Question 1

The principal reason why two firms would form a conglomerate merger is to

Accepted Answer

A)  increase the concentration in the industry 
B)  reduce the concentration in the industry 
C)  reduce dependency on buyers and thereby have greater control over price 
D)  diversify assets 
E)  achieve monopoly control 
A)  increase the concentration in the industry 
B)  reduce the concentration in the industry 
C)  reduce dependency on buyers and thereby have greater control over price 
D)  diversify assets 
E)  achieve monopoly control

Question 2

A market structure wherein one firm among several is dominant is referred to as

Accepted Answer

A)  unbalanced oligopoly 
B)  monopolistic competition 
C)  perfect competition 
D)  balanced oligopoly 
E)  monopoly 
A)  unbalanced oligopoly 
B)  monopolistic competition 
C)  perfect competition 
D)  balanced oligopoly 
E)  monopoly

Question 3

In a balanced oligopoly,

Accepted Answer

A)  one firm has significantly greater market power than any other in the industry 
B)  only one firm exists in the industry 
C)  the industry is rapidly converging into a monopolistically competitive industry 
D)  all firms have near-equal market shares 
E)  the four-firm concentration ratio exceeds 100 percent 
A)  one firm has significantly greater market power than any other in the industry 
B)  only one firm exists in the industry 
C)  the industry is rapidly converging into a monopolistically competitive industry 
D)  all firms have near-equal market shares 
E)  the four-firm concentration ratio exceeds 100 percent

Question 4

Why do firms collude to become a cartel? Because it allows them to

Accepted Answer

A)  develop innovations without the threat of competition within the industry 
B)  compete in order to increase market share 
C)  act like a monopoly 
D)  diversify their markets without fear of losing market share 
E)  increase their own individual concentration ratio 
A)  develop innovations without the threat of competition within the industry 
B)  compete in order to increase market share 
C)  act like a monopoly 
D)  diversify their markets without fear of losing market share 
E)  increase their own individual concentration ratio

Question 5

The text describes various pricing strategies that oligopolists use. Which of the following is not one of these strategies?

Accepted Answer

A)  game theory 
B)  price leadership 
C)  kinked demand 
D)  cartel 
E)  trial and error 
A)  game theory 
B)  price leadership 
C)  kinked demand 
D)  cartel 
E)  trial and error

Question 6

A cartel

Accepted Answer

A)  consists of two firms that collude to eliminate product differentiation so that they can sell their goods as identical goods 
B)  is a group of firms that collude to limit competition within their market 
C)  refers to the breakup of a firm into two or more firms where each produces a good that does not compete against the others 
D)  is a government-supported merger of two or more firms to improve the nation's advantage in international trade 
E)  is an illegal merger of two firms that produce unrelated goods 
A)  consists of two firms that collude to eliminate product differentiation so that they can sell their goods as identical goods 
B)  is a group of firms that collude to limit competition within their market 
C)  refers to the breakup of a firm into two or more firms where each produces a good that does not compete against the others 
D)  is a government-supported merger of two or more firms to improve the nation's advantage in international trade 
E)  is an illegal merger of two firms that produce unrelated goods

Question 7

Census data clearly shows the United States economy is becoming increasingly more oligopolistic.

Accepted Answer

A) True 
 B)False

Question 8

Over the years, many food and beverage producers began merging with other companies. Nabisco merged with a tobacco firm; Campbell's Soup purchased mushroom farms; and Anheuser-Busch purchased, among others, malt, yeast, and canning companies. Pepsi purchased Kentucky Fried Chicken, Taco Bell, and Pizza Hut. Which of these merging firms sought to diversify its assets through a merger?

Accepted Answer

A)  Anheuser-Busch 
B)  Pepsi 
C)  Nabisco 
D)  Taco Bell 
E)  Campbell's Soup 
A)  Anheuser-Busch 
B)  Pepsi 
C)  Nabisco 
D)  Taco Bell 
E)  Campbell's Soup

Question 9

In an unbalanced oligopoly

Accepted Answer

A)  only two firms make up the oligopoly 
B)  the sales of the leading firms are distributed unevenly 
C)  the sales of the leading firms are distributed evenly 
D)  the sales of the 4 leading firms is less than 50 percent 
E)  the market share of the 4 leading firms equals 100 percent 
A)  only two firms make up the oligopoly 
B)  the sales of the leading firms are distributed unevenly 
C)  the sales of the leading firms are distributed evenly 
D)  the sales of the 4 leading firms is less than 50 percent 
E)  the market share of the 4 leading firms equals 100 percent

Question 10

Market power refers to the

Accepted Answer

A)  firm's ability to control the industry's supply and demand 
B)  joining of firms into a cartel 
C)  firm's ability to control market price 
D)  market's ability to control a firm's price 
E)  industry's ability to control market price 
A)  firm's ability to control the industry's supply and demand 
B)  joining of firms into a cartel 
C)  firm's ability to control market price 
D)  market's ability to control a firm's price 
E)  industry's ability to control market price

Question 11

Carson Bell and Renee Dohr own the only two firms in the United States that sell a unique herbal vitaminsupplement that has no close substitutes. They plan a secret meeting at the National Zoo in Washington,DC, to form a cartel in order to increase their profit.
-Do Carson and Renee have an incentive to cheat on their agreement with each other? Explain.

Accepted Answer

A firm in a cartel can increase its prof

Question 12

-In Exhibit L-2, the table shows the market shares of five firms that operate in three different industries. According to the text, Industry I would be classified as a

Accepted Answer

A)  balanced oligopoly 
B)  unbalanced oligopoly 
C)  price leadership oligopoly 
D)  cartel 
E)  price discriminating oligopoly 
A)  balanced oligopoly 
B)  unbalanced oligopoly 
C)  price leadership oligopoly 
D)  cartel 
E)  price discriminating oligopoly

Question 13

U.S. industry is much more concentrated than other leading industrial nations of the world.

