Question 1

In oligopoly, firms

Accepted Answer

A)  are able to influence price only if the oligopolist's products are standardized. 
B)  are able to influence price only if the oligopolist's products are differentiated. 
C)  by virtue of their size, are able to influence price regardless of whether or not the product is differentiated or standardized. 
D)  have no influence over price regardless of whether or not the product is differentiated or standardized. 
A)  are able to influence price only if the oligopolist's products are standardized. 
B)  are able to influence price only if the oligopolist's products are differentiated. 
C)  by virtue of their size, are able to influence price regardless of whether or not the product is differentiated or standardized. 
D)  have no influence over price regardless of whether or not the product is differentiated or standardized. C

Question 2

A ________ industry has a relatively small number of firms that dominate a market.

Accepted Answer

A)  Cournot 
B)  contestable 
C)  concentrated 
D)  monopolistically competitive 
A)  Cournot 
B)  contestable 
C)  concentrated 
D)  monopolistically competitive C

Question 3

The Five Forces Model helps illustrate the five competitive forces that determine the ________ in an industry.

Accepted Answer

A)  price and quality of output 
B)  level of R&D and price of output 
C)  level of competition and profitability 
D)  profitability and degree of product differentiation 
A)  price and quality of output 
B)  level of R&D and price of output 
C)  level of competition and profitability 
D)  profitability and degree of product differentiation C

Question 4

In the Cournot model the final level of output is ________ the output that would be produced if the industry was a monopoly, and is ________ the output that would be produced if the industry was perfectly competitive.

Accepted Answer

A)  greater than; less than 
B)  less than; greater than 
C)  equal to; less than 
D)  greater than; equal to 
A)  greater than; less than 
B)  less than; greater than 
C)  equal to; less than 
D)  greater than; equal to

Question 5

The airline industry is an example of a(n) ________ industry.

Accepted Answer

A)  perfectly competitive 
B)  monopolistic 
C)  monopolistically competitive 
D)  oligopolistic 
A)  perfectly competitive 
B)  monopolistic 
C)  monopolistically competitive 
D)  oligopolistic

Question 6

Refer to the information provided in Table 14.1 below to answer the question that follows.
Table 14.1
B's Strategy
 $\begin{array}{c}
\begin{array}{lll}
\
\hline\
\
\text { A's Strategy }\
\
\ 
\end{array}
\begin{array}{lll}
\text { Raise Price }\
\hline \text {Raise A's profit $ \$ 3,000 $}\
 \text {Price B's profit $ \$ 3,000 $}\
\
 \text {Don't A's profit $ \$ 15,000 $}\
 \text {Raise $ B^{\prime} $ s profit $ \$ 10,000 $} 
\end{array}
\begin{array}{lll}
\text { Don't Raise Price}\
\hline\text { A's profit $ \$ 10,000 $}\
\text { B's profit $ \$ 15,000 $}\
\
\text { A's profit $ \$ 5,000 $}\
\text { B's profit $ \$ 5,000 $} 
\end{array}
\end{array}$

-Refer to Table 14.1. If both firms follow a maximin strategy, the equilibrium in the game is

Accepted Answer

A)  (Raise Price, Don't Raise Price). 
B)  (Raise Price, Raise Price). 
C)  (Don't Raise Price, Raise Price). 
D)  (Don't Raise Price, Don't Raise Price). 
A)  (Raise Price, Don't Raise Price). 
B)  (Raise Price, Raise Price). 
C)  (Don't Raise Price, Raise Price). 
D)  (Don't Raise Price, Don't Raise Price).

Question 7

Explicit price- and quantity-fixing agreements are a form of tacit collusion.

Accepted Answer

A) True 
 B)False

Question 8

The ________ helps illustrate the competitive forces that determine the level of competition and profitability in an industry.

Accepted Answer

A)  Cournot Model 
B)  concentration ratio 
C)  Five Forces Model 
D)  Contestable Market Model 
A)  Cournot Model 
B)  concentration ratio 
C)  Five Forces Model 
D)  Contestable Market Model

Question 9

Entry to and exit from ________ market are easy.

Accepted Answer

A)  an oligopolistic 
B)  a monopoly 
C)  a contestable 
D)  All of the above are correct. 
A)  an oligopolistic 
B)  a monopoly 
C)  a contestable 
D)  All of the above are correct.

Question 10

Products produced in oligopoly markets can be homogeneous.

Accepted Answer

A) True 
 B)False

Question 11

Predatory pricing is

Accepted Answer

A)  often effective and a relatively inexpensive means of eliminating competition. 
B)  legal under the U.S. antitrust laws. 
C)  the practice by which a large, powerful firm attempts to drive its competitors out of the market by temporarily setting an artificially low price. 
D)  generally more effective when barriers to entry exist. 
A)  often effective and a relatively inexpensive means of eliminating competition. 
B)  legal under the U.S. antitrust laws. 
C)  the practice by which a large, powerful firm attempts to drive its competitors out of the market by temporarily setting an artificially low price. 
D)  generally more effective when barriers to entry exist.

