Question 1

Which of the following is not a reason for firms to merge?

Accepted Answer

A)  to exercise greater market control 
B)  to diversify asset holdings 
C)  to increase control over suppliers 
D)  to lower the Herfindahl-Hirschman Index 
E)  to increase market share 
A)  to exercise greater market control 
B)  to diversify asset holdings 
C)  to increase control over suppliers 
D)  to lower the Herfindahl-Hirschman Index 
E)  to increase market share

Question 2

-In Exhibit L-4, the Herfindahl-Hirschman Index is

Accepted Answer

A)  1,947 
B)  2,067 
C)  2,244 
D)  17,700 
E)  20,200 
A)  1,947 
B)  2,067 
C)  2,244 
D)  17,700 
E)  20,200

Question 3

Which of the following terms is not associated with a market having a firm whose behavior has been judged to be characteristic of the dominant firm model?

Accepted Answer

A)  godfather 
B)  price leadership 
C)  kinked demand curve 
D)  profit maximization 
E)  oligopoly 
A)  godfather 
B)  price leadership 
C)  kinked demand curve 
D)  profit maximization 
E)  oligopoly

Question 4

Which of the following statements is not true?

Accepted Answer

A)  Oligopolies usually have few firms each with some significant degree of market power. 
B)  Only a small percentage of industries have four-firm concentration ratios above 85 percent. 
C)  Market price is related to the concentration ratio. 
D)  The United States is becoming more oligopolistic. 
E)  Karl Marx believed the United States was becoming more oligopolistic. 
A)  Oligopolies usually have few firms each with some significant degree of market power. 
B)  Only a small percentage of industries have four-firm concentration ratios above 85 percent. 
C)  Market price is related to the concentration ratio. 
D)  The United States is becoming more oligopolistic. 
E)  Karl Marx believed the United States was becoming more oligopolistic.

Question 5

The kinked demand curve exists because consumers make erratic decisions.

Accepted Answer

A) True 
 B)False

Question 6

Why does Philip Morris produce so many different kinds of cigarettes?

Accepted Answer

It engages in brand multiplication to in

Question 7

Collusion among firms to form a cartel refers to

Accepted Answer

A)  joint ventures in producing new goods, such as France and England colluding to produce the European Airbus as a viable competitor to the U.S. Boeing's 747 
B)  joint ventures between business and government, such as the exploration of space 
C)  joint ventures between a domestic firm and a foreign firm, such as in the mega- movies of the entertainment world 
D)  the practice among firms of preventing other firms from entering the industry 
E)  the practice among firms of agreeing to abide by the group decision on price and output 
A)  joint ventures in producing new goods, such as France and England colluding to produce the European Airbus as a viable competitor to the U.S. Boeing's 747 
B)  joint ventures between business and government, such as the exploration of space 
C)  joint ventures between a domestic firm and a foreign firm, such as in the mega- movies of the entertainment world 
D)  the practice among firms of preventing other firms from entering the industry 
E)  the practice among firms of agreeing to abide by the group decision on price and output

Question 8

Many studies show that price and concentration ratios are

Accepted Answer

A)  not related 
B)  inversely related 
C)  positively related 
D)  constant 
E)  both higher in perfectly competitive markets 
A)  not related 
B)  inversely related 
C)  positively related 
D)  constant 
E)  both higher in perfectly competitive markets

Question 9

-The price is likely to be quite stable in the godfather model because

Accepted Answer

A)  the market functions like a cartel 
B)  the other firms in the industry have cost advantages over the godfather 
C)  the godfather could decrease price below levels that other firms could afford 
D)  entry into the market is easy 
E)  all firms are maximizing profit anyway 
A)  the market functions like a cartel 
B)  the other firms in the industry have cost advantages over the godfather 
C)  the godfather could decrease price below levels that other firms could afford 
D)  entry into the market is easy 
E)  all firms are maximizing profit anyway

Question 10

A cartel is a group of firms that acts as if it were a monopoly and produces where MR = MC for the industry.

Accepted Answer

A) True 
 B)False

Question 11

Three gas stations are located at different corners of a busy intersection. Kelly manages one of them, and he notices that when he raises his gas prices, the other stations don't follow suit, but that when he cuts his gas prices, his competitors follow. What does demand for Kelly's gas look like, and how should he respond to a change in the wholesale price of gasoline?

Accepted Answer

Kelly faces a kinked demand curve. When

Question 12

A firm with substantial market power must be in a ____________ industry.

Accepted Answer

A)  monopoly or oligopoly 
B)  perfectly competitive 
C)  monopolistically competitive 
D)  perfectly competitive or monopolistically competitive 
E)  perfectly competitive or a monopoly 
A)  monopoly or oligopoly 
B)  perfectly competitive 
C)  monopolistically competitive 
D)  perfectly competitive or monopolistically competitive 
E)  perfectly competitive or a monopoly

Question 13

If an oligopolistic firm in a game theory kind of market cuts price, in the long run

Accepted Answer

A)  the other firms will follow and all firms will be worse off 
B)  the price cutter will be worse off if other firms don't cut price as well because revenue equals price times output and since price was cut, its revenue must be less 
C)  its market share and profit will increase at the expense of its rivals 
D)  the other firms will follow and all firms will be better off because at lower prices, industry sales will increase 
E)  it will become a monopoly, having outsmarted its rivals, and will be able to raise the price again. That's how the game is played. 
A)  the other firms will follow and all firms will be worse off 
B)  the price cutter will be worse off if other firms don't cut price as well because revenue equals price times output and since price was cut, its revenue must be less 
C)  its market share and profit will increase at the expense of its rivals 
D)  the other firms will follow and all firms will be better off because at lower prices, industry sales will increase 
E)  it will become a monopoly, having outsmarted its rivals, and will be able to raise the price again. That's how the game is played.

Question 14

What assumption(s) is (are) necessary to generate a kinked demand curve?

Accepted Answer

A)  all firms in the industry ignore the price changes made by any one firm 
B)  any price decrease will be ignored but price increases will be followed 
C)  all firms will follow a price decrease but will ignore any price increase 
D)  all price changes made by any firm will be followed by all of the other firms 
E)  price can increase, but not decrease 
A)  all firms in the industry ignore the price changes made by any one firm 
B)  any price decrease will be ignored but price increases will be followed 
C)  all firms will follow a price decrease but will ignore any price increase 
D)  all price changes made by any firm will be followed by all of the other firms 
E)  price can increase, but not decrease

Question 15

If a four-firm concentration ratio in an industry equals 75 percent, this implies that

Accepted Answer

A)  75 percent of all profits in the industry accrue to the leading four firms 
B)  25 percent of sales in the industry are accounted for by the four leading firms 
C)  the four firms represent 75 percent of all the firms in the industry 
D)  the four firms represent 25 percent of all the firms in the industry 
E)  75 percent of all sales in the industry are accounted for by the four leading firms 
A)  75 percent of all profits in the industry accrue to the leading four firms 
B)  25 percent of sales in the industry are accounted for by the four leading firms 
C)  the four firms represent 75 percent of all the firms in the industry 
D)  the four firms represent 25 percent of all the firms in the industry 
E)  75 percent of all sales in the industry are accounted for by the four leading firms

Question 16

The "prisoner's dilemma" is a result of

Accepted Answer

A)  differentiated products 
B)  large number of participants 
C)  game theory 
D)  certain outcomes 
E)  open market entry 
A)  differentiated products 
B)  large number of participants 
C)  game theory 
D)  certain outcomes 
E)  open market entry

Question 17

Why would a firm price discriminate? Because price discrimination allows the firm to

Accepted Answer

A)  increase consumer surplus 
B)  create brand multiplication 
C)  select the best consumers who are willing to pay the highest price 
D)  convert consumer surplus into economic profit 
E)  shift its demand curve to the right 
A)  increase consumer surplus 
B)  create brand multiplication 
C)  select the best consumers who are willing to pay the highest price 
D)  convert consumer surplus into economic profit 
E)  shift its demand curve to the right

Question 18

Paul Bergeron and Virginia Clacey each own a 100-acre soybean farm in Soyburg, Illinois. Together they grow 1/1,000th of 1 percent of the nation's soybeans. When they merge, it will

