Question 1

Suppose firms in a collusive oligopoly decide to establish their prices at a level that discourages new rivals from entering the industry.This is called

Accepted Answer

A)  mutual interdependence.
B)  pricing the demand curve.
C)  limit pricing.
D)  price leadership.E) A) and B)
F) B) and C)

Question 2

As it relates to oligopoly, game theory focuses on the strategic behavior of rival firms.

Accepted Answer

A) True 
 B)False

Question 3

The kinked-demand curve model shows that oligopolistic firms tend to change their prices frequently.

Accepted Answer

A) True 
 B)False

Question 4

Mergers of firms in an industry tend to

Accepted Answer

A)  transform monopolistic competition into pure competition.
B)  transform monopolistic competition into oligopoly.
C)  reduce the Herfindahl index for the industry.
D)  break up an oligopoly.E) A) and C)
F) A) and D) B

Question 5

(Last Word)  Microsoft

Accepted Answer

A)  dominates the primary Internet markets.
B)  is attempting to gain market share in the Internet, smartphone, and tablet markets in an effort to offset a shrinking PC market.
C)  has colluded with Amazon and Google to fix online advertising prices.
D)  holds a near-monopoly in the Internet search market.E) A) and C)
F) All of the above

Question 6

Some observers assert that oligopolies are less socially desirable than pure monopolies because

Accepted Answer

A)  monopolies are often government-regulated, whereas collusion among oligopolies may lead to similar results as a monopoly yet, having several firms, may give the illusion of competition.
B)  monopolies have unique products, whereas product differentiation in oligopolies would lead to economic inefficiencies.
C)  mutual interdependence among firms in an oligopoly would lead to more inefficiencies than in the case of a monopoly.
D)  oligopolies tend to engage in advertising more so than monopolies.E) A) and D)
F) None of the above A

Question 7

Secret conspiracies to fix prices are examples of

Accepted Answer

A)  cartels.
B)  price leadership.
C)  overt collusion.
D)  covert collusion.E) A) and C)
F) All of the above D

Question 8

A two-player or firm game in which one firm's gain must equal the other firm's loss is called a

Accepted Answer

A)  positive-sum game.
B)  zero-sum game.
C)  negative-sum game.
D)  one-time game.E) None of the above
F) B) and D)

Question 9

Which one of the following is not illustrated by the so-called Prisoner's Dilemma?

Accepted Answer

A)  Each player in the game ends up with results that depend on the other player's action.
B)  It does not pay for the players to collude with each other.
C)  Both players would be better off, if they could only agree on which action to take.
D)  The results for each player in the game are uncertain, if they are not able to communicate.E) None of the above
F) A) and B)

Question 10

The terminal nodes in an extensive form representation

Accepted Answer

A)  are used solely to show payoffs that represent a Nash equilibrium.
B)  represent the starting points for a sequential game.
C)  indicate the strategies available to the players of a game.
D)  indicate the possible outcomes of a game.E) None of the above
F) B) and C)

Question 11

A low concentration ratio means that

Accepted Answer

A)  there is a low probability of entering the industry.
B)  there is a low probability of success in the industry.
C)  each firm accounts for a small market share of the industry.
D)  each firm accounts for a large market share of the industry.E) A) and D)
F) B) and D)

Question 12

The kinked-demand curve model of oligopoly

Accepted Answer

A)  assumes a firm's rivals will ignore a price cut but match a price increase.
B)  embodies the possibility that changes in unit costs will have no effect on equilibrium price and output.
C)  assumes a firm's rivals will match any price change it may initiate.
D)  assumes a firm's rivals will ignore any price change it may initiate.E) A) and B)
F) A) and C)

Question 13

Game-theory models analyze the interdependence of oligopolists' strategies.

Accepted Answer

A) True 
 B)False

Question 14

Economic efficiency can suffer as a result of advertising, when it

Accepted Answer

A)  enhances competition among oligopolistic firms.
B)  facilitates the introduction and success of new products to replace old one.
C)  increases sales of firms and enhances their monopoly power.
D)  increases brand loyalty, reducing buyers' elasticity of demand.Difficulty: 02 MediumE) C) and D)
F) None of the above

Question 15

If an oligopoly is faced with a kinked-demand curve that is relatively elastic above, and relatively inelastic below, the going price, then it will

Accepted Answer

A)  increase total revenue by increasing price but lower total revenue by decreasing price.
B)  decrease total revenue by either increasing or decreasing price.
C)  increase total revenue by either increasing or decreasing price.
D)  increase total revenue by decreasing price but lower total revenue by increasing price.E) A) and C)
F) All of the above

Question 16

Which of the following is an illustration of differentiated oligopoly?

Accepted Answer

A)  the aluminum industry
B)  the steel industry
C)  the soft drink industry
D)  retail stores in large citiesE) B) and C)
F) None of the above

Question 17

Concentration ratios measure the

Accepted Answer

A)  geographic distribution of the largest corporations in each industry.
B)  degree to which a particular firm accounts for sales in a given metropolitan area.
C)  percentage of total industry sales accounted for by the largest firms in the industry.
D)  dependence of an industry on its resource suppliers.E) A) and B)
F) A) and C)

Question 18

Which of the following is the best example of oligopoly?

Accepted Answer

A)  women's dress manufacturing
B)  automobile manufacturing
C)  restaurants
D)  cotton farmingE) B) and C)
F) None of the above

Question 19

If the four-firm concentration ratio in an oligopolistic five-firm industry is 80 percent, and each firm has an equal percentage of sales, the Herfindahl index is

Accepted Answer

A)  8,000.
B)  2,000.
C)  2,500.
D)  1,600.E) B) and D)
F) B) and C)

Question 20

Concentration ratios may be inaccurate indicators of the degree of monopoly power in an industry because

Accepted Answer

A)  they include interindustry competition.
B)  foreign competition is not considered.
C)  they are only calculated for local and regional markets.
D)  they do not distinguish between normal and economic profit.E) None of the above
F) A) and D)

Exam 14: Oligopoly and Strategic Behavior

Suppose firms in a collusive oligopoly decide to establish their prices at a level that discourages new rivals from entering the industry.This is called

Correct AnswerverifiedShow Answer

As it relates to oligopoly, game theory focuses on the strategic behavior of rival firms.

Correct AnswerverifiedShow Answer

The kinked-demand curve model shows that oligopolistic firms tend to change their prices frequently.

Correct AnswerverifiedShow Answer

Mergers of firms in an industry tend to

Correct AnswerverifiedB

(Last Word) Microsoft

Correct AnswerverifiedShow Answer

Some observers assert that oligopolies are less socially desirable than pure monopolies because

Correct AnswerverifiedA

Secret conspiracies to fix prices are examples of

Correct AnswerverifiedD

A two-player or firm game in which one firm's gain must equal the other firm's loss is called a

Correct AnswerverifiedShow Answer

Which one of the following is not illustrated by the so-called Prisoner's Dilemma?

Correct AnswerverifiedShow Answer

The terminal nodes in an extensive form representation

Correct AnswerverifiedShow Answer

A low concentration ratio means that

Correct AnswerverifiedShow Answer

The kinked-demand curve model of oligopoly

Correct AnswerverifiedShow Answer

Game-theory models analyze the interdependence of oligopolists' strategies.

Correct AnswerverifiedShow Answer

Economic efficiency can suffer as a result of advertising, when it

Correct AnswerverifiedShow Answer

If an oligopoly is faced with a kinked-demand curve that is relatively elastic above, and relatively inelastic below, the going price, then it will

Correct AnswerverifiedShow Answer

Which of the following is an illustration of differentiated oligopoly?

Correct AnswerverifiedShow Answer

Concentration ratios measure the

Correct AnswerverifiedShow Answer

Which of the following is the best example of oligopoly?

Correct AnswerverifiedShow Answer

If the four-firm concentration ratio in an oligopolistic five-firm industry is 80 percent, and each firm has an equal percentage of sales, the Herfindahl index is

Correct AnswerverifiedShow Answer

Concentration ratios may be inaccurate indicators of the degree of monopoly power in an industry because

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
B

Correct Answer
verified

Correct Answer
verified
A

Correct Answer
verified
D

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified