Question 1

Suppose a cereal firm, Nabisco, merges with both a wheat firm and milling firm. This is an example of a

Accepted Answer

A)  vertical merger. 
B)  horizontal merger. 
C)  parallel merger. 
D)  diagonal merger. 
A)  vertical merger. 
B)  horizontal merger. 
C)  parallel merger. 
D)  diagonal merger.

Question 2

Which of the following is likely among the most concentrated industries in the United States?

Accepted Answer

A)  printing and publishing 
B)  breakfast cereals 
C)  primary aluminum 
D)  computers 
A)  printing and publishing 
B)  breakfast cereals 
C)  primary aluminum 
D)  computers

Question 3

Which of the following combinations would constitute a vertical merger?

Accepted Answer

A)  General Motors and Bridgestone Tire Company 
B)  General Motors and Ford Motor Company 
C)  Dell and Apple computer companies 
D)  Yahoo! and Google Internet search engine companies 
A)  General Motors and Bridgestone Tire Company 
B)  General Motors and Ford Motor Company 
C)  Dell and Apple computer companies 
D)  Yahoo! and Google Internet search engine companies

Question 4

In a zero-sum game

Accepted Answer

A)  both players are better off at the end of the game. 
B)  both players are worse off at the end of the game. 
C)  one player's losses are exactly offset by another player's gains. 
D)  both players collude to make both of them better off. 
A)  both players are better off at the end of the game. 
B)  both players are worse off at the end of the game. 
C)  one player's losses are exactly offset by another player's gains. 
D)  both players collude to make both of them better off.

Question 5

The most common reason for the existence of oligopolies is

Accepted Answer

A)  ease of entry. 
B)  economies of scale. 
C)  product homogeneity 
D)  advertising. 
A)  ease of entry. 
B)  economies of scale. 
C)  product homogeneity 
D)  advertising.

Question 6

Credit card companies that operate as intermediary firms between credit card holders and business vendors are best described as

Accepted Answer

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

Question 7

Which of the following has the highest Herfindahl-Hirschman index?

Accepted Answer

A)  monopoly 
B)  monopolistic competition 
C)  oligopoly 
D)  any of the above, depending on the size of firm sales 
A)  monopoly 
B)  monopolistic competition 
C)  oligopoly 
D)  any of the above, depending on the size of firm sales

Question 8

What is meant by the concentration of an industry? How is concentration measured? What are likely causes of high concentration?

Accepted Answer

Industry concentration means that a rela

Question 9

When a cartel breaks down and its members start cheating, the behavior in the industry becomes a

Accepted Answer

A)  noncooperative game. 
B)  zero-sum game. 
C)  high stakes game. 
D)  positive sum game. 
A)  noncooperative game. 
B)  zero-sum game. 
C)  high stakes game. 
D)  positive sum game.

Question 10

A concentration ratio measures

Accepted Answer

A)  the average size of the firms in the industry. 
B)  the sales of the three largest firms in the industry minus the costs of these three largest firms in the industry. 
C)  the share of industry sales accounted for by the largest firms in the industry. 
D)  the excess capacity found in a particular oligopolistic industry. 
A)  the average size of the firms in the industry. 
B)  the sales of the three largest firms in the industry minus the costs of these three largest firms in the industry. 
C)  the share of industry sales accounted for by the largest firms in the industry. 
D)  the excess capacity found in a particular oligopolistic industry.

Question 11

A game in which all the players are worse off at the end of the game is a

Accepted Answer

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

Question 12

In a two-sided market with network effects, the platform will most likely

Accepted Answer

A)  set the same prices for the two sides of the market. 
B)  set different prices for the two sides of the market. 
C)  set a price of zero for both sides of the market. 
D)  combine the two groups of the market before setting its price. 
A)  set the same prices for the two sides of the market. 
B)  set different prices for the two sides of the market. 
C)  set a price of zero for both sides of the market. 
D)  combine the two groups of the market before setting its price.

Question 13

A cartel most likely forms in

Accepted Answer

A)  an oligopolistic market. 
B)  a perfectly competitive market. 
C)  a monopolistically competitive market. 
D)  a heavily regulated industry. 
A)  an oligopolistic market. 
B)  a perfectly competitive market. 
C)  a monopolistically competitive market. 
D)  a heavily regulated industry.

