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Exam 9: Market Structure: Oligopoly

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Question 21

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It is often observed that the prices charged for gasoline by the various gas stations in a particular city tend to move together very closely.Is this an example of tacit collusion that should be prosecuted in the United States? Why or why not?

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Question 22

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Assume the production of a particular good is characterized by significant economies of scale.In addition, three different versions of the good can be produced, and large segments of the population prefer different versions of the good.In this case, the preferred market structure for this good would be:

A) perfect competition.
B) monopoly.
C) monopolistic competition.
D) oligopoly.

E) All of the above
F) C) and D)

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Question 23

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Of the various models of noncooperative oligopoly behavior discussed in the text, which one has the greatest shortcoming when it comes to explaining observed behavior in an oligopoly market

A firm could gain from cheating on a cartel agreement by doing all of the following except:

In which of the following situations would each of the members be responsible for producing an equal share of the total amount of output sold by the cartel engaged in joint profit maximization?

Because cooperation dominates noncooperation as a strategy for maximizing profits, cheating is rarely if ever an issue that cartels have to contend with.

According to the information presented in the text the parcel and express delivery industry could best be characterized as:

Which of the following is the best example of tacit collusion?

According to the kinked demand curve model, if an oligopolistic firm lowers its price, it should expect to see its total revenue:

Assume the four major grocery stores in a large metropolitan area decide to meet secretly to fix prices for meat.It would be easiest to maintain this arrangement when:

OPEC has had a sustained effect on the price of oil since it was first founded in 1960.

All else constant, a cartel agreement will become more difficult to enforce as the number of firms competing the market increases and the members of the cartel produce a differentiated product.

The fact that the firms in an oligopoly are mutually interdependent means that each firm:

Because there is no formal agreement among the participating firms, firms that engage in tacit collusion are exempt from prosecution under the anti-trust laws.

To maximize joint profits, a cartel must determine the level of output at which:

Predatory pricing will be most effective when the costs structures of the firms in an industry, including potential entrants into the market, are identical or at least very similar.

Assume two firms are currently competing in a market.If one of the two firms wants to try to eliminate the other firm as a competitor, should it undertake a strategy of limit pricing or predatory pricing? Why? In addition, describe the conditions under which the strategy you have selected will be most successful.

The assumption that rival firms will match a firm's price decreases but not its price increases is a basic feature of:

Assume a cartel that consists of two firms has determined its profit-maximizing level of output and must now decide how to allocate total output between the two firms.Assuming firm A's marginal costs are less than firm B's marginal costs, firm A should produce a smaller share of total output than firm B.

It has been observed that whenever one imported beer distributor raises its price, other imported beer distributors quickly raise their price as well.Such behavior is characteristic of: