Question 1

One reason why the smaller oligopolistic firms accept godfather pricing in unbalanced oligopoly is because they can

Accepted Answer

A)  differentiate their products more fully in order to increase market power 
B)  engage in mergers if the godfather chooses the wrong price 
C)  together influence the price leader (godfather firm) to share industry profit more equally 
D)  enjoy a higher economic profit than they would otherwise 
E)  survive a price war without too many losses 
A)  differentiate their products more fully in order to increase market power 
B)  engage in mergers if the godfather chooses the wrong price 
C)  together influence the price leader (godfather firm) to share industry profit more equally 
D)  enjoy a higher economic profit than they would otherwise 
E)  survive a price war without too many losses

Question 2

If there are only 10 firms in an industry, each with 10 percent of industry sales, this is an example of

Accepted Answer

A)  monopolistic competition 
B)  unbalanced oligopoly 
C)  balanced oligopoly 
D)  perfect competition 
E)  insignificant firm market power 
A)  monopolistic competition 
B)  unbalanced oligopoly 
C)  balanced oligopoly 
D)  perfect competition 
E)  insignificant firm market power

Question 3

Which of the following differentiates firm behavior in oligopoly from firm behavior in other market structures?

Accepted Answer

A)  They are price makers. 
B)  They collude to lower prices together. 
C)  They collude to raise prices together. 
D)  They are price takers. 
E)  They take into consideration how other firms might react to their actions. 
A)  They are price makers. 
B)  They collude to lower prices together. 
C)  They collude to raise prices together. 
D)  They are price takers. 
E)  They take into consideration how other firms might react to their actions.

Question 4

The practice of a group of firms negotiating a uniform price and fixing agreed-upon market share in order to limit competition is

Accepted Answer

A)  legal in all states but illegal in Washington, D.C. 
B)  called conglomerate behavior 
C)  seldom successful because entry into the industry cannot be denied 
D)  called collusion 
E)  less profitable for each firm than maximizing profit individually 
A)  legal in all states but illegal in Washington, D.C. 
B)  called conglomerate behavior 
C)  seldom successful because entry into the industry cannot be denied 
D)  called collusion 
E)  less profitable for each firm than maximizing profit individually

Question 5

Why would a firm in balanced oligopoly choose a tit-for-tat strategy?

Accepted Answer

A firm appreciates that the most attract

Question 6

If two steel firms merge, the merger is described as

Accepted Answer

A)  a horizontal merger 
B)  a vertical merger 
C)  a conglomerate merger 
D)  either a vertical or conglomerate merger depending on whether the oligopoly is balanced or unbalanced 
E)  either a vertical or conglomerate merger depending on the number of steel firms in the steel industry 
A)  a horizontal merger 
B)  a vertical merger 
C)  a conglomerate merger 
D)  either a vertical or conglomerate merger depending on whether the oligopoly is balanced or unbalanced 
E)  either a vertical or conglomerate merger depending on the number of steel firms in the steel industry

Question 7

When a firm's competitors cut their prices when the firm does, but do not raise their prices when the firm does, the result is that the firm has a kinked demand curve.

Accepted Answer

A) True 
 B)False

Question 8

Cartel pricing refers to an agreement made by members of the cartel to abide by the cartel's price decision. The outcome most closely resembles that of a

Accepted Answer

A)  price discriminator 
B)  godfather oligopoly 
C)  monopolistically competitive industry 
D)  monopoly 
E)  competitive industry 
A)  price discriminator 
B)  godfather oligopoly 
C)  monopolistically competitive industry 
D)  monopoly 
E)  competitive industry

Question 9

Collusion is designed to limit competition in a market.

Accepted Answer

A) True 
 B)False

Question 10

Game theory pricing behavior may be best described as the decision by a firm to

Accepted Answer

A)  accommodate the competition by cutting price when they cut and increasing price when they do so that the firm is not caught in a situation where it prices low while its competitors price high 
B)  disregard competitors when formulating price since it cannot control the behavior of its competitors 
C)  price its good in order to maximize profit, assuming the firm anticipates correctly (that's a big assumption) how its competitors will respond 
D)  lower the price until there is no profit left in order to drive its competitors out of the market, then raise price to its former level 
E)  collaborate with competitors prior to making pricing decisions to avoid unnecessary competition 
A)  accommodate the competition by cutting price when they cut and increasing price when they do so that the firm is not caught in a situation where it prices low while its competitors price high 
B)  disregard competitors when formulating price since it cannot control the behavior of its competitors 
C)  price its good in order to maximize profit, assuming the firm anticipates correctly (that's a big assumption) how its competitors will respond 
D)  lower the price until there is no profit left in order to drive its competitors out of the market, then raise price to its former level 
E)  collaborate with competitors prior to making pricing decisions to avoid unnecessary competition

Question 11

When there is a kinked demand curve, an oligopolist's competitors will match price increases.