Accepted Answer

A)  raise the price of soybeans in the U.S. 
B)  be a vertical merger 
C)  reduce competition in the soy market 
D)  increase the market power of Paul and Virginia 
E)  probably go unnoticed outside of Soyburg 
A)  raise the price of soybeans in the U.S. 
B)  be a vertical merger 
C)  reduce competition in the soy market 
D)  increase the market power of Paul and Virginia 
E)  probably go unnoticed outside of Soyburg

Question 19

The greatest global redistribution of income ever recorded occurred in the 1970s as a direct result of

Accepted Answer

A)  a worldwide drop in food prices 
B)  the OPEC cartel 
C)  growing international oligopoly 
D)  a shift from balanced to unbalanced oligopoly 
E)  a shift from price leadership to kinked demand curve oligopoly 
A)  a worldwide drop in food prices 
B)  the OPEC cartel 
C)  growing international oligopoly 
D)  a shift from balanced to unbalanced oligopoly 
E)  a shift from price leadership to kinked demand curve oligopoly

Question 20

Oligopolists often use price discrimination to increase economic profit. Which of the following is not considered to be price discrimination?

Accepted Answer

A)  discount admission for children to Disneyland 
B)  senior citizen's bus discounts 
C)  student rates for movie tickets 
D)  "men only" clubs 
E)  paperback and hardcover books 
A)  discount admission for children to Disneyland 
B)  senior citizen's bus discounts 
C)  student rates for movie tickets 
D)  "men only" clubs 
E)  paperback and hardcover books

Which of the following is not a reason for firms to merge?

-In Exhibit L-4, the Herfindahl-Hirschman Index is

Which of the following terms is not associated with a market having a firm whose behavior has been judged to be characteristic of the dominant firm model?

Which of the following statements is not true?

The kinked demand curve exists because consumers make erratic decisions.

Why does Philip Morris produce so many different kinds of cigarettes?

Collusion among firms to form a cartel refers to

Many studies show that price and concentration ratios are

-The price is likely to be quite stable in the godfather model because

A cartel is a group of firms that acts as if it were a monopoly and produces where MR = MC for the industry.

A firm with substantial market power must be in a ____________ industry.

If an oligopolistic firm in a game theory kind of market cuts price, in the long run

What assumption(s) is (are) necessary to generate a kinked demand curve?

If a four-firm concentration ratio in an industry equals 75 percent, this implies that

The "prisoner's dilemma" is a result of

Why would a firm price discriminate? Because price discrimination allows the firm to

Paul Bergeron and Virginia Clacey each own a 100-acre soybean farm in Soyburg, Illinois. Together they grow 1/1,000th of 1 percent of the nation's soybeans. When they merge, it will

The greatest global redistribution of income ever recorded occurred in the 1970s as a direct result of

Oligopolists often use price discrimination to increase economic profit. Which of the following is not considered to be price discrimination?

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

Which of the following is not a reason for firms to merge?

-In Exhibit L-4, the Herfindahl-Hirschman Index is

Which of the following terms is not associated with a market having a firm whose behavior has been judged to be characteristic of the dominant firm model?

Which of the following statements is not true?

The kinked demand curve exists because consumers make erratic decisions.

Why does Philip Morris produce so many different kinds of cigarettes?

Collusion among firms to form a cartel refers to

Many studies show that price and concentration ratios are

-The price is likely to be quite stable in the godfather model because

A cartel is a group of firms that acts as if it were a monopoly and produces where MR = MC for the industry.

A firm with substantial market power must be in a ____________ industry.

If an oligopolistic firm in a game theory kind of market cuts price, in the long run

What assumption(s) is (are) necessary to generate a kinked demand curve?

If a four-firm concentration ratio in an industry equals 75 percent, this implies that

The "prisoner's dilemma" is a result of

Why would a firm price discriminate? Because price discrimination allows the firm to

Paul Bergeron and Virginia Clacey each own a 100-acre soybean farm in Soyburg, Illinois. Together they grow 1/1,000th of 1 percent of the nation's soybeans. When they merge, it will

The greatest global redistribution of income ever recorded occurred in the 1970s as a direct result of

Oligopolists often use price discrimination to increase economic profit. Which of the following is not considered to be price discrimination?

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