Question 1

The main objective of the members of a cartel is to

Accepted Answer

A)  earn economic profits. 
B)  produce efficiently. 
C)  make the industry more competitive. 
D)  obtain a patent. 
A)  earn economic profits. 
B)  produce efficiently. 
C)  make the industry more competitive. 
D)  obtain a patent.

Question 2

How does the presence of network effects in a two-sided market affects the pricing behavior in the market?

Accepted Answer

In a two-sided market, platform firms ma

Question 3

What are the main characteristics that make it more likely for a cartel to enforce agreements among participating members?

Accepted Answer

A cartel is more effective in

Question 4

The prisoners' dilemma is a game in which

Accepted Answer

A)  the dominant strategy for all participants is the best outcome no matter what the other side does. 
B)  the dominant strategy is to cooperate. 
C)  only one of the firms is able to make above-normal profits. 
D)  each firm, in making decisions on the basis of its own self-interest, also makes decisions that benefit the group as a whole. 
A)  the dominant strategy for all participants is the best outcome no matter what the other side does. 
B)  the dominant strategy is to cooperate. 
C)  only one of the firms is able to make above-normal profits. 
D)  each firm, in making decisions on the basis of its own self-interest, also makes decisions that benefit the group as a whole.

Question 5

A tit-for-tat strategy is one in which oligopolies

Accepted Answer

A)  cooperate as long as other members cooperate, but if anyone cheats, they cut the price until the cheater reverts to cooperation. 
B)  cooperate almost all of the time, but occasionally do not cooperate in order to fool the antitrust authorities. 
C)  keep cutting prices to punish rivals until the competitive price is reached. 
D)  try to avoid the problems of the prisoners' dilemma, but actually make themselves worse off. 
A)  cooperate as long as other members cooperate, but if anyone cheats, they cut the price until the cheater reverts to cooperation. 
B)  cooperate almost all of the time, but occasionally do not cooperate in order to fool the antitrust authorities. 
C)  keep cutting prices to punish rivals until the competitive price is reached. 
D)  try to avoid the problems of the prisoners' dilemma, but actually make themselves worse off.

Question 6

The network effect in the TV broadcasting industry results in

Accepted Answer

A)  a positive market feedback between the number of advertisers and the size of TV audience. 
B)  a negative market feedback between the number of advertisers and the size of TV audience. 
C)  a positive market feedback between the number of advertisers and the number of TV channels. 
D)  a negative market feedback between the number of advertisers and the number of TV channels. 
A)  a positive market feedback between the number of advertisers and the size of TV audience. 
B)  a negative market feedback between the number of advertisers and the size of TV audience. 
C)  a positive market feedback between the number of advertisers and the number of TV channels. 
D)  a negative market feedback between the number of advertisers and the number of TV channels.

Question 7

-Use the above table. If firms 3 and 4 merge, the four-firm concentration ratio will

Accepted Answer

A)  increase from 75 percent to 80 percent. 
B)  increase from 60 percent to 75 percent. 
C)  decrease from 75 percent to 60 percent. 
D)  not change. 
A)  increase from 75 percent to 80 percent. 
B)  increase from 60 percent to 75 percent. 
C)  decrease from 75 percent to 60 percent. 
D)  not change.

Question 8

Suppose an industry is composed of 10 firms. Each firm's share of total sales in the industry is 10 percent. If two of the firms merge, then the four-firm concentration ratio in the industry is

Accepted Answer

A)  40 percent. 
B)  45 percent. 
C)  50 percent. 
D)  unable to determine. 
A)  40 percent. 
B)  45 percent. 
C)  50 percent. 
D)  unable to determine.

Question 9

The main function of a platform firm is to

Accepted Answer

A)  deal with the government on behalf of sellers. 
B)  link producers with consumers. 
C)  perform collective bargaining with sellers on behalf of buyers. 
D)  create entry barriers for an industry on behalf of existing firms. 
A)  deal with the government on behalf of sellers. 
B)  link producers with consumers. 
C)  perform collective bargaining with sellers on behalf of buyers. 
D)  create entry barriers for an industry on behalf of existing firms.

Question 10

-The most oligopolistic industry of those presented in the above table is likely to be industry

Accepted Answer

A)  W. 
B)  X. 
C)  Y. 
D)  Z. 
A)  W. 
B)  X. 
C)  Y. 
D)  Z.

Question 11

Your teacher decides to play a game where every student must contribute a dollar. All money collected is distributed at the end of the game among the students. This is an example of 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 12

The market power of a firm refers to its ability to

Accepted Answer

A)  erect entry barriers in the industry. 
B)  make a profit even when other firms in the industry are making losses. 
C)  control its own output level while keeping its price the same as the prices charged by other firms. 
D)  affect the market price for its industry's output. 
A)  erect entry barriers in the industry. 
B)  make a profit even when other firms in the industry are making losses. 
C)  control its own output level while keeping its price the same as the prices charged by other firms. 
D)  affect the market price for its industry's output.

Question 13

Based on the table below, the four-firm concentration ratio equals what percentage of annual sales?

Accepted Answer

A)  33 percent 
B)  40 percent 
C)  60 percent 
D)  100 percent 
A)  33 percent 
B)  40 percent 
C)  60 percent 
D)  100 percent

Question 14

Which of the following is a characteristic of oligopoly?

Accepted Answer

A)  mutual firm independence 
B)  zero economic profits in the short run 
C)  marginal cost pricing 
D)  only a few firms in the industry 
A)  mutual firm independence 
B)  zero economic profits in the short run 
C)  marginal cost pricing 
D)  only a few firms in the industry

Question 15

In game theory, the strategy that always yields the highest benefit for the player using it is the

Accepted Answer

A)  dominant strategy. 
B)  cooperative strategy. 
C)  prisoners' strategy. 
D)  matrix strategy. 
A)  dominant strategy. 
B)  cooperative strategy. 
C)  prisoners' strategy. 
D)  matrix strategy.

Question 16

Strategic dependence is found in

Accepted Answer

A)  monopoly markets. 
B)  oligopolistic markets. 
C)  monopolistic competitive markets. 
D)  perfect competitive markets. 
A)  monopoly markets. 
B)  oligopolistic markets. 
C)  monopolistic competitive markets. 
D)  perfect competitive markets.

Question 17

When a new product is introduced in the market, a consumer always wants to see how popular the item becomes before she purchases it. The consumer's behavior is known as

Accepted Answer

A)  overt collusion. 
B)  limit-pricing. 
C)  a network effect. 
D)  a rational decision. 
A)  overt collusion. 
B)  limit-pricing. 
C)  a network effect. 
D)  a rational decision.

Question 18

Other things being equal, which market structure would produce the least output and the highest average product price?

Accepted Answer

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

Question 19

The joining of a firm with another to which it sells an output or from which it buys an input is known as

Accepted Answer

A)  a conglomerate merger. 
B)  a horizontal merger. 
C)  a vertical merger. 
D)  economies to scale. 
A)  a conglomerate merger. 
B)  a horizontal merger. 
C)  a vertical merger. 
D)  economies to scale.

Question 20

A dominant strategy is one that

Accepted Answer

A)  yields a position of the winner so long as the other participants act as planned. 
B)  every participant in the game will follow. 
C)  turns a negative-sum game into a positive-sum game. 
D)  always yields the highest benefit regardless of what the other players do. 
A)  yields a position of the winner so long as the other participants act as planned. 
B)  every participant in the game will follow. 
C)  turns a negative-sum game into a positive-sum game. 
D)  always yields the highest benefit regardless of what the other players do.

Exam 26: Oligopoly and Strategic Behavior

The main objective of the members of a cartel is to

How does the presence of network effects in a two-sided market affects the pricing behavior in the market?

What are the main characteristics that make it more likely for a cartel to enforce agreements among participating members?

The prisoners' dilemma is a game in which

A tit-for-tat strategy is one in which oligopolies

The network effect in the TV broadcasting industry results in

-Use the above table. If firms 3 and 4 merge, the four-firm concentration ratio will

Suppose an industry is composed of 10 firms. Each firm's share of total sales in the industry is 10 percent. If two of the firms merge, then the four-firm concentration ratio in the industry is

The main function of a platform firm is to

-The most oligopolistic industry of those presented in the above table is likely to be industry

Your teacher decides to play a game where every student must contribute a dollar. All money collected is distributed at the end of the game among the students. This is an example of a

The market power of a firm refers to its ability to

Based on the table below, the four-firm concentration ratio equals what percentage of annual sales?

Which of the following is a characteristic of oligopoly?

In game theory, the strategy that always yields the highest benefit for the player using it is the

Strategic dependence is found in

When a new product is introduced in the market, a consumer always wants to see how popular the item becomes before she purchases it. The consumer's behavior is known as

Other things being equal, which market structure would produce the least output and the highest average product price?

The joining of a firm with another to which it sells an output or from which it buys an input is known as

A dominant strategy is one that

The Nature of Economics

Scarcity and the World of Trade-Offs

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The Macroeconomy: Unemployment, Inflation, and Deflation

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