Question 1

Why would Apple subsidize developers of mobile applications that operate with its iPhone's operating system?

Accepted Answer

A)  There is a positive market feedback from the mobile applications to consumer's willingness to buy iPhones. 
B)  Apple attempts to ensure that all developers of mobile applications are profitable. 
C)  Apple thinks iPhones are too cheap for consumers. 
D)  Applies attempts to create competition among developers of its mobile applications. 
A)  There is a positive market feedback from the mobile applications to consumer's willingness to buy iPhones. 
B)  Apple attempts to ensure that all developers of mobile applications are profitable. 
C)  Apple thinks iPhones are too cheap for consumers. 
D)  Applies attempts to create competition among developers of its mobile applications.

Question 2

Suppose that an industry consists of 10 firms, and the top 4 firms have annual sales of $2.5 million, $2 million, $1.5 million, and $1 million, respectively. If the entire industry has annual sales of $10 million, the four-firm concentration ratio is

Accepted Answer

A)  85 percent. 
B)  50 percent. 
C)  10 percent. 
D)  70 percent. 
A)  85 percent. 
B)  50 percent. 
C)  10 percent. 
D)  70 percent.

Question 3

When OPEC meets to set production levels, this organization 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 4

In a 20-firm industry, two of the smallest firms merge. Yet the 4-firm concentration ratio and the 8-firm concentration ratio did not change. All things considered, we can say that the industry has

Accepted Answer

A)  moved closer to pure competition because the number of firms decreased. 
B)  moved farther away from competition because the number of firms decreased. 
C)  experienced no change in competition even though the number of firms decreased. 
D)  to be identified first; otherwise there is no way to tell. 
A)  moved closer to pure competition because the number of firms decreased. 
B)  moved farther away from competition because the number of firms decreased. 
C)  experienced no change in competition even though the number of firms decreased. 
D)  to be identified first; otherwise there is no way to tell.

Question 5

A tendency for a good to come into favor with consumers because other consumers have chosen to buy the item is

Accepted Answer

A)  price-leadership. 
B)  a negative-sum game. 
C)  positive market feedback. 
D)  negative market feedback. 
A)  price-leadership. 
B)  a negative-sum game. 
C)  positive market feedback. 
D)  negative market feedback.

Question 6

-Refer to the above figure. The figure gives the payoff matrix for two individuals who are being accused of robbing a bank together. If Bob does NOT confess, what is the best strategy for Harry?

Accepted Answer

A)  Confess. 
B)  Don't confess. 
C)  Flip a coin to decide what to do. 
D)  There is no best strategy. 
A)  Confess. 
B)  Don't confess. 
C)  Flip a coin to decide what to do. 
D)  There is no best strategy.

Question 7

-Refer to the above table. The four-firm concentration ratio is

Accepted Answer

A)  86.5 percent. 
B)  33.3 percent. 
C)  13.3 percent. 
D)  11.6 percent. 
A)  86.5 percent. 
B)  33.3 percent. 
C)  13.3 percent. 
D)  11.6 percent.

Question 8

The market structure of oligopoly is 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 a differentiated product. 
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 a differentiated product. 
D)  there are many producers of a homogeneous product.

Question 9

Refer to the above payoff matrix for the profits (in $ millions) of two firms (X and Y) making a decision to advertise or not. Which of the following is the outcome of the dominant strategy without cooperation?

Accepted Answer

A)  Both firm X and firm Y choose not to advertise. 
B)  There is no dominant strategy in this scenario. 
C)  Firm X chooses to advertise while firm Y chooses not to advertise. 
D)  Firm X chooses not to advertise while firm Y chooses to advertise. 
A)  Both firm X and firm Y choose not to advertise. 
B)  There is no dominant strategy in this scenario. 
C)  Firm X chooses to advertise while firm Y chooses not to advertise. 
D)  Firm X chooses not to advertise while firm Y chooses to advertise.

Question 10

-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 of the dominant strategy without 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 11

If three firms of similar sizes join to form a cartel, then it is most likely that

Accepted Answer

A)  they will charge a common, higher market price. 
B)  they will collectively produce more than before. 
C)  all three firms will stop producing. 
D)  all three firms will earn zero profits. 
A)  they will charge a common, higher market price. 
B)  they will collectively produce more than before. 
C)  all three firms will stop producing. 
D)  all three firms will earn zero profits.

Question 12

The goal of a cartel is to

Accepted Answer

A)  increase competition among members. 
B)  maximize industry profits. 
C)  increase industry supply. 
D)  none of the above. 
A)  increase competition among members. 
B)  maximize industry profits. 
C)  increase industry supply. 
D)  none of the above.

Question 13

Frank purchases snickle-dees only because his friends do. This is a

Accepted Answer

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

Question 14

Which of the following is NOT true of an oligopoly?

Accepted Answer

A)  They advertise their product. 
B)  The firms recognize their interdependence. 
C)  A few firm account for a large portion of the total output. 
D)  Firms are price takers. 
A)  They advertise their product. 
B)  The firms recognize their interdependence. 
C)  A few firm account for a large portion of the total output. 
D)  Firms are price takers.

Question 15

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

Accepted Answer

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

Question 16

For years, your neighbor insisted she had no desire to own a computer. Recently, however, she purchased one and says she did so because all her relatives have computers and she wants to exchange e-mail with them. Your neighbor's behavior is an example of

Accepted Answer

A)  a switching cost. 
B)  the impact of negative market feedback. 
C)  limited-pricing behavior. 
D)  a network effect. 
A)  a switching cost. 
B)  the impact of negative market feedback. 
C)  limited-pricing behavior. 
D)  a network effect.

Question 17

The outputs of an oligopolistic industry

Accepted Answer

A)  can be homogeneous or differentiated. 
B)  must be at high levels so that price exceeds average total cost. 
C)  always have excise taxes imposed on them. 
D)  have no substitutes on the market. 
A)  can be homogeneous or differentiated. 
B)  must be at high levels so that price exceeds average total cost. 
C)  always have excise taxes imposed on them. 
D)  have no substitutes on the market.

Question 18

Negative market feedback refers to a tendency for

Accepted Answer

A)  one or two firms in an oligopolistic industry to respond to price decreases by initiating efforts to engage in price leadership. 
B)  a particular product to fall out of favor with additional consumers because other consumers have stopped purchasing the product. 
C)  the dominant firm in an oligopolistic industry to react to competing firms' price increases by decreasing the price of its own product. 
D)  price wars to break out in oligopolistic industries in which firms produce products possessing characteristics that make them prone to network effects. 
A)  one or two firms in an oligopolistic industry to respond to price decreases by initiating efforts to engage in price leadership. 
B)  a particular product to fall out of favor with additional consumers because other consumers have stopped purchasing the product. 
C)  the dominant firm in an oligopolistic industry to react to competing firms' price increases by decreasing the price of its own product. 
D)  price wars to break out in oligopolistic industries in which firms produce products possessing characteristics that make them prone to network effects.

Question 19

Suppose an industry consists of 20 firms. Each firm's share of total sales in the industry is 5 percent. If two of the firms merge, then the four-firm concentration ratio in the industry will

Accepted Answer

A)  remain unchanged. 
B)  decrease as there are fewer firms in the industry. 
C)  increase. 
D)  depend on the market condition faced by the industry. 
A)  remain unchanged. 
B)  decrease as there are fewer firms in the industry. 
C)  increase. 
D)  depend on the market condition faced by the industry.

Question 20

Collusion always involves firms engaging in a

Accepted Answer

A)  vertical merger. 
B)  horizontal merger. 
C)  cooperative game. 
D)  noncooperative game. 
A)  vertical merger. 
B)  horizontal merger. 
C)  cooperative game. 
D)  noncooperative game.

Exam 26: Oligopoly and Strategic Behavior

Why would Apple subsidize developers of mobile applications that operate with its iPhone's operating system?

Suppose that an industry consists of 10 firms, and the top 4 firms have annual sales of $2.5 million, $2 million, $1.5 million, and $1 million, respectively. If the entire industry has annual sales of $10 million, the four-firm concentration ratio is

When OPEC meets to set production levels, this organization is playing a

In a 20-firm industry, two of the smallest firms merge. Yet the 4-firm concentration ratio and the 8-firm concentration ratio did not change. All things considered, we can say that the industry has

A tendency for a good to come into favor with consumers because other consumers have chosen to buy the item is

-Refer to the above figure. The figure gives the payoff matrix for two individuals who are being accused of robbing a bank together. If Bob does NOT confess, what is the best strategy for Harry?

-Refer to the above table. The four-firm concentration ratio is

The market structure of oligopoly is when

Refer to the above payoff matrix for the profits (in $ millions) of two firms (X and Y) making a decision to advertise or not. Which of the following is the outcome of the dominant strategy without cooperation?

-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 of the dominant strategy without cooperation?

If three firms of similar sizes join to form a cartel, then it is most likely that

The goal of a cartel is to

Frank purchases snickle-dees only because his friends do. This is a

Which of the following is NOT true of an oligopoly?

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

For years, your neighbor insisted she had no desire to own a computer. Recently, however, she purchased one and says she did so because all her relatives have computers and she wants to exchange e-mail with them. Your neighbor's behavior is an example of

The outputs of an oligopolistic industry

Negative market feedback refers to a tendency for

Suppose an industry consists of 20 firms. Each firm's share of total sales in the industry is 5 percent. If two of the firms merge, then the four-firm concentration ratio in the industry will

Collusion always involves firms engaging in a

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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