Question 1

If the firms in an oligopolistic industry can establish an effective cartel, the resulting output and price will approximate those of

Accepted Answer

A)  a purely competitive producer.
B)  a pure monopoly.
C)  a monopolistically competitive producer.
D)  an industry with a low four-firm concentration ratio.E) B) and C)
F) A) and D)

Question 2

Concentration ratios may be inaccurate indicators of the degree of monopoly power in an industry because

Accepted Answer

A)  they include interindustry competition.
B)  foreign competition is not considered.
C)  they are only calculated for local and regional markets.
D)  they do not distinguish between normal and economic profit.E) All of the above
F) C) and D)

Question 3

Define a simultaneous one-time game.

Accepted Answer

A simultaneous one-time game is a strate...

Question 4

Repeated games with reciprocity tend to reduce the payoffs for both players, as compared to a one-time game with a similar payoff matrix.

Accepted Answer

A) True 
 B)False

Question 5

The four-firm concentration ratio for the industry described in this table is

Accepted Answer

A)  100 percent.
B)  indeterminate since we don't know which four firms are included.
C)  70 percent.
D)  30 percent.E) B) and D)
F) A) and B)

Question 6

Both collusive and noncollusive oligopoly models suggest that price changes will be relatively infrequent in these types of industries.

Accepted Answer

A) True 
 B)False

Question 7

The product in an oligopolistic market

Accepted Answer

A)  is assumed to be homogeneous.
B)  is always differentiated from one firm to another.
C)  may be homogeneous or differentiated.
D)  has very many close substitutes.E) B) and D)
F) B) and C)

Question 8

The conclusion that oligopoly is inefficient relative to the competitive ideal must be qualified because

Accepted Answer

A)  industry price leaders often select a price equal to marginal cost.
B)  over time oligopolistic industries may promote more rapid product development and greater improvement of production techniques than if they were purely competitive.
C)  increased output due to persuasive advertising may perfectly offset the restriction of output caused by monopoly power.
D)  many oligopolists sell their products in monopolistically competitive or even purely competitive industries.E) A) and B)
F) A) and C)

Question 9

The study of how people behave and decide in strategic situations is called

Accepted Answer

A)  game theory.
B)  collusion.
C)  market structure.
D)  product differentiation.E) A) and D)
F) B) and C)

Question 10

According to the definition of a positive-sum game, both players get positive payoffs.

Accepted Answer

A) True 
 B)False

Question 11

Suppose firms in a collusive oligopoly decide to establish their prices at a level that discourages new rivals from entering the industry. This is called

Accepted Answer

A)  mutual interdependence.
B)  pricing the demand curve.
C)  limit pricing.
D)  price leadership.E) A) and B)
F) A) and C)

Question 12

If neither player has an incentive to deviate from the outcome of a game, the outcome is a Nash equilibrium.

Accepted Answer

A) True 
 B)False

Question 13

If there are significant economies of scale in an industry, then

Accepted Answer

A)  a firm that is large may be able to produce at a lower unit cost than can a small firm.
B)  a firm that is large will have to charge a higher price than will a small firm.
C)  entry to that industry will be easy.
D)  firms must differentiate their products to earn economic profits.E) A) and B)
F) A) and C)

Question 14

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. Assuming the two firms have perfect information about this game, what can we conclude about the existence of a Nash equilibrium?

Accepted Answer

A)  There is a Nash equilibrium, but it occurs at a different outcome than the solution to the game.
B)  There is no Nash equilibrium for this game.
C)  The solution to the game is a Nash equilibrium.
D)  There are multiple Nash equilibriums for this gameE) All of the above
F) A) and B)

Question 15

In the kinked-demand model of oligopoly, if one firm increases its price, the most likely reaction of the other firms will be to

Accepted Answer

A)  decrease their prices.
B)  increase their prices.
C)  not change their prices.
D)  reduce their quantity.E) B) and D)
F) None of the above

Question 16

Which of the following statements best describes the Internet market structure?

Accepted Answer

A)  It is highly competitive, with many providers and no firms in a dominant position.
B)  There are a few large firms, such as Google, Facebook, and Amazon, but they each occupy their own niche and don't infringe on the others' territories.
C)  There are a few large firms, such as Google, Facebook, and Amazon, each dominating a particular sector but always trying to gain market share in another sector.
D)  It comprises firms that have been granted monopolies by the government and are highly regulated.E) B) and D)
F) B) and C)

Question 17

List the four shortcomings of the four-firm concentration ratio.

Accepted Answer

The four shortcomings of the f...

Question 18

Refer to the payoff matrix. Suppose that Speedy Bike and Power Bike are the only two bicycle manufacturing firms serving the market. Both can choose large or small advertising budgets. If this is a repeated game with no cooperation or reciprocity, which cell represents the final outcome we would expect to occur?

