Question 1

Using the concentration ratio to measure the degree of competition

Accepted Answer

A)  may understate the degree of competition because it ignores imported goods. 
B)  may overstate the degree of competition because it ignores imported goods. 
C)  may overstate the degree of competition because inter-industry competition is ignored. 
D)  may understate the degree of competition because market share changes annually. 
A)  may understate the degree of competition because it ignores imported goods. 
B)  may overstate the degree of competition because it ignores imported goods. 
C)  may overstate the degree of competition because inter-industry competition is ignored. 
D)  may understate the degree of competition because market share changes annually. A

Question 2

Actions that ignore the possible long-run benefits of cooperation and focus solely on short-run gains are

Accepted Answer

A)  a zero-sum game. 
B)  a negative-sum game. 
C)  tit-for-tat strategic behavior. 
D)  opportunistic behavior. 
A)  a zero-sum game. 
B)  a negative-sum game. 
C)  tit-for-tat strategic behavior. 
D)  opportunistic behavior. D

Question 3

Which of the following is NOT a cause for an oligopoly to exist?

Accepted Answer

A)  economies of scale 
B)  structural dependence 
C)  barriers to entry 
D)  horizontal mergers 
A)  economies of scale 
B)  structural dependence 
C)  barriers to entry 
D)  horizontal mergers B

Question 4

A market situation in which there are a few large firms is called

Accepted Answer

A)  monopolistic competition. 
B)  imperfect competition. 
C)  oligopoly. 
D)  monopoly. 
A)  monopolistic competition. 
B)  imperfect competition. 
C)  oligopoly. 
D)  monopoly.

Question 5

The manner in which one oligopolist reacts to a change in price, output, or quality made by another oligopolist in the industry is

Accepted Answer

A)  a cooperative game. 
B)  the reaction function. 
C)  a zero-sum game. 
D)  the concentration ratio. 
A)  a cooperative game. 
B)  the reaction function. 
C)  a zero-sum game. 
D)  the concentration ratio.

Question 6

A radio station is best described as

Accepted Answer

A)  an end user in a transaction-based market. 
B)  a platform in an audience-making market. 
C)  an end user in a matchmaking market. 
D)  a platform in a shared-input market. 
A)  an end user in a transaction-based market. 
B)  a platform in an audience-making market. 
C)  an end user in a matchmaking market. 
D)  a platform in a shared-input market.

Question 7

The recent merger of Southwest Bell (SBC) and AT&T companies is an example of a

Accepted Answer

A)  horizontal merger. 
B)  vertical merger. 
C)  consolidation merger. 
D)  cooperative merger. 
A)  horizontal merger. 
B)  vertical merger. 
C)  consolidation merger. 
D)  cooperative merger.

Question 8

A member in a cartel can earn more profits by

Accepted Answer

A)  charging a slightly lower price and raising production. 
B)  producing less than the agreed rate. 
C)  selling less than the agreed amount. 
D)  none of the above. 
A)  charging a slightly lower price and raising production. 
B)  producing less than the agreed rate. 
C)  selling less than the agreed amount. 
D)  none of the above.

Question 9

-According to the above table, if the fourth and fifth largest firms in the industry merge, the four-firm concentration ratio in the industry will be

Accepted Answer

A)  82.5 percent. 
B)  35.8 percent. 
C)  69.0 percent. 
D)  84.1 percent. 
A)  82.5 percent. 
B)  35.8 percent. 
C)  69.0 percent. 
D)  84.1 percent.

Question 10

All of the following are reasons for an oligopoly to occur EXCEPT

Accepted Answer

A)  economies to scale. 
B)  barriers to entry. 
C)  independence among firms. 
D)  merger. 
A)  economies to scale. 
B)  barriers to entry. 
C)  independence among firms. 
D)  merger.

Question 11

Interdependence is the key characteristic of

Accepted Answer

A)  perfect competition. 
B)  monopolistic competition. 
C)  oligopoly. 
D)  monopoly. 
A)  perfect competition. 
B)  monopolistic competition. 
C)  oligopoly. 
D)  monopoly.

Question 12

The market structure of monopoly exists when

Accepted Answer

A)  there are a small number of interdependent firms that constitute the entire market. 
B)  there is a single producer of a product. 
C)  there are many producers of differentiated products. 
D)  there are many producers of a homogeneous product. 
A)  there are a small number of interdependent firms that constitute the entire market. 
B)  there is a single producer of a product. 
C)  there are many producers of differentiated products. 
D)  there are many producers of a homogeneous product.

Question 13

Economies of scale means that

Accepted Answer

A)  the average fixed cost curve slopes downward over its entire range. 
B)  the four-firm concentration ratio is below 80. 
C)  the long-run average total cost curve slopes downward over it entire range. 
D)  the long-run total cost curve slopes downward over it entire range. 
A)  the average fixed cost curve slopes downward over its entire range. 
B)  the four-firm concentration ratio is below 80. 
C)  the long-run average total cost curve slopes downward over it entire range. 
D)  the long-run total cost curve slopes downward over it entire range.

Question 14

Which of the following is NOT subject to a network effect?

Accepted Answer

A)  the layout of the keys on your keyboard 
B)  rotating your tires every six months 
C)  listening to popular songs 
D)  purchasing a new high-definition DVD player 
A)  the layout of the keys on your keyboard 
B)  rotating your tires every six months 
C)  listening to popular songs 
D)  purchasing a new high-definition DVD player

Question 15

A game in which any gains within the group are exactly offset by equal losses by the end of the game is a

Accepted Answer

A)  positive-sum game. 
B)  zero-sum game. 
C)  strategy. 
D)  negative-sum game. 
A)  positive-sum game. 
B)  zero-sum game. 
C)  strategy. 
D)  negative-sum game.

Question 16

The joining of firms that are producing or selling a similar product is

Accepted Answer

A)  a conglomerate merger. 
B)  a horizontal merger. 
C)  a vertical merger. 
D)  a cross or diagonal merger. 
A)  a conglomerate merger. 
B)  a horizontal merger. 
C)  a vertical merger. 
D)  a cross or diagonal merger.

Question 17

Firms face downward sloping demand curves in

Accepted Answer

A)  monopolies only. 
B)  monopolies and oligopolies only. 
C)  monopolies and oligopolies that collude only. 
D)  all market structures except perfect competition. 
A)  monopolies only. 
B)  monopolies and oligopolies only. 
C)  monopolies and oligopolies that collude only. 
D)  all market structures except perfect competition.

Question 18

A concentration ratio is used to

Accepted Answer

A)  determine whether a market structure is oligopoly. 
B)  determine the price level relative to firms' marginal costs. 
C)  determine the degree of homogeneity in the market. 
D)  determine the absolute size of a market. 
A)  determine whether a market structure is oligopoly. 
B)  determine the price level relative to firms' marginal costs. 
C)  determine the degree of homogeneity in the market. 
D)  determine the absolute size of a market.

Question 19

An association of producers that fixes common prices and output quotas is known as a

Accepted Answer

A)  cartel. 
B)  common selling organization. 
C)  joint-marketing arrangement. 
D)  trade association. 
A)  cartel. 
B)  common selling organization. 
C)  joint-marketing arrangement. 
D)  trade association.

Question 20

Which of the following is NOT a characteristic of pure monopoly?

Accepted Answer

A)  many sellers 
B)  considerable price setting ability 
C)  restricted ability to enter market 
D)  long-run economic profits are possible 
A)  many sellers 
B)  considerable price setting ability 
C)  restricted ability to enter market 
D)  long-run economic profits are possible

Exam 26: Oligopoly and Strategic Behavior

Using the concentration ratio to measure the degree of competition

Actions that ignore the possible long-run benefits of cooperation and focus solely on short-run gains are

Which of the following is NOT a cause for an oligopoly to exist?

A market situation in which there are a few large firms is called

The manner in which one oligopolist reacts to a change in price, output, or quality made by another oligopolist in the industry is

A radio station is best described as

The recent merger of Southwest Bell (SBC) and AT&T companies is an example of a

A member in a cartel can earn more profits by

-According to the above table, if the fourth and fifth largest firms in the industry merge, the four-firm concentration ratio in the industry will be

All of the following are reasons for an oligopoly to occur EXCEPT

Interdependence is the key characteristic of

The market structure of monopoly exists when

Economies of scale means that

Which of the following is NOT subject to a network effect?

A game in which any gains within the group are exactly offset by equal losses by the end of the game is a

The joining of firms that are producing or selling a similar product is

Firms face downward sloping demand curves in

A concentration ratio is used to

An association of producers that fixes common prices and output quotas is known as a

Which of the following is NOT a characteristic of pure monopoly?

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, Banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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