Accepted Answer

A) True 
 B)False

Question 12

-In Exhibit L-2, the table shows the market shares of five firms that operate in three different industries. The HHI in industry I is

Accepted Answer

A)  20 percent 
B)  20 
C)  400 
D)  2,000 
E)  80 percent 
A)  20 percent 
B)  20 
C)  400 
D)  2,000 
E)  80 percent

Question 13

Examples of "disguised" cartels are the citrus cooperatives in Florida and California.

Accepted Answer

A) True 
 B)False

Question 14

The most common form of merger(s) in the U.S. economy is (are)

Accepted Answer

A)  the horizontal merger 
B)  the vertical merger 
C)  the conglomerate merger 
D)  horizontal and vertical mergers (equally common) 
E)  horizontal and conglomerate mergers (equally common) 
A)  the horizontal merger 
B)  the vertical merger 
C)  the conglomerate merger 
D)  horizontal and vertical mergers (equally common) 
E)  horizontal and conglomerate mergers (equally common)

Question 15

Suppose there are 100 firms in an industry. If the leading firm has a 60 percent market share, the second largest firm has a market share of half the leader's, the third has a market share of half the second's, and the fourth largest has a market share of half the third's, what is the four-firm concentration ratio?

Accepted Answer

A)  75 percent 
B)  85 percent 
C)  95 percent 
D)  100 percent 
E)  impossible because their combined market shares exceed 100 percent 
A)  75 percent 
B)  85 percent 
C)  95 percent 
D)  100 percent 
E)  impossible because their combined market shares exceed 100 percent

Question 16

A kinked demand curve is associated with

Accepted Answer

A)  tit-for-tat behavior 
B)  a dominant firm 
C)  a discontinuous marginal revenue curve 
D)  extreme marginalism 
E)  price leadership 
A)  tit-for-tat behavior 
B)  a dominant firm 
C)  a discontinuous marginal revenue curve 
D)  extreme marginalism 
E)  price leadership

Question 17

-In Exhibit L-2, the table shows the market shares of five firms that operate in three different industries. The four-firm concentration ratio in Industry II is equal to

Accepted Answer

A)  30 percent 
B)  50 percent 
C)  70 percent 
D)  85 percent 
E)  100 percent 
A)  30 percent 
B)  50 percent 
C)  70 percent 
D)  85 percent 
E)  100 percent

Question 18

In a price leadership oligopoly model,

Accepted Answer

A)  a cartel of leading firms determines price and industry output 
B)  the leading firm colludes on price with each of the other firms and in this way has primary decision-making powers over price 
C)  one firm is the price leader and all other firms in the industry follow 
D)  the firm that leads abandons the profit-maximizing goal 
E)  the leader firm produces where MR = MC, and all others produce where P = ATC 
A)  a cartel of leading firms determines price and industry output 
B)  the leading firm colludes on price with each of the other firms and in this way has primary decision-making powers over price 
C)  one firm is the price leader and all other firms in the industry follow 
D)  the firm that leads abandons the profit-maximizing goal 
E)  the leader firm produces where MR = MC, and all others produce where P = ATC

Question 19

The kinked demand curve model of oligopoly explains why oligopoly

Accepted Answer

A)  firms cannot maximize their profits 
B)  firms do not lower prices to increase market share 
C)  firms tend to increase price 
D)  firms tend to decrease price to their minimum ATC 
E)  tends to generate a higher economic profit than in any other market structure 
A)  firms cannot maximize their profits 
B)  firms do not lower prices to increase market share 
C)  firms tend to increase price 
D)  firms tend to decrease price to their minimum ATC 
E)  tends to generate a higher economic profit than in any other market structure

Question 20

The Ford Taurus and Ford Escort product lines (both produced by Ford) use many of the same parts in their cars, and the cars are, apart from design, virtually identical to one another, except for price. This suggests

Accepted Answer

A)  a balanced oligopoly 
B)  cartel pricing 
C)  Ford's production inefficiency 
D)  game theory pricing 
E)  price discrimination 
A)  a balanced oligopoly 
B)  cartel pricing 
C)  Ford's production inefficiency 
D)  game theory pricing 
E)  price discrimination

One reason why the smaller oligopolistic firms accept godfather pricing in unbalanced oligopoly is because they can

If there are only 10 firms in an industry, each with 10 percent of industry sales, this is an example of

Which of the following differentiates firm behavior in oligopoly from firm behavior in other market structures?

The practice of a group of firms negotiating a uniform price and fixing agreed-upon market share in order to limit competition is

Why would a firm in balanced oligopoly choose a tit-for-tat strategy?

If two steel firms merge, the merger is described as

When a firm's competitors cut their prices when the firm does, but do not raise their prices when the firm does, the result is that the firm has a kinked demand curve.

Cartel pricing refers to an agreement made by members of the cartel to abide by the cartel's price decision. The outcome most closely resembles that of a

Collusion is designed to limit competition in a market.

Game theory pricing behavior may be best described as the decision by a firm to

When there is a kinked demand curve, an oligopolist's competitors will match price increases.

-In Exhibit L-2, the table shows the market shares of five firms that operate in three different industries. The HHI in industry I is

Examples of "disguised" cartels are the citrus cooperatives in Florida and California.

The most common form of merger(s) in the U.S. economy is (are)

A kinked demand curve is associated with

-In Exhibit L-2, the table shows the market shares of five firms that operate in three different industries. The four-firm concentration ratio in Industry II is equal to

In a price leadership oligopoly model,

The kinked demand curve model of oligopoly explains why oligopoly

The Ford Taurus and Ford Escort product lines (both produced by Ford) use many of the same parts in their cars, and the cars are, apart from design, virtually identical to one another, except for price. This suggests

Introduction

Production Possibilities and Opportunity Costs

Demand and Supply

Elasticity

Happiness, Utility, and Consumer Choice

Price Ceilings and Price Floors

Entrepreneurship and Business Ownership

Costs of Production

Maximizing Profit

Identifying Markets and Market Structures

Price and Output in Monopoly, Monopolistic Competition, and Perfect Competition

Antitrust and Regulation

Externalities, Market Failure, and Public Choice

Wage Rates in Competitive Labor Markets

Wages and Employment: Monopsony and Labor Unions

Interest, Rent, and Profit

Income Distribution and Poverty

International Trade

Exchange Rates, Balance of Payments, and International Debt

The Economic Problems of Less-Developed Economies

Filters

Exam 12: Price and Output Determination Under Oligopoly

One reason why the smaller oligopolistic firms accept godfather pricing in unbalanced oligopoly is because they can

If there are only 10 firms in an industry, each with 10 percent of industry sales, this is an example of

Which of the following differentiates firm behavior in oligopoly from firm behavior in other market structures?

The practice of a group of firms negotiating a uniform price and fixing agreed-upon market share in order to limit competition is

Why would a firm in balanced oligopoly choose a tit-for-tat strategy?

If two steel firms merge, the merger is described as

When a firm's competitors cut their prices when the firm does, but do not raise their prices when the firm does, the result is that the firm has a kinked demand curve.

Cartel pricing refers to an agreement made by members of the cartel to abide by the cartel's price decision. The outcome most closely resembles that of a

Collusion is designed to limit competition in a market.

Game theory pricing behavior may be best described as the decision by a firm to

When there is a kinked demand curve, an oligopolist's competitors will match price increases.

-In Exhibit L-2, the table shows the market shares of five firms that operate in three different industries. The HHI in industry I is

Examples of "disguised" cartels are the citrus cooperatives in Florida and California.

The most common form of merger(s) in the U.S. economy is (are)

A kinked demand curve is associated with

-In Exhibit L-2, the table shows the market shares of five firms that operate in three different industries. The four-firm concentration ratio in Industry II is equal to

In a price leadership oligopoly model,

The kinked demand curve model of oligopoly explains why oligopoly

The Ford Taurus and Ford Escort product lines (both produced by Ford) use many of the same parts in their cars, and the cars are, apart from design, virtually identical to one another, except for price. This suggests

Introduction

Production Possibilities and Opportunity Costs

Demand and Supply

Elasticity

Happiness, Utility, and Consumer Choice

Price Ceilings and Price Floors

Entrepreneurship and Business Ownership

Costs of Production

Maximizing Profit

Identifying Markets and Market Structures

Price and Output in Monopoly, Monopolistic Competition, and Perfect Competition

Antitrust and Regulation

Externalities, Market Failure, and Public Choice

Wage Rates in Competitive Labor Markets

Wages and Employment: Monopsony and Labor Unions

Interest, Rent, and Profit

Income Distribution and Poverty

International Trade

Exchange Rates, Balance of Payments, and International Debt

The Economic Problems of Less-Developed Economies

Filters