Question 1

An oligopoly market is characterized by limited number of sellers, each having complete control over the market price level as in case of monopoly.

Accepted Answer

A) True 
 B)False

Question 2

If the supply curve of the fringe in the oligopoly market is highly elastic:

Accepted Answer

A) the dominant firm will command a higher share of market output. 
B) the price chosen by the dominant firm will be high. 
C) the dominant firm's profit will be lower. 
D) the market price for the commodity will be low.

Question 3

The smaller U.S.mainframe computer and peripheral equipment manufacturers of the 1960s (the "Bunch") were perfect competitors, since they produced homogenous products and had little control over the market price.

Accepted Answer

A) True 
 B)False

Question 4

The Stackelberg model of oligopoly assumes that each of the two producers will choose prices instead of quantities and neither will change price in response to the other's decision.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following assumptions were made by the Cournot model of oligopoly?

Accepted Answer

A) Each seller psychoanalyzes the competition and decides how to react in all possible situations. 
B) Each seller psychoanalyzes the competition and exactly predicts the output decisions of the competitors. 
C) Each seller chooses its own output and believes the others in the market will respond to its choices. 
D) Each seller chooses its own output and believes the others in the market will not respond to its choices.

Question 6

Which of the following statements about Nash equilibrium is true?

Accepted Answer

A) Every finite game has more than one Nash equilibrium. 
B) A pair of dominant strategies in a price-fixing game is always a Nash equilibrium. 
C) A dominance solvable game does not have a Nash equilibrium. 
D) Games with an infinite number of strategies have multiple Nash equilibria.

Question 7

How does the existence of the fringe alter the price and output in an oligopoly market?

Accepted Answer

The answer of How does the existence of the fringe...

Question 8

In a price-fixing agreement amongst two oligopolists, each seller's best strategy would be to maintain the agreement, as it would leave both of them better off.

Accepted Answer

A) True 
 B)False

Question 9

The demand curve faced by a dominant firm in an oligopoly model is the difference between the market demand and the supply that the fringe will produce at each price.

Accepted Answer

A) True 
 B)False

Question 10

In a game, which strategic choice is called a dominant strategy?

Accepted Answer

The answer of In a game, which strategic choice is...

Question 11

An agreement between the dominant firm and the fringe members to keep output low often breaks because:

Accepted Answer

A) the fringe firms usually appropriate a larger share of the profits. 
B) the agreement is not self enforcing. 
C) the dominant firm usually appropriates a larger share of the profits. 
D) both have an incentive to charge a higher price for their output.

Question 12

In a mixed strategy situation, like the "heads or tails" game, the players can maximize their income by randomly choosing head or tail each with a probability of:

Accepted Answer

A) 0.25 
B) 0.5 
C) 0.75 
D) 1.0

Question 13

The following matrix represents the payoffs to two students who have been caught cheating in a class.

-Refer to Table .What will be the Nash equilibrium if there is no interaction between the two students?

Accepted Answer

A) Student A will confess while Student B will remain silent. 
B) Student B will confess while Student A will remain silent. 
C) Both the students will confess. 
D) Both the students will remain silent.

Question 14

A gaming strategy in which one player states that he/she would break the agreement for eternity if his/her co-player breaks the agreement once is called:

Accepted Answer

A) a grim trigger. 
B) a credible threat. 
C) a chain-store paradox. 
D) a dominance pull.

Question 15

When all players are choosing their best strategies on the assumption that their opponents are doing likewise, the outcome is called:

Accepted Answer

A) a Stackelberg equilibrium. 
B) a Nash equilibrium. 
C) a Cournot equilibrium. 
D) a Bertrand equilibrium.

Question 16

In a mixed strategy situation, a player does best by unpredictably mixing his strategies in accordance with probabilities that depend on the strategies of the others.

Accepted Answer

A) True 
 B)False

Question 17

The figure given below represents the total output and price produced in an oligopoly market characterized by a dominant firm and a fringe.SF represents the supply curve of the fringe, D is the market demand curve, DRES represents the residual demand curve of the dominant firm, MRRES represents the residual marginal revenue curve of the dominant firm, and MCD represents the marginal cost of the dominant firm.

-Refer to Figure .Which of the following price and output combinations represents the overall oligopoly market equilibrium?

Accepted Answer

A) Price = $3 and output = 2.6 units 
B) Price = $10.1 and output = 0.6 unit 
C) Price = $7 and output = 2.6 units 
D) Price = $7 and output = 1 unit

Question 18

The smaller the share of the fringe firms in an oligopoly market, the smaller will be the profit earned by the dominant firm.

Accepted Answer

A) True 
 B)False

Question 19

The figure given below represents the output choices of each of the two oligopolists, given the choices of its competitor.QA and QB are the quantities of output produced by Producer A and Producer B.The marginal cost of production is zero for both producers.

-Refer to Figure .Determine the total production in this market under Cournot equilibrium?

Accepted Answer

A) 6 units 
B) 12 units 
C) 8 units 
D) 20 units

Question 20

Which of the following is a characteristic of the oligopoly model?

Accepted Answer

A) The oligopoly market consists of only a small number of sellers. 
B) The sellers in an oligopoly market are price takers. 
C) The output decisions taken by sellers are uniform and steady. 
D) There are barriers to the exit of firms in an oligopoly market.

Exam 7: Between the Extremes: Interaction and Strategy

An oligopoly market is characterized by limited number of sellers, each having complete control over the market price level as in case of monopoly.

If the supply curve of the fringe in the oligopoly market is highly elastic:

The smaller U.S.mainframe computer and peripheral equipment manufacturers of the 1960s (the "Bunch") were perfect competitors, since they produced homogenous products and had little control over the market price.

The Stackelberg model of oligopoly assumes that each of the two producers will choose prices instead of quantities and neither will change price in response to the other's decision.

Which of the following assumptions were made by the Cournot model of oligopoly?

Which of the following statements about Nash equilibrium is true?

How does the existence of the fringe alter the price and output in an oligopoly market?

In a price-fixing agreement amongst two oligopolists, each seller's best strategy would be to maintain the agreement, as it would leave both of them better off.

The demand curve faced by a dominant firm in an oligopoly model is the difference between the market demand and the supply that the fringe will produce at each price.

In a game, which strategic choice is called a dominant strategy?

An agreement between the dominant firm and the fringe members to keep output low often breaks because:

In a mixed strategy situation, like the "heads or tails" game, the players can maximize their income by randomly choosing head or tail each with a probability of:

The following matrix represents the payoffs to two students who have been caught cheating in a class. -Refer to Table .What will be the Nash equilibrium if there is no interaction between the two students?

A gaming strategy in which one player states that he/she would break the agreement for eternity if his/her co-player breaks the agreement once is called:

When all players are choosing their best strategies on the assumption that their opponents are doing likewise, the outcome is called:

In a mixed strategy situation, a player does best by unpredictably mixing his strategies in accordance with probabilities that depend on the strategies of the others.

The smaller the share of the fringe firms in an oligopoly market, the smaller will be the profit earned by the dominant firm.

Which of the following is a characteristic of the oligopoly model?