 percent.How does the five competitive forces model provide better insight into the degree of competition in the breakfast cereal industry than just observing the concentration ratio?

Accepted Answer

The concentration ratio only measures th

Question 12

Firms are more likely to find themselves in a prisoner's dilemma in sequential games as opposed to simultaneous games.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is not an example of a government-imposed entry barrier?

Accepted Answer

A)  patents 
B)  occupational licensing 
C)  barriers to international trade 
D)  antitrust legislation 
A)  patents 
B)  occupational licensing 
C)  barriers to international trade 
D)  antitrust legislation

Question 14

Which of the following economists did not help to develop game theory analysis?

Accepted Answer

A)  Adam Smith 
B)  John Nash 
C)  John von Neumann 
D)  Oskar Morgenstern 
A)  Adam Smith 
B)  John Nash 
C)  John von Neumann 
D)  Oskar Morgenstern

Question 15

In many business situations one firm will act first,and then other firms will respond.To help analyze these types of situations economists use

Accepted Answer

A)  retaliation games. 
B)  follow-the-leader-games. 
C)  sequential games. 
D)  bargaining games. 
A)  retaliation games. 
B)  follow-the-leader-games. 
C)  sequential games. 
D)  bargaining games.

Question 16

Which industry has the highest four-firm concentration ratio?

Accepted Answer

A)  discount department stores 
B)  college bookstores 
C)  retail gasoline stations 
D)  cigarettes 
A)  discount department stores 
B)  college bookstores 
C)  retail gasoline stations 
D)  cigarettes

Question 17

Collusion makes firms better off because if they act as a single entity (a cartel)they can reduce output and increase their prices and profits.But some cartels have failed and others are unstable.Which of the following is a reason why cartels often break down?

Accepted Answer

A)  Most cartels do not have a dominant strategy. 
B)  When a cartel is profitable the amount of competition it faces increases. 
C)  Members of a cartel may resent having to share their profits equally. 
D)  Each member of a cartel has an incentive to "cheat" on the collusive agreement by producing more than its share when everyone else sticks with the collusive agreement. 
A)  Most cartels do not have a dominant strategy. 
B)  When a cartel is profitable the amount of competition it faces increases. 
C)  Members of a cartel may resent having to share their profits equally. 
D)  Each member of a cartel has an incentive to "cheat" on the collusive agreement by producing more than its share when everyone else sticks with the collusive agreement.

Question 18

A cooperative equilibrium results when firms

Accepted Answer

A)  choose the best strategy regardless of what other players do. 
B)  choose the strategy that maximizes the total game payoff. 
C)  choose the strategy that minimizes the payoff to other players. 
D)  choose a strategy by random chance. 
A)  choose the best strategy regardless of what other players do. 
B)  choose the strategy that maximizes the total game payoff. 
C)  choose the strategy that minimizes the payoff to other players. 
D)  choose a strategy by random chance.

Question 19

Ocean Spray is considered to be an oligopoly firm because,until the 1990s,it faced little competition in the market for fresh and frozen cranberries.Why?

Accepted Answer

A)  Ocean Spray had a patent on the production of cranberries that gave the company the exclusive right to market its product for 20 years. The 20-year period ended in the 1990s. 
B)  Until the 1990s, Ocean Spray controlled almost the entire supply of cranberries. 
C)  Ocean Spray was able to achieve significant economies of scale in the production of cranberries. Beginning in the 1990s, other firms finally achieved economies of scale as well, but Ocean Spray still controls about 80 percent of the cranberry market. 
D)  The federal government imposed a high tariff on cranberry imports. During the 1990s the tariff was eliminated, but Ocean Spray still controls about 80 percent of the cranberry market. 
A)  Ocean Spray had a patent on the production of cranberries that gave the company the exclusive right to market its product for 20 years. The 20-year period ended in the 1990s. 
B)  Until the 1990s, Ocean Spray controlled almost the entire supply of cranberries. 
C)  Ocean Spray was able to achieve significant economies of scale in the production of cranberries. Beginning in the 1990s, other firms finally achieved economies of scale as well, but Ocean Spray still controls about 80 percent of the cranberry market. 
D)  The federal government imposed a high tariff on cranberry imports. During the 1990s the tariff was eliminated, but Ocean Spray still controls about 80 percent of the cranberry market.

Question 20

An oligopolistic industry is characterized 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 standardized 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 standardized products.

An example of a barrier to entry is

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

A market comprised of only two firms is called a

The four-firm concentration ratio of the aircraft industry is over 80 percent.Most economists would consider this industry an oligopoly.

In most business situations where firms compete,often they can escape the prisoner's dilemma and reach the most profitable outcome.Which of the following is a reason for this?

Because of the flaws of the concentration ratio as a measure of the extent of competition in an industry,some economists prefer another measure of competition,the Herfindahl-Hirschman Index.

Collusion would be common in an oligopoly and a monopolistically competitive industry.

List the competitive forces in the five competitive forces model.

What is a second-price auction?

The four-firm concentration ratio in the breakfast cereal industry is 78 percent.How does the five competitive forces model provide better insight into the degree of competition in the breakfast cereal industry than just observing the concentration ratio?

Firms are more likely to find themselves in a prisoner's dilemma in sequential games as opposed to simultaneous games.

Which of the following is not an example of a government-imposed entry barrier?

Which of the following economists did not help to develop game theory analysis?

In many business situations one firm will act first,and then other firms will respond.To help analyze these types of situations economists use

Which industry has the highest four-firm concentration ratio?

Collusion makes firms better off because if they act as a single entity (a cartel)they can reduce output and increase their prices and profits.But some cartels have failed and others are unstable.Which of the following is a reason why cartels often break down?

A cooperative equilibrium results when firms

Ocean Spray is considered to be an oligopoly firm because,until the 1990s,it faced little competition in the market for fresh and frozen cranberries.Why?

An oligopolistic industry is characterized by all of the following except

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

An example of a barrier to entry is

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

A market comprised of only two firms is called a

The four-firm concentration ratio of the aircraft industry is over 80 percent.Most economists would consider this industry an oligopoly.

In most business situations where firms compete,often they can escape the prisoner's dilemma and reach the most profitable outcome.Which of the following is a reason for this?

Because of the flaws of the concentration ratio as a measure of the extent of competition in an industry,some economists prefer another measure of competition,the Herfindahl-Hirschman Index.

Collusion would be common in an oligopoly and a monopolistically competitive industry.

List the competitive forces in the five competitive forces model.

What is a second-price auction?

The four-firm concentration ratio in the breakfast cereal industry is 78 percent.How does the five competitive forces model provide better insight into the degree of competition in the breakfast cereal industry than just observing the concentration ratio?

Firms are more likely to find themselves in a prisoner's dilemma in sequential games as opposed to simultaneous games.

Which of the following is not an example of a government-imposed entry barrier?

Which of the following economists did not help to develop game theory analysis?

In many business situations one firm will act first,and then other firms will respond.To help analyze these types of situations economists use

Which industry has the highest four-firm concentration ratio?

Collusion makes firms better off because if they act as a single entity (a cartel)they can reduce output and increase their prices and profits.But some cartels have failed and others are unstable.Which of the following is a reason why cartels often break down?

A cooperative equilibrium results when firms

Ocean Spray is considered to be an oligopoly firm because,until the 1990s,it faced little competition in the market for fresh and frozen cranberries.Why?

An oligopolistic industry is characterized by all of the following except

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