Question 1

Which of the following nations is not a member of the OPEC oil cartel?

Accepted Answer

A) Iraq 
B) Iran 
C) Venezuela 
D) Norway 
A) Iraq 
B) Iran 
C) Venezuela 
D) Norway D

Question 2

In which set of market models are there the most significant barriers to entry?

Accepted Answer

A) monopolistic competition and pure competition 
B) monopolistic competition and pure monopoly 
C) oligopoly and monopolistic competition 
D) oligopoly and pure monopoly 
A) monopolistic competition and pure competition 
B) monopolistic competition and pure monopoly 
C) oligopoly and monopolistic competition 
D) oligopoly and pure monopoly D

Question 3

In repeated games, players may be willing to accept lower payoffs in the short run in exchange for greater net payoffs over the long run.

Accepted Answer

A) True 
 B)False  True

Question 4

Refer to the payoff matrix. Bob's Burgers and Sam's Sandwiches are competing restaurants in a small town. Both are considering adding pizza to their line of products. If this is a sequential game but we don't know who moves first, what can we say about the final outcome?

Accepted Answer

A) There is no Nash equilibrium attainable for this game. 
B) Cell A represents the only Nash equilibrium possible for this game. 
C) Cell D represents the only Nash equilibrium possible for this game. 
D) Cells B and C both represent possible Nash equilibrium outcomes for this game. 
A) There is no Nash equilibrium attainable for this game. 
B) Cell A represents the only Nash equilibrium possible for this game. 
C) Cell D represents the only Nash equilibrium possible for this game. 
D) Cells B and C both represent possible Nash equilibrium outcomes for this game.

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

In a sequential game with two firms, the first mover into a new market

Accepted Answer

A) is guaranteed positive economic profits. 
B) is assured of blocking any potential second mover from entering the market. 
C) runs the risk that the untested new market will not provide enough customers. 
D) will likely set a high price to reap greater profits until the second mover enters. 
A) is guaranteed positive economic profits. 
B) is assured of blocking any potential second mover from entering the market. 
C) runs the risk that the untested new market will not provide enough customers. 
D) will likely set a high price to reap greater profits until the second mover enters.

Question 7

A game where players choose their strategies at the same time is called a

Accepted Answer

A) positive-sum game. 
B) zero-sum game. 
C) simultaneous game. 
D) one-time game. 
A) positive-sum game. 
B) zero-sum game. 
C) simultaneous game. 
D) one-time game.

Question 8

The so-called first-mover advantage may be observed in

Accepted Answer

A) repeated games. 
B) multi-period games. 
C) sequential games. 
D) credible games. 
A) repeated games. 
B) multi-period games. 
C) sequential games. 
D) credible games.

Question 9

Answer the question based on the payoff matrices for a repeated game involving two firms that are considering introducing new products to the market. The numbers indicate the profit from following either a strategy to introduce a new product or a strategy to not introduce a new product.First game.   Second game.   In the first game, if firm B doesn't introduce a new product and firm A does, then firm A would be better off if

Accepted Answer

A) both firms introduce new products in game 2. 
B) neither firm introduces new products in game 2. 
C) firm B reciprocates in game 2. 
D) game 2 reaches a Nash equilibrium. 
A) both firms introduce new products in game 2. 
B) neither firm introduces new products in game 2. 
C) firm B reciprocates in game 2. 
D) game 2 reaches a Nash equilibrium.

Question 10

When firms in an industry reach an agreement to fix prices, divide up market share, or otherwise restrict competition, they are practicing the strategy of

Accepted Answer

A) interindustry competition. 
B) limit pricing. 
C) price leadership. 
D) collusion. 
A) interindustry competition. 
B) limit pricing. 
C) price leadership. 
D) collusion.

Question 11

In an oligopoly, producers' agreements to restrict output tend to be unstable because each firm has an incentive to

Accepted Answer

A) produce more than its output quota. 
B) lower both its price and its output. 
C) raise its price above the cooperative price. 
D) establish competitive price and output levels. 
A) produce more than its output quota. 
B) lower both its price and its output. 
C) raise its price above the cooperative price. 
D) establish competitive price and output levels.

Question 12

In which of the following market models do demand and marginal revenue not diverge?

Accepted Answer

A) pure competition 
B) monopolistic competition 
C) pure monopoly 
D) oligopoly 
A) pure competition 
B) monopolistic competition 
C) pure monopoly 
D) oligopoly

Question 13

Use your basic knowledge and your understanding of market structures to answer this question. Which of the following companies most closely approximates a homogeneous oligopolist in a highly concentrated industry?