Accepted Answer

A) True 
 B)False

Question 14

A good example of _________ is the merger between a steel firm and a cookware firm.

Accepted Answer

A)  a horizontal merger 
B)  a vertical merger 
C)  a conglomerate merger 
D)  either a horizontal or conglomerate merger, depending on whether the oligopoly is balanced or unbalanced 
E)  either a horizontal or conglomerate merger, depending on the market shares of the two firms 
A)  a horizontal merger 
B)  a vertical merger 
C)  a conglomerate merger 
D)  either a horizontal or conglomerate merger, depending on whether the oligopoly is balanced or unbalanced 
E)  either a horizontal or conglomerate merger, depending on the market shares of the two firms

Question 15

-In Exhibit L-5, if Southwest knows that Delta is planning to charge a high price, in the short run it should

Accepted Answer

A)  charge a low price and increase output 
B)  charge a high price and decrease output 
C)  exit the market 
D)  wait until it discovers what happens to market share 
E)  cut back on output regardless of price 
A)  charge a low price and increase output 
B)  charge a high price and decrease output 
C)  exit the market 
D)  wait until it discovers what happens to market share 
E)  cut back on output regardless of price

Question 16

Brand multiplication is a technique used by firms to

Accepted Answer

A)  confuse consumers into thinking they are getting a bargain 
B)  increase market share 
C)  lure competitors into a price war 
D)  reduce competition by reducing consumer choice 
E)  increase production efficiency 
A)  confuse consumers into thinking they are getting a bargain 
B)  increase market share 
C)  lure competitors into a price war 
D)  reduce competition by reducing consumer choice 
E)  increase production efficiency

Question 17

A "sticky price" model has its primary characteristic (i.e., sticky prices) due to

Accepted Answer

A)  barriers to entry 
B)  a monopoly situation 
C)  differentiated products 
D)  too many competitors 
E)  a gap in marginal revenue curve 
A)  barriers to entry 
B)  a monopoly situation 
C)  differentiated products 
D)  too many competitors 
E)  a gap in marginal revenue curve

Question 18

In order to practice price discrimination, the firm must

Accepted Answer

A)  offer a good at different prices to different segments of the market 
B)  first establish a monopoly position in the market 
C)  make sure the practice is sanctioned by the government 
D)  select a price so that different segments of the market will demand different quantities 
E)  first collude with the other firms in the industry 
A)  offer a good at different prices to different segments of the market 
B)  first establish a monopoly position in the market 
C)  make sure the practice is sanctioned by the government 
D)  select a price so that different segments of the market will demand different quantities 
E)  first collude with the other firms in the industry

Question 19

In agriculture, where firms producing similar goods are often located near each other, supervision of neighboring firm activity is fairly easy. When these firms come together formally to agree on price and restraint of output, their organization is called a(n)

Accepted Answer

A)  collusive venture 
B)  cartel 
C)  cooperative 
D)  agricultural merger 
E)  conglomerate 
A)  collusive venture 
B)  cartel 
C)  cooperative 
D)  agricultural merger 
E)  conglomerate

Question 20

Under what circumstances do firms in a balanced oligopoly arrive at a Nash equilibrium outcome?

Accepted Answer

A Nash equilibrium is obtained at low pr

The principal reason why two firms would form a conglomerate merger is to

A market structure wherein one firm among several is dominant is referred to as

In a balanced oligopoly,

Why do firms collude to become a cartel? Because it allows them to

The text describes various pricing strategies that oligopolists use. Which of the following is not one of these strategies?

A cartel

Census data clearly shows the United States economy is becoming increasingly more oligopolistic.

In an unbalanced oligopoly

Market power refers to the

-In Exhibit L-2, the table shows the market shares of five firms that operate in three different industries. According to the text, Industry I would be classified as a

U.S. industry is much more concentrated than other leading industrial nations of the world.

A good example of _________ is the merger between a steel firm and a cookware firm.

-In Exhibit L-5, if Southwest knows that Delta is planning to charge a high price, in the short run it should

Brand multiplication is a technique used by firms to

A "sticky price" model has its primary characteristic (i.e., sticky prices) due to

In order to practice price discrimination, the firm must

In agriculture, where firms producing similar goods are often located near each other, supervision of neighboring firm activity is fairly easy. When these firms come together formally to agree on price and restraint of output, their organization is called a(n)

Under what circumstances do firms in a balanced oligopoly arrive at a Nash equilibrium outcome?

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

The principal reason why two firms would form a conglomerate merger is to

A market structure wherein one firm among several is dominant is referred to as

In a balanced oligopoly,

Why do firms collude to become a cartel? Because it allows them to

The text describes various pricing strategies that oligopolists use. Which of the following is not one of these strategies?

A cartel

Census data clearly shows the United States economy is becoming increasingly more oligopolistic.

In an unbalanced oligopoly

Market power refers to the

-In Exhibit L-2, the table shows the market shares of five firms that operate in three different industries. According to the text, Industry I would be classified as a

U.S. industry is much more concentrated than other leading industrial nations of the world.

A good example of _________ is the merger between a steel firm and a cookware firm.

-In Exhibit L-5, if Southwest knows that Delta is planning to charge a high price, in the short run it should

Brand multiplication is a technique used by firms to

A "sticky price" model has its primary characteristic (i.e., sticky prices) due to

In order to practice price discrimination, the firm must

In agriculture, where firms producing similar goods are often located near each other, supervision of neighboring firm activity is fairly easy. When these firms come together formally to agree on price and restraint of output, their organization is called a(n)

Under what circumstances do firms in a balanced oligopoly arrive at a Nash equilibrium outcome?

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