Question 14

There are 30 firms in an industry. What happens to that industry's four-firm concentration when the third- and fourth-largest firms merge?

Accepted Answer

A)  Nothing, because their shares are already included in the concentration calculation. 
B)  The industry's concentration ratio will fall. 
C)  The industry's concentration ratio will increase. 
D)  It is impossible to know without more information. 
A)  Nothing, because their shares are already included in the concentration calculation. 
B)  The industry's concentration ratio will fall. 
C)  The industry's concentration ratio will increase. 
D)  It is impossible to know without more information.

Question 15

Cheating in a cartel is more likely to occur if the industry

Accepted Answer

A)  has a large number of firms. 
B)  has homogeneous products. 
C)  has easily observable prices. 
D)  has little ability to affect market prices. 
A)  has a large number of firms. 
B)  has homogeneous products. 
C)  has easily observable prices. 
D)  has little ability to affect market prices.

Question 16

An association of producers in an industry that agree to set common prices and output quotas to prevent competition is

Accepted Answer

A)  a tariff. 
B)  a patent. 
C)  economies of scale. 
D)  a cartel. 
A)  a tariff. 
B)  a patent. 
C)  economies of scale. 
D)  a cartel.

Question 17

Refer to the above payoff matrix (in years of sentence) for two people (A and B) charged for robbery. Which of the following is the outcome of the dominant strategy without cooperation?

Accepted Answer

A)  Both A and B confess. 
B)  Both A and B do not confess. 
C)  A confesses while B does not confess. 
D)  A does not confess while B confesses. 
A)  Both A and B confess. 
B)  Both A and B do not confess. 
C)  A confesses while B does not confess. 
D)  A does not confess while B confesses.

Question 18

When decisions are guided strictly by short-run gains, this is known as

Accepted Answer

A)  opportunistic behavior. 
B)  the prisoners' dilemma. 
C)  tit-for-tat strategy. 
D)  a positive-sum game. 
A)  opportunistic behavior. 
B)  the prisoners' dilemma. 
C)  tit-for-tat strategy. 
D)  a positive-sum game.

Question 19

A game in which all the players are better off at the end of the game is a

Accepted Answer

A)  tit-for-tat game. 
B)  dominant strategy game. 
C)  positive-sum game. 
D)  noncooperative game. 
A)  tit-for-tat game. 
B)  dominant strategy game. 
C)  positive-sum game. 
D)  noncooperative game.

Question 20

The existence of economies of scale is one reason oligopolies exist because

Accepted Answer

A)  a firm is able to increase price leading to increased profits. 
B)  the marginal cost decreases as output increases. 
C)  of strategic dependence. 
D)  as output increases average total cost decreases leading to large-scale firms. 
A)  a firm is able to increase price leading to increased profits. 
B)  the marginal cost decreases as output increases. 
C)  of strategic dependence. 
D)  as output increases average total cost decreases leading to large-scale firms.

Exam 26: Oligopoly and Strategic Behavior

Suppose a cereal firm, Nabisco, merges with both a wheat firm and milling firm. This is an example of a

Which of the following is likely among the most concentrated industries in the United States?

Which of the following combinations would constitute a vertical merger?

In a zero-sum game

The most common reason for the existence of oligopolies is

Credit card companies that operate as intermediary firms between credit card holders and business vendors are best described as

Which of the following has the highest Herfindahl-Hirschman index?

What is meant by the concentration of an industry? How is concentration measured? What are likely causes of high concentration?

When a cartel breaks down and its members start cheating, the behavior in the industry becomes a

A concentration ratio measures

A game in which all the players are worse off at the end of the game is a

In a two-sided market with network effects, the platform will most likely

A cartel most likely forms in

There are 30 firms in an industry. What happens to that industry's four-firm concentration when the third- and fourth-largest firms merge?

Cheating in a cartel is more likely to occur if the industry

An association of producers in an industry that agree to set common prices and output quotas to prevent competition is

Refer to the above payoff matrix (in years of sentence) for two people (A and B) charged for robbery. Which of the following is the outcome of the dominant strategy without cooperation?

When decisions are guided strictly by short-run gains, this is known as

A game in which all the players are better off at the end of the game is a

The existence of economies of scale is one reason oligopolies exist because

The Nature of Economics

Scarcity and the World of Trade-Offs

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Public Spending and Public Choice

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The Macroeconomy: Unemployment, Inflation, and Deflation

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