Question 12

Refer to the information provided in Table 14.5 below to answer the question that follows.
Table 14.5
B's Strategy
 $$\begin{array} { l l l l } 
\hline & & \text { Advertise } & \text { Don't Advertise } \
\hline & & \text { A's profit } \$ 200 & \text { A's profit } \$ 400 \
& & \text { million } & \text { million } \
& & \text { B's profit } \$ 200 & \text { B's profit } \$ 100 \
 & \text { Advertise } & \text { million } & \text { million } \
\text { A's Strategy } & & & \
& & \text { A's profit } \$ 100 & \text { A's profit } \$ 150 \
& \text { Don't } & \text { million } & \text { million } \
& & \text { B'sprofit } \$ 400 & \text { B's profit } \$ 150 \
& \text { Advertise } & \text { million } & \text { million }
\end{array}$$
-Refer to Table 14.5. If both firms follow a maximin strategy, the equilibrium in the game is

Accepted Answer

A)  (Advertise, Advertise). 
B)  (Don't Advertise, Don't Advertise). 
C)  (Don't Advertise, Advertise). 
D)  (Advertise, Don't Advertise). 
A)  (Advertise, Advertise). 
B)  (Don't Advertise, Don't Advertise). 
C)  (Don't Advertise, Advertise). 
D)  (Advertise, Don't Advertise).

Question 13

Oligopoly is difficult to analyze because

Accepted Answer

A)  there is no price competition among oligopolistic firms. 
B)  of the complex interdependence that usually exists among oligopolistic firms. 
C)  price is not a decision variable for oligopolistic firms. 
D)  there is price competition among oligopolistic firms but no competition on product quality. 
A)  there is no price competition among oligopolistic firms. 
B)  of the complex interdependence that usually exists among oligopolistic firms. 
C)  price is not a decision variable for oligopolistic firms. 
D)  there is price competition among oligopolistic firms but no competition on product quality.

Question 14

An industry in which there are five firms each accounting for 20 percent of the market has an HHI of 2,000.

Accepted Answer

A) True 
 B)False

Question 15

Industry A has two firms that each control 50 percent of the market. Industry B has three firms, where one firm controls 70 percent of the market and the other two firms control 15 percent of the market each. According to the HHI, which industry is more concentrated?

Accepted Answer

A)  Industry A 
B)  Industry B 
C)  Both industries are equally concentrated. 
D)  indeterminate from the given information. 
A)  Industry A 
B)  Industry B 
C)  Both industries are equally concentrated. 
D)  indeterminate from the given information.

Question 16

An oligopoly with a dominant price leader will produce a level of output

Accepted Answer

A)  equal to what a monopolist would choose in the same industry. 
B)  between that which would prevail under competition and that which a monopolist would choose in the same industry. 
C)  between that which would prevail under competition and that which a monopolistic competitor would choose in the same industry. 
D)  that would prevail under competition. 
A)  equal to what a monopolist would choose in the same industry. 
B)  between that which would prevail under competition and that which a monopolist would choose in the same industry. 
C)  between that which would prevail under competition and that which a monopolistic competitor would choose in the same industry. 
D)  that would prevail under competition.

Question 17

When all players play their best strategy given what their competitors are doing, they are following their dominant strategy.

Accepted Answer

A) True 
 B)False

Question 18

The Celler-Kefauver Act ________ the government's authority to ________ vertical and conglomerate mergers.

Accepted Answer

A)  limited; ban 
B)  limited; allow 
C)  extended; ban 
D)  extended; allow 
A)  limited; ban 
B)  limited; allow 
C)  extended; ban 
D)  extended; allow

Question 19

The contestable market model is the oligopoly model which results in

Accepted Answer

A)  the greatest efficiency. 
B)  the greatest inefficiency. 
C)  the highest profits. 
D)  the greatest deadweight loss. 
A)  the greatest efficiency. 
B)  the greatest inefficiency. 
C)  the highest profits. 
D)  the greatest deadweight loss.

Question 20

Refer to the information provided in Figure 14.1 below to answer the question(s) that follow.   Figure 14.1
-Refer to Figure 14.1. Four firms that produce chewing gum form a cartel. The cartel faces the market demand curve given by D. At the profit-maximizing output, the profit on each pack of gum is

Accepted Answer

A)  $0.04. 
B)  $0.09. 
C)  $0.15. 
D)  $0.25. 
A)  $0.04. 
B)  $0.09. 
C)  $0.15. 
D)  $0.25.

In oligopoly, firms

A ________ industry has a relatively small number of firms that dominate a market.

The Five Forces Model helps illustrate the five competitive forces that determine the ________ in an industry.

In the Cournot model the final level of output is the output that would be produced if the industry was a monopoly, and is the output that would be produced if the industry was perfectly competitive.

The airline industry is an example of a(n) ________ industry.

Explicit price- and quantity-fixing agreements are a form of tacit collusion.

The ________ helps illustrate the competitive forces that determine the level of competition and profitability in an industry.

Entry to and exit from ________ market are easy.

Products produced in oligopoly markets can be homogeneous.

Predatory pricing is

Oligopoly is difficult to analyze because

An industry in which there are five firms each accounting for 20 percent of the market has an HHI of 2,000.

Industry A has two firms that each control 50 percent of the market. Industry B has three firms, where one firm controls 70 percent of the market and the other two firms control 15 percent of the market each. According to the HHI, which industry is more concentrated?

An oligopoly with a dominant price leader will produce a level of output

When all players play their best strategy given what their competitors are doing, they are following their dominant strategy.

The Celler-Kefauver Act the government's authority to vertical and conglomerate mergers.

The contestable market model is the oligopoly model which results in

Refer to the information provided in Figure 14.1 below to answer the question(s) that follow. Figure 14.1 -Refer to Figure 14.1. Four firms that produce chewing gum form a cartel. The cartel faces the market demand curve given by D. At the profit-maximizing output, the profit on each pack of gum is

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand, Supply, and Market Equilibrium

Demand and Supply Applications

Elasticity

Household Behavior and Consumer Choice

The Production Process: the Behavior of Profit-Maximizing Firms

Short-Run Costs and Output Decisions

Long-Run Costs and Output Decisions

Input Demand: the Labor and Land Markets

Input Demand: the Capital Market and the Investment Decision

General Equilibrium and the Efficiency of Perfect Competition

Monopoly and Antitrust Policy

Monopolistic Competition

Externalities, Public Goods, and Common Resources

Uncertainty and Asymmetric Information

Income Distribution and Poverty

Public Finance: the Economics of Taxation

International Trade, Comparative Advantage, and Protectionism

Economic Growth in Developing Economies

Critical Thinking About Research

Filters

Exam 14: Oligopoly

In oligopoly, firms

A ________ industry has a relatively small number of firms that dominate a market.

The Five Forces Model helps illustrate the five competitive forces that determine the ________ in an industry.

In the Cournot model the final level of output is ________ the output that would be produced if the industry was a monopoly, and is ________ the output that would be produced if the industry was perfectly competitive.

The airline industry is an example of a(n) ________ industry.

Explicit price- and quantity-fixing agreements are a form of tacit collusion.

The ________ helps illustrate the competitive forces that determine the level of competition and profitability in an industry.

Entry to and exit from ________ market are easy.

Products produced in oligopoly markets can be homogeneous.

Predatory pricing is

Oligopoly is difficult to analyze because

An industry in which there are five firms each accounting for 20 percent of the market has an HHI of 2,000.

Industry A has two firms that each control 50 percent of the market. Industry B has three firms, where one firm controls 70 percent of the market and the other two firms control 15 percent of the market each. According to the HHI, which industry is more concentrated?

An oligopoly with a dominant price leader will produce a level of output

When all players play their best strategy given what their competitors are doing, they are following their dominant strategy.

The Celler-Kefauver Act ________ the government's authority to ________ vertical and conglomerate mergers.

The contestable market model is the oligopoly model which results in

Refer to the information provided in Figure 14.1 below to answer the question(s) that follow. Figure 14.1 -Refer to Figure 14.1. Four firms that produce chewing gum form a cartel. The cartel faces the market demand curve given by D. At the profit-maximizing output, the profit on each pack of gum is

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand, Supply, and Market Equilibrium

Demand and Supply Applications

Elasticity

Household Behavior and Consumer Choice

The Production Process: the Behavior of Profit-Maximizing Firms

Short-Run Costs and Output Decisions

Long-Run Costs and Output Decisions

Input Demand: the Labor and Land Markets

Input Demand: the Capital Market and the Investment Decision

General Equilibrium and the Efficiency of Perfect Competition

Monopoly and Antitrust Policy

Monopolistic Competition

Externalities, Public Goods, and Common Resources

Uncertainty and Asymmetric Information

Income Distribution and Poverty

Public Finance: the Economics of Taxation

International Trade, Comparative Advantage, and Protectionism

Economic Growth in Developing Economies

Critical Thinking About Research

Filters

In the Cournot model the final level of output is the output that would be produced if the industry was a monopoly, and is the output that would be produced if the industry was perfectly competitive.

The Celler-Kefauver Act the government's authority to vertical and conglomerate mergers.