Accepted Answer

A)  A
B)  B
C)  C
D)  DE) B) and C)
F) B) and D)

Question 19

If advertising succeeds in enhancing brand loyalty among consumers, it tends to enhance the monopoly power of the seller.

Accepted Answer

A) True 
 B)False

Question 20

The mutual interdependence that characterizes oligopoly arises because

Accepted Answer

A)  the products of various firms are homogeneous.
B)  the products of various firms are differentiated.
C)  each firm in an oligopoly depends on its own pricing strategy and that of its rivals.
D)  the demand curves of firms are kinked at the prevailing price.E) C) and D)
F) A) and B)

Exam 14: Oligopoly and Strategic Behavior

Concentration ratios may be inaccurate indicators of the degree of monopoly power in an industry because

Correct Answer
verified

If advertising succeeds in enhancing brand loyalty among consumers, it tends to enhance the monopoly power of the seller.

Correct Answer
verified

If the firms in an oligopolistic industry can establish an effective cartel, the resulting output and price will approximate those of

Correct Answer
verified

The mutual interdependence that characterizes oligopoly arises because

Correct Answer
verified

The conclusion that oligopoly is inefficient relative to the competitive ideal must be qualified because

Correct Answer
verified

Repeated games with reciprocity tend to reduce the payoffs for both players, as compared to a one-time game with a similar payoff matrix.

Correct Answer
verified

Correct Answer
verified

In the kinked-demand model of oligopoly, if one firm increases its price, the most likely reaction of the other firms will be to

Correct Answer
verified

If neither player has an incentive to deviate from the outcome of a game, the outcome is a Nash equilibrium.

Correct Answer
verified

Both collusive and noncollusive oligopoly models suggest that price changes will be relatively infrequent in these types of industries.

Correct Answer
verified

Define a simultaneous one-time game.

Correct Answer
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A simultaneous one-time game is a strate...
View Answer

The four-firm concentration ratio for the industry described in this table is

Correct Answer
verified

According to the definition of a positive-sum game, both players get positive payoffs.

Correct Answer
verified

Suppose firms in a collusive oligopoly decide to establish their prices at a level that discourages new rivals from entering the industry. This is called

Correct Answer
verified

The study of how people behave and decide in strategic situations is called

Correct Answer
verified

Which of the following statements best describes the Internet market structure?

Correct Answer
verified

The product in an oligopolistic market

Correct Answer
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List the four shortcomings of the four-firm concentration ratio.

Correct Answer
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The four shortcomings of the f...
View Answer

Correct Answer
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If there are significant economies of scale in an industry, then

Correct Answer
verified

Exam 14: Oligopoly and Strategic Behavior

Concentration ratios may be inaccurate indicators of the degree of monopoly power in an industry because

Correct AnswerverifiedShow Answer

If advertising succeeds in enhancing brand loyalty among consumers, it tends to enhance the monopoly power of the seller.

Correct AnswerverifiedShow Answer

If the firms in an oligopolistic industry can establish an effective cartel, the resulting output and price will approximate those of

Correct AnswerverifiedShow Answer

The mutual interdependence that characterizes oligopoly arises because

Correct AnswerverifiedShow Answer

The conclusion that oligopoly is inefficient relative to the competitive ideal must be qualified because

Correct AnswerverifiedShow Answer

Repeated games with reciprocity tend to reduce the payoffs for both players, as compared to a one-time game with a similar payoff matrix.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In the kinked-demand model of oligopoly, if one firm increases its price, the most likely reaction of the other firms will be to

Correct AnswerverifiedShow Answer

If neither player has an incentive to deviate from the outcome of a game, the outcome is a Nash equilibrium.

Correct AnswerverifiedShow Answer

Both collusive and noncollusive oligopoly models suggest that price changes will be relatively infrequent in these types of industries.

Correct AnswerverifiedShow Answer

Define a simultaneous one-time game.

Correct AnswerverifiedA simultaneous one-time game is a strate...View AnswerShow Answer

The four-firm concentration ratio for the industry described in this table is

Correct AnswerverifiedShow Answer

According to the definition of a positive-sum game, both players get positive payoffs.

Correct AnswerverifiedShow Answer

Suppose firms in a collusive oligopoly decide to establish their prices at a level that discourages new rivals from entering the industry. This is called

Correct AnswerverifiedShow Answer

The study of how people behave and decide in strategic situations is called

Correct AnswerverifiedShow Answer

Which of the following statements best describes the Internet market structure?

Correct AnswerverifiedShow Answer

The product in an oligopolistic market

Correct AnswerverifiedShow Answer

List the four shortcomings of the four-firm concentration ratio.

Correct AnswerverifiedThe four shortcomings of the f...View AnswerShow Answer

Correct AnswerverifiedShow Answer

If there are significant economies of scale in an industry, then

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A simultaneous one-time game is a strate...
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The four shortcomings of the f...
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