Accepted Answer

A) Kellogg's Cereals 
B) Pittsburgh Plate Glass 
C) Ford Motor Company 
D) Starbucks Coffee 
A) Kellogg's Cereals 
B) Pittsburgh Plate Glass 
C) Ford Motor Company 
D) Starbucks Coffee

Question 14

A positive effect of advertising for society is that it

Accepted Answer

A) increases market share for the dominant firm in the industry. 
B) provides useful information to reduce search cost for consumers. 
C) raises barriers to entry into the industry and protects existing firms. 
D) creates price leadership and gives firms guidance in dealing with rivals. 
A) increases market share for the dominant firm in the industry. 
B) provides useful information to reduce search cost for consumers. 
C) raises barriers to entry into the industry and protects existing firms. 
D) creates price leadership and gives firms guidance in dealing with rivals.

Question 15

An oligopolistic firm tends to have less control over its own pricing decisions than a firm in

Accepted Answer

A) pure competition or monopolistic competition. 
B) monopoly only. 
C) pure competition or monopoly. 
D) pure competition only. 
A) pure competition or monopolistic competition. 
B) monopoly only. 
C) pure competition or monopoly. 
D) pure competition only.

Question 16

Interindustry competition refers to the fact that

Accepted Answer

A) oligopolistic producers establish a common price for their products. 
B) products are identical in a purely competitive industry. 
C) firms that sell a product at one stage of production buy materials and parts from other firms at prior stages of production. 
D) in some markets, the producers of a certain commodity might face competition from products of other industries. 
A) oligopolistic producers establish a common price for their products. 
B) products are identical in a purely competitive industry. 
C) firms that sell a product at one stage of production buy materials and parts from other firms at prior stages of production. 
D) in some markets, the producers of a certain commodity might face competition from products of other industries.

Question 17

Refer to the diagram for a non-collusive oligopolist. We assume that the firm is initially in equilibrium at point E, where the equilibrium price and quantity are P and Q. If the firm's rivals will ignore any price increase but match any price reduction, over what range might marginal cost rise without disturbing equilibrium price and output?

Accepted Answer

A) bE 
B) ab 
C) Qa 
D) Qb 
A) bE 
B) ab 
C) Qa 
D) Qb

Question 18

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. 
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.

Question 19

The diagram shows the extensive form version of a strategic game between the two nationally dominant coffee sellers, Corporate Coffee and Jumbo Java, both of whom are considering opening coffee shops in a new town. The payoffs represent, in thousands per month, the profit (or loss)the firm will realize from its decision. What is the solution to this extensive form game?

Accepted Answer

A) Corporate Coffee will open a new coffee shop in this town; Jumbo Java will not. 
B) Jumbo Java will open a new coffee shop in this town; Corporate Coffee will not. 
C) Both firms will open a new coffee shop in this town. 
D) Neither firm will open a new coffee shop in this town. 
A) Corporate Coffee will open a new coffee shop in this town; Jumbo Java will not. 
B) Jumbo Java will open a new coffee shop in this town; Corporate Coffee will not. 
C) Both firms will open a new coffee shop in this town. 
D) Neither firm will open a new coffee shop in this town.

Question 20

Refer to the payoff matrix. Bob's Burgers and Sam's Sandwiches are competing restaurants in a small town. Both are considering adding pizza to their line of products. If this is a sequential game and Bob's moves first, which cell represents the final outcome?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
A) A 
B) B 
C) C 
D) D

Exam 14: Oligopoly and Strategic Behavior

Which of the following nations is not a member of the OPEC oil cartel?

In which set of market models are there the most significant barriers to entry?

In repeated games, players may be willing to accept lower payoffs in the short run in exchange for greater net payoffs over the long run.

Refer to the payoff matrix. Bob's Burgers and Sam's Sandwiches are competing restaurants in a small town. Both are considering adding pizza to their line of products. If this is a sequential game but we don't know who moves first, what can we say about the final outcome?

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

In a sequential game with two firms, the first mover into a new market

A game where players choose their strategies at the same time is called a

The so-called first-mover advantage may be observed in

When firms in an industry reach an agreement to fix prices, divide up market share, or otherwise restrict competition, they are practicing the strategy of

In an oligopoly, producers' agreements to restrict output tend to be unstable because each firm has an incentive to

In which of the following market models do demand and marginal revenue not diverge?

Use your basic knowledge and your understanding of market structures to answer this question. Which of the following companies most closely approximates a homogeneous oligopolist in a highly concentrated industry?

A positive effect of advertising for society is that it

An oligopolistic firm tends to have less control over its own pricing decisions than a firm in

Interindustry competition refers to the fact that

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

Refer to the payoff matrix. Bob's Burgers and Sam's Sandwiches are competing restaurants in a small town. Both are considering adding pizza to their line of products. If this is a sequential game and Bob's moves first, which cell represents the final outcome?

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures Caused by Externalities Asymmetric Information

Public Goods, Public Choice, and Government Failure

Elasticity

Utility Maximization

Behavioral Economics

Businesses and the Costs of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition

Technology, RD, and Efficiency

The Demand for Resources

Wage Determination

Rent, Interest, and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

Health Care

Immigration

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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