Question 1

Unlike a monopoly, an oligopoly tends to achieve allocative efficiency due to the rivalry among several firms.

Accepted Answer

A) True 
 B)False

Question 2

The characteristic most closely associated with oligopoly is

Accepted Answer

A)  easy entry into the industry.
B)  a few large producers.
C)  product standardization.
D)  no control over price.

Question 3

Collusion refers to a situation where rival firms decide to

Accepted Answer

A)  compete aggressively against each other.
B)  cheat on each other.
C)  agree with each other to set prices and output.
D)  combine their operations and merge with each other.

Question 4

Clear-cut mutual interdependence with respect to the price-output policies exists in

Accepted Answer

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

Question 5

If competing oligopolists completely ignore oligopolist X's price changes, then X's

Accepted Answer

A)  demand curve will be less elastic than if the other oligopolists matched X's price changes.
B)  demand curve will be more elastic than if the other oligopolists matched X's price changes.
C)  marginal revenue curve will have a vertical gap.
D)  demand and marginal revenue curves will coincide.

Question 6

The study of how people (or firms) behave in strategic situations is called

Accepted Answer

A)  cost-benefit analysis.
B)  recursive analysis.
C)  normative economics.
D)  game theory.

Question 7

A major reason that firms form a cartel is to

Accepted Answer

A)  reduce the elasticity of demand for the product.
B)  enlarge the market share for each producer.
C)  minimize the costs of production.
D)  maximize joint profits.

Question 8

A prediction from the kinked demand curve model of oligopoly is that, for an individual firm, small changes in

Accepted Answer

A)  demand will lead to changes in price or output.
B)  marginal revenue will lead to changes in price and output.
C)  marginal cost will lead to changes in price and output.
D)  marginal cost will not lead to changes in price or output.

Question 9

The U.S. breakfast cereal industry is an example of differentiated oligopoly.

Accepted Answer

A) True 
 B)False

Question 10

Mutually cancelling advertising by oligopolistic firms tends to improve economic efficiency in the industry.

Accepted Answer

A) True 
 B)False

Question 11

OPEC functions as a classic example of a kinked demand curve oligopoly.

Accepted Answer

A) True 
 B)False

Question 12

Assume six firms composing an industry have market shares of 35, 25, 15, 10, 10, and 5 percent. The Herfindahl index for this industry is

Accepted Answer

A)  2,175.
B)  2,300.
C)  1,225.
D)  85.

Question 13

Refer to the diagram for a non-collusive oligopolist. Suppose that the firm is initially in equilibrium at point E, where the equilibrium price and quantity are P and Q. Which of the following statements is correct?

Accepted Answer

A)  Demand curve D₁ assumes that rivals will match any price change initiated by this oligopolist.
B)  Demand curves D₁ and D₂ both assume that rivals will ignore any price change initiated by this oligopolist.
C)  Demand curves D₁ and D₂ both assume that rivals will match any price change initiated by this oligopolist.
D)  Demand curve D₂ assumes that rivals will match any price change initiated by this oligopolist.

Question 14

Which of the following best describes a Nash equilibrium?

Accepted Answer

A)  An outcome from which one or both competitors can improve their position by adopting an alternative strategy.
B)  The unstable outcome of a repeated game.
C)  An outcome that is stable only because of credible threats.
D)  An outcome that both competitors see as optimal, given the strategy of their rival.

Question 15

Answer the question based on the payoff matrices for a repeated game involving two firms that are considering introducing new products to the market. The numbers indicate the profit from following either a strategy to introduce a new product or a strategy to not introduce a new product.First game.  Second game.  In the second game,

Accepted Answer

A)  introducing a new product is the dominant strategy for both firms.
B)  not introducing a new product is the dominant strategy for both firms.
C)  introducing a new product is the dominant strategy for firm A, while not introducing a new product is the dominant strategy for firm B.
D)  not introducing a new product is the dominant strategy for firm A, while introducing a new product is the dominant strategy for firm B.

Question 16

Negative-sum games do not exist, because neither player has an incentive to play the game.

Accepted Answer

A) True 
 B)False

Question 17

Two characteristics of oligopoly pricing that have frequently been observed are that

Accepted Answer

A)  oligopolistic prices tend to be "sticky" or inflexible, and when the firms do change their prices, they tend to do so together.
B)  oligopolistic firms' prices tend to fluctuate a lot, and these prices tend to move together with each other.
C)  oligopolists tend to practice a lot of price discrimination, and there tends to be a wide variance in oligopoly pricing.
D)  oligopolistic firms' prices tend to fluctuate a lot, and there tends to be a wide variance in oligopoly pricing.

Question 18

Answer the question based on the payoff matrix for a duopoly, in which the numbers indicate the profit from following either an international strategy or a national strategy. Which of the following is true?

Accepted Answer

A)  The international strategy is the dominant strategy for both firms.
B)  The national strategy is the dominant strategy for both firms.
C)  The international strategy is the dominant strategy for firm A, and the national strategy is the dominant strategy for firm B.
D)  The national strategy is the dominant strategy for firm A, and the international strategy is the dominant strategy for firm B.

Question 19

Advertising can impede economic efficiency when it

Accepted Answer

A)  reduces entry barriers.
B)  reduces brand loyalty.
C)  leads to greater monopoly power.
D)  provides consumers with useful information about product quality.

Question 20

If an industry evolves from monopolistic competition to oligopoly, we would expect

Accepted Answer

A)  the four-firm concentration ratio to decrease.
B)  the four-firm concentration ratio to increase.
C)  the four-firm concentration ratio to remain the same.
D)  barriers to entry to weaken.

Exam 14: Oligopoly and Strategic Behavior

Clear-cut mutual interdependence with respect to the price-output policies exists in

Correct Answer
verified

Answer the question based on the payoff matrix for a duopoly, in which the numbers indicate the profit from following either an international strategy or a national strategy. Which of the following is true?

Correct Answer
verified

Advertising can impede economic efficiency when it

Correct Answer
verified

The study of how people (or firms) behave in strategic situations is called

Correct Answer
verified

If an industry evolves from monopolistic competition to oligopoly, we would expect

Correct Answer
verified

A major reason that firms form a cartel is to

Correct Answer
verified

Which of the following best describes a Nash equilibrium?

Correct Answer
verified

Unlike a monopoly, an oligopoly tends to achieve allocative efficiency due to the rivalry among several firms.

Correct Answer
verified

Negative-sum games do not exist, because neither player has an incentive to play the game.

Correct Answer
verified

The characteristic most closely associated with oligopoly is

Correct Answer
verified

Two characteristics of oligopoly pricing that have frequently been observed are that

Correct Answer
verified

Assume six firms composing an industry have market shares of 35, 25, 15, 10, 10, and 5 percent. The Herfindahl index for this industry is

Correct Answer
verified

Correct Answer
verified

Collusion refers to a situation where rival firms decide to

Correct Answer
verified

The U.S. breakfast cereal industry is an example of differentiated oligopoly.

Correct Answer
verified

A prediction from the kinked demand curve model of oligopoly is that, for an individual firm, small changes in

Correct Answer
verified

Mutually cancelling advertising by oligopolistic firms tends to improve economic efficiency in the industry.

Correct Answer
verified

If competing oligopolists completely ignore oligopolist X's price changes, then X's

Correct Answer
verified

OPEC functions as a classic example of a kinked demand curve oligopoly.

Correct Answer
verified

Refer to the diagram for a non-collusive oligopolist. Suppose that the firm is initially in equilibrium at point E, where the equilibrium price and quantity are P and Q. Which of the following statements is correct?

Correct Answer
verified

Exam 14: Oligopoly and Strategic Behavior

Clear-cut mutual interdependence with respect to the price-output policies exists in

Correct AnswerverifiedShow Answer

Answer the question based on the payoff matrix for a duopoly, in which the numbers indicate the profit from following either an international strategy or a national strategy. Which of the following is true?

Correct AnswerverifiedShow Answer

Advertising can impede economic efficiency when it

Correct AnswerverifiedShow Answer

The study of how people (or firms) behave in strategic situations is called

Correct AnswerverifiedShow Answer

If an industry evolves from monopolistic competition to oligopoly, we would expect

Correct AnswerverifiedShow Answer

A major reason that firms form a cartel is to

Correct AnswerverifiedShow Answer

Which of the following best describes a Nash equilibrium?

Correct AnswerverifiedShow Answer

Unlike a monopoly, an oligopoly tends to achieve allocative efficiency due to the rivalry among several firms.

Correct AnswerverifiedShow Answer

Negative-sum games do not exist, because neither player has an incentive to play the game.

Correct AnswerverifiedShow Answer

The characteristic most closely associated with oligopoly is

Correct AnswerverifiedShow Answer

Two characteristics of oligopoly pricing that have frequently been observed are that

Correct AnswerverifiedShow Answer

Assume six firms composing an industry have market shares of 35, 25, 15, 10, 10, and 5 percent. The Herfindahl index for this industry is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Collusion refers to a situation where rival firms decide to

Correct AnswerverifiedShow Answer

The U.S. breakfast cereal industry is an example of differentiated oligopoly.

Correct AnswerverifiedShow Answer

A prediction from the kinked demand curve model of oligopoly is that, for an individual firm, small changes in

Correct AnswerverifiedShow Answer

Mutually cancelling advertising by oligopolistic firms tends to improve economic efficiency in the industry.

Correct AnswerverifiedShow Answer

If competing oligopolists completely ignore oligopolist X's price changes, then X's

Correct AnswerverifiedShow Answer

OPEC functions as a classic example of a kinked demand curve oligopoly.

Correct AnswerverifiedShow Answer

Refer to the diagram for a non-collusive oligopolist. Suppose that the firm is initially in equilibrium at point E, where the equilibrium price and quantity are P and Q. Which of the following statements is correct?

Correct AnswerverifiedShow Answer

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