Question 1

A game in which players collectively gain is known as a

Accepted Answer

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

Question 2

A market structure characterized by a small number of interdependent sellers is called a(n)

Accepted Answer

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

Question 3

In the wireless communication industry, firms that provide broadband access to the Internet are best regarded as

Accepted Answer

A)  platforms in a shared-input market. 
B)  end users in a shared-input market. 
C)  platforms in a matchmaking market. 
D)  end users in a matchmaking market. 
A)  platforms in a shared-input market. 
B)  end users in a shared-input market. 
C)  platforms in a matchmaking market. 
D)  end users in a matchmaking market.

Question 4

A network effect arises whenever

Accepted Answer

A)  firms in an oligopolistic industry engage in limit pricing. 
B)  firms in an oligopolistic industry engage in a zero-sum game. 
C)  a consumer's willingness to purchase a good or service is influenced by how many others also buy or have bought the item. 
D)  a producer's willingness to produce a good or service is influenced by how many other firms also produce or have produced the item. 
A)  firms in an oligopolistic industry engage in limit pricing. 
B)  firms in an oligopolistic industry engage in a zero-sum game. 
C)  a consumer's willingness to purchase a good or service is influenced by how many others also buy or have bought the item. 
D)  a producer's willingness to produce a good or service is influenced by how many other firms also produce or have produced the item.

Question 5

The way in which an oligopolist acts in response to a price change by a competitor is known as a

Accepted Answer

A)  zero-sum game. 
B)  positive-sum game. 
C)  reaction function. 
D)  cooperative game. 
A)  zero-sum game. 
B)  positive-sum game. 
C)  reaction function. 
D)  cooperative game.

Question 6

When Goodyear increases its production when Michelin reduces its production, Goodyear is playing a

Accepted Answer

A)  negative-sum game. 
B)  cooperative game. 
C)  non-cooperative game. 
D)  reaction function game. 
A)  negative-sum game. 
B)  cooperative game. 
C)  non-cooperative game. 
D)  reaction function game.

Question 7

Which of the following is an example of a horizontal merger?

Accepted Answer

A)  Northeastern Illinois University merging with McDonald's. 
B)  Northeastern Illinois University merging with a training academy for new professors. 
C)  Northeastern Illinois University merging with Roosevelt University. 
D)  Northeastern Illinois University going from a public to a private university. 
A)  Northeastern Illinois University merging with McDonald's. 
B)  Northeastern Illinois University merging with a training academy for new professors. 
C)  Northeastern Illinois University merging with Roosevelt University. 
D)  Northeastern Illinois University going from a public to a private university.

Question 8

In an oligopolistic market, each firm

Accepted Answer

A)  has a constant marginal cost. 
B)  faces a perfectly elastic demand function. 
C)  must consider the reaction of rival firms when making a pricing or output decision. 
D)  produces at minimum average cost in the long run. 
A)  has a constant marginal cost. 
B)  faces a perfectly elastic demand function. 
C)  must consider the reaction of rival firms when making a pricing or output decision. 
D)  produces at minimum average cost in the long run.

Question 9

If a firm is an oligopolist, which is NOT true?

Accepted Answer

A)  It must pay attention to other firms' prices. 
B)  It is one of a relatively small number of firms dominating its industry. 
C)  It can sell all the units it wants at the going market price. 
D)  It is engaged in a strategic game. 
A)  It must pay attention to other firms' prices. 
B)  It is one of a relatively small number of firms dominating its industry. 
C)  It can sell all the units it wants at the going market price. 
D)  It is engaged in a strategic game.

Question 10

A reaction function is

Accepted Answer

A)  companies colluding in order to make higher than competitive rates of return. 
B)  the manner in which one oligopolist reacts to a change in price made by another oligopolist in the industry. 
C)  a game in which firms will not negotiate in any way. 
D)  when plans made by firms are known as game strategies. 
A)  companies colluding in order to make higher than competitive rates of return. 
B)  the manner in which one oligopolist reacts to a change in price made by another oligopolist in the industry. 
C)  a game in which firms will not negotiate in any way. 
D)  when plans made by firms are known as game strategies.

Question 11

A market with many sellers, no influence over price, no barriers to entry, a homogeneous product, and an absence of non-price competition is known as

Accepted Answer

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

Question 12

In a "game," strategies are

Accepted Answer

A)  the reactions of firms to the changes in the economy. 
B)  the laws regulating the industry. 
C)  the plans made by the participants. 
D)  the potential returns the participants may get. 
A)  the reactions of firms to the changes in the economy. 
B)  the laws regulating the industry. 
C)  the plans made by the participants. 
D)  the potential returns the participants may get.

Question 13

The analytical framework in which two or more firms compete for certain payoffs that depend on the strategy that the others employ is

Accepted Answer

A)  game theory. 
B)  the concentration ratio. 
C)  a horizontal merger. 
D)  network effect. 
A)  game theory. 
B)  the concentration ratio. 
C)  a horizontal merger. 
D)  network effect.

Question 14

If an industry has 25 firms that collectively have $150 million in total sales and the top four firms in this industry account for $90 million in sales, what is the concentration ratio of the top four firms in this industry?

Accepted Answer

A)  42 percent 
B)  60 percent 
C)  70 percent 
D)  80 percent 
A)  42 percent 
B)  60 percent 
C)  70 percent 
D)  80 percent

Question 15

The number of firms in an oligopolistic industry

Accepted Answer

A)  must be less than 10. 
B)  must be less than 20. 
C)  must be small enough that firms are interdependent. 
D)  must be large enough for firms to be independent. 
A)  must be less than 10. 
B)  must be less than 20. 
C)  must be small enough that firms are interdependent. 
D)  must be large enough for firms to be independent.

Question 16

If Verizon Wireless and T-mobile, another wireless service company, were to merge, this would represent

Accepted Answer

A)  a vertical merger. 
B)  a horizontal merger. 
C)  a cartel. 
D)  an up-and-down merger. 
A)  a vertical merger. 
B)  a horizontal merger. 
C)  a cartel. 
D)  an up-and-down merger.

Question 17

-Refer to the above figure. The figure gives the payoff matrix for two individuals who are being accused of robbing a bank together. Which of the following is the outcome with cooperation?

Accepted Answer

A)  Both confess. 
B)  Both don't confess. 
C)  Bob confesses while Harry does not confess. 
D)  Harry confesses while Bo does not confess. 
A)  Both confess. 
B)  Both don't confess. 
C)  Bob confesses while Harry does not confess. 
D)  Harry confesses while Bo does not confess.

Question 18

Which of the following statements about concentration ratios is correct?

Accepted Answer

A)  A high concentration ratio indicates that the industry is a monopoly. 
B)  A high concentration ratio indicates that the industry is monopolistically competitive. 
C)  A high concentration ratio suggests that the industry is characterized by strategic independence. 
D)  A high concentration ratio suggests that the industry is characterized by strategic dependence. 
A)  A high concentration ratio indicates that the industry is a monopoly. 
B)  A high concentration ratio indicates that the industry is monopolistically competitive. 
C)  A high concentration ratio suggests that the industry is characterized by strategic independence. 
D)  A high concentration ratio suggests that the industry is characterized by strategic dependence.

Question 19

-Refer to the above figure. Ajax and Greenco are oligopolists. Above you are given the payoff matrix for the two firms giving the payoff associated with different pricing strategies. What is the dominant strategy for Greenco?

Accepted Answer

A)  high price 
B)  low price 
C)  There is no best strategy. 
D)  Not enough information is given to determine the best strategy. 
A)  high price 
B)  low price 
C)  There is no best strategy. 
D)  Not enough information is given to determine the best strategy.

Question 20

In which market structures do firms earn long-term profits of zero?

Accepted Answer

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

Exam 26: Oligopoly and Strategic Behavior

A game in which players collectively gain is known as a

A market structure characterized by a small number of interdependent sellers is called a(n)

In the wireless communication industry, firms that provide broadband access to the Internet are best regarded as

A network effect arises whenever

The way in which an oligopolist acts in response to a price change by a competitor is known as a

When Goodyear increases its production when Michelin reduces its production, Goodyear is playing a

Which of the following is an example of a horizontal merger?

In an oligopolistic market, each firm

If a firm is an oligopolist, which is NOT true?

A reaction function is

A market with many sellers, no influence over price, no barriers to entry, a homogeneous product, and an absence of non-price competition is known as

In a "game," strategies are

The analytical framework in which two or more firms compete for certain payoffs that depend on the strategy that the others employ is

If an industry has 25 firms that collectively have $150 million in total sales and the top four firms in this industry account for $90 million in sales, what is the concentration ratio of the top four firms in this industry?

The number of firms in an oligopolistic industry

If Verizon Wireless and T-mobile, another wireless service company, were to merge, this would represent

-Refer to the above figure. The figure gives the payoff matrix for two individuals who are being accused of robbing a bank together. Which of the following is the outcome with cooperation?

Which of the following statements about concentration ratios is correct?

-Refer to the above figure. Ajax and Greenco are oligopolists. Above you are given the payoff matrix for the two firms giving the payoff associated with different pricing strategies. What is the dominant strategy for Greenco?

In which market structures do firms earn long-term profits of zero?

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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