Question 1

In Michael Porter's five competitive forces model,what do the competitive forces determine?

Accepted Answer

The five competitive

Question 2

Collusion occurs when

Accepted Answer

A) a firm chooses a level of output to maximize its own profit. 
B) two firms' price and output decisions come into conflict. 
C) there is an agreement among firms to charge the same price or otherwise not to compete. 
D) firms refuse to follow their price leaders. 
A) a firm chooses a level of output to maximize its own profit. 
B) two firms' price and output decisions come into conflict. 
C) there is an agreement among firms to charge the same price or otherwise not to compete. 
D) firms refuse to follow their price leaders.

Question 3

If the painting firms in a city sign a contract outlining a pricing plan,they are involved in

Accepted Answer

A) price competition. 
B) a legal form of business contract in the United States. 
C) collusion. 
D) price regulation. 
A) price competition. 
B) a legal form of business contract in the United States. 
C) collusion. 
D) price regulation.

Question 4

When an oligopoly market is in Nash equilibrium

Accepted Answer

A) firms have colluded to set their prices. 
B) firms will not behave as profit maximizers. 
C) a firm will not take into account the strategies of its rivals. 
D) a firm will choose its best pricing strategy,given the strategies that it observes other firms have taken. 
A) firms have colluded to set their prices. 
B) firms will not behave as profit maximizers. 
C) a firm will not take into account the strategies of its rivals. 
D) a firm will choose its best pricing strategy,given the strategies that it observes other firms have taken.

Question 5

Which of the following statements about the prisoner's dilemma is false?

Accepted Answer

A) The prisoner's dilemma in a one-shot game leads to a noncooperative,equilibrium outcome. 
B) The prisoner's dilemma in repeated games could lead to cooperation especially if there is some enforcement mechanism that punishes a player who does not cooperate. 
C) Players caught in a prisoner's dilemma act in selfish ways that lead to an equilibrium that is sub-optimal. 
D) The prisoner's dilemma game can never reach a Nash equilibrium as long as players do not cooperate. 
A) The prisoner's dilemma in a one-shot game leads to a noncooperative,equilibrium outcome. 
B) The prisoner's dilemma in repeated games could lead to cooperation especially if there is some enforcement mechanism that punishes a player who does not cooperate. 
C) Players caught in a prisoner's dilemma act in selfish ways that lead to an equilibrium that is sub-optimal. 
D) The prisoner's dilemma game can never reach a Nash equilibrium as long as players do not cooperate.

Question 6

Which industry has the highest four-firm concentration ratio?

Accepted Answer

A) discount department stores 
B) college bookstores 
C) retail gasoline stations 
D) cigarettes 
A) discount department stores 
B) college bookstores 
C) retail gasoline stations 
D) cigarettes

Question 7

A member of a cartel earns more profits by producing more than its quota and selling at a price higher than the cartel's price.

Accepted Answer

A) True 
 B)False

Question 8

Godrickporter and Star Connections are the only two airport shuttle and limousine rental service companies in the mid-sized town of Godrick Hollow.Each firm must decide on whether to increase its advertising spending to compete for customers.Table 14-1 shows the payoff matrix for this advertising game.
-Refer to Table 14-1.Is there a dominant strategy for Godrickporter and if so,what is it?

Accepted Answer

A) No,its outcome depends on what Star Connections does. 
B) Yes,Godrickporter should increase its advertising budget. 
C) Yes,Godrickporter should not change its advertising budget. 
D) Yes,Godrickporter's dominant strategy is to collude with Star Connections. 
A) No,its outcome depends on what Star Connections does. 
B) Yes,Godrickporter should increase its advertising budget. 
C) Yes,Godrickporter should not change its advertising budget. 
D) Yes,Godrickporter's dominant strategy is to collude with Star Connections.

Question 9

Firms in an oligopoly are said to be interdependent.What does this mean?

Accepted Answer

Interdependence among firms means that t

Question 10

On January 2,1971,all cigarette advertising was banned on U.S.television and radio stations.Did this ban likely increase or decrease the profits of cigarette companies in 1971? Briefly explain.

Accepted Answer

If advertising is a prisoners'

Question 11

What is meant by the term "government-imposed barrier to entry"? Why would a government be willing to impose barriers to entering an industry?

Accepted Answer

Government-imposed barriers to entry are

Question 12

Sequential games are often used to analyze which two types of business strategies?

Accepted Answer

A) whether to invest in research and development and whether to offer employees an early retirement package 
B) deciding to merge with another firm and deciding how much to spend on an advertising campaign 
C) deciding to end production of an unprofitable product and deciding to shut down temporarily 
D) deterring entry by another firm and bargaining between firms 
A) whether to invest in research and development and whether to offer employees an early retirement package 
B) deciding to merge with another firm and deciding how much to spend on an advertising campaign 
C) deciding to end production of an unprofitable product and deciding to shut down temporarily 
D) deterring entry by another firm and bargaining between firms

Question 13

Two rival oligopolists in the athletic supplements industry,the Power Fuel Company and the Brawny Juice Company,have to decide on their pricing strategy.Each can choose either a high price or a low price.Table 14-8 shows the payoff matrix with the profits that each firm can expect to earn depending on the pricing strategy it adopts.
-Refer to Table 14-8.Which of the following is true?

Accepted Answer

A) Power Fuel's dominant strategy is to select a low price. 
B) Brawny Juice's dominant strategy is to select a high price. 
C) Power Fuel does not have a dominant strategy. 
D) Brawny Juice does not have a dominant strategy. 
A) Power Fuel's dominant strategy is to select a low price. 
B) Brawny Juice's dominant strategy is to select a high price. 
C) Power Fuel does not have a dominant strategy. 
D) Brawny Juice does not have a dominant strategy.

Question 14

Which of the following is important in determining the extent of competition in an industry?

Accepted Answer

A) the minimum level of short-run average total costs of production 
B) the minimum efficient scale of production relative to market demand 
C) whether or not the industry product is differentiated or standardized 
D) the level of market demand for the industry's product 
A) the minimum level of short-run average total costs of production 
B) the minimum efficient scale of production relative to market demand 
C) whether or not the industry product is differentiated or standardized 
D) the level of market demand for the industry's product

Question 15

Which of the following is the best example of an oligopolistic industry?

Accepted Answer

A) the beef market 
B) the pharmaceutical industry 
C) public education 
D) the beauty products industry 
A) the beef market 
B) the pharmaceutical industry 
C) public education 
D) the beauty products industry

Question 16

How does the demand curve for an oligopoly firm differ from the demand curves for firms in competitive market structures?

Accepted Answer

The demand curve facing a perfectly comp

Question 17

Occupational licensing is an example of an entry barrier that improves a country's standard of living.

Accepted Answer

A) True 
 B)False

Question 18

Assume that Lexus (L)is the first automobile company to produce a luxury class hybrid automobile and is the only such company for the past four years.BMW is now considering producing its own luxury hybrid automobile and Lexus must decide whether or not to lower the price of its luxury hybrid to counter BMW's entry into the luxury hybrid niche.
-Refer to Figure 14-1.If Lexus lowers its price,will this deter BMW from entering the market?

Accepted Answer

A) Yes,because BMW stands to lose $100 million if it competes with Lexus. 
B) Yes,because BMW will make a smaller profit than Lexus if it chooses to compete. 
C) No,because BMW will still make a profit of $120 if it competes with Lexus. 
D) No,because BMW will be able to break Lexus' first-mover advantage. 
A) Yes,because BMW stands to lose $100 million if it competes with Lexus. 
B) Yes,because BMW will make a smaller profit than Lexus if it chooses to compete. 
C) No,because BMW will still make a profit of $120 if it competes with Lexus. 
D) No,because BMW will be able to break Lexus' first-mover advantage.

Question 19

What is a subgame?

Accepted Answer

A) It is one that begins at any node of the tree,including the game itself. 
B) It is one that begins at any decision node of the tree except the first decision node. 
C) It is one that starts at the final decision node of the tree. 
D) It is a simultaneous game embedded in a sequential game. 
A) It is one that begins at any node of the tree,including the game itself. 
B) It is one that begins at any decision node of the tree except the first decision node. 
C) It is one that starts at the final decision node of the tree. 
D) It is a simultaneous game embedded in a sequential game.

Question 20

In a sequential game,one firm will act first and then other firms will respond.

Accepted Answer

A) True 
 B)False

Exam 14: Oligopoly: Firms in Less Competitive Markets

In Michael Porter's five competitive forces model,what do the competitive forces determine?

Collusion occurs when

If the painting firms in a city sign a contract outlining a pricing plan,they are involved in

When an oligopoly market is in Nash equilibrium

Which of the following statements about the prisoner's dilemma is false?

Which industry has the highest four-firm concentration ratio?

A member of a cartel earns more profits by producing more than its quota and selling at a price higher than the cartel's price.

Firms in an oligopoly are said to be interdependent.What does this mean?

On January 2,1971,all cigarette advertising was banned on U.S.television and radio stations.Did this ban likely increase or decrease the profits of cigarette companies in 1971? Briefly explain.

What is meant by the term "government-imposed barrier to entry"? Why would a government be willing to impose barriers to entering an industry?

Sequential games are often used to analyze which two types of business strategies?

Which of the following is important in determining the extent of competition in an industry?

Which of the following is the best example of an oligopolistic industry?

How does the demand curve for an oligopoly firm differ from the demand curves for firms in competitive market structures?

Occupational licensing is an example of an entry barrier that improves a country's standard of living.

What is a subgame?

In a sequential game,one firm will act first and then other firms will respond.

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

Externalities, environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms,the Stock Market,and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology,production,and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, taxes, and the Distribution of Income

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money,banks,and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

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