Question 1

Suppose an oligopolistic producer assumes its rivals will ignore a price increase but match a price cut.In this case the firm perceives its

Accepted Answer

A)  demand curve as being of unit elasticity throughout.
B)  supply curve as kinked, being steeper below the going price than above.
C)  demand curve as kinked, being steeper below the going price than above.
D)  demand curve as kinked, being steeper above the going price than below.

Question 2

All other things equal, the larger the number of firms in an oligopolistic industry, the more difficult it is for those firms to collude.

Accepted Answer

A) True 
 B)False

Question 3

Potential entry by new firms and competition from imports tend to worsen the economic inefficiency in an oligopoly.

Accepted Answer

A) True 
 B)False

Question 4

Mutual interdependence means that each firm in an oligopoly

Accepted Answer

A)  faces a perfectly inelastic demand for its product.
B)  considers the reactions of its rivals when it determines its pricing policy.
C)  depends on the other firms for its inputs.
D)  depends on the other firms for its markets.

Question 5

One major problem with four-firm concentration ratios is that they fail to take into account

Accepted Answer

A)  the localized market for products.
B)  excess capacity in production.
C)  price leadership.
D)  mutual interdependence.

Question 6

Which of the following industries is an illustration of homogeneous oligopoly?

Accepted Answer

A)  household laundry products
B)  personal computers
C)  aluminum
D)  the auto industry

Question 7

Interindustry competition refers to the fact that

Accepted Answer

A)  oligopolistic producers establish a common price for their products.
B)  products are identical in a purely competitive industry.
C)  firms that sell a product at one stage of production buy materials and parts from other firms at prior stages of production.
D)  in some markets, the producers of a certain commodity might face competition from products of other industries.

Question 8

Generally speaking, oligopolistic industries producing raw materials and semifinished goods usually offer differentiated products, while oligopolists producing consumer goods usually offer standardized products.

Accepted Answer

A) True 
 B)False

Question 9

In which set of market models are there the most significant barriers to entry?

Accepted Answer

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

Question 10

Assume that an industry is significantly affected by import competition from foreign suppliers.Taking this factor into account, it would mean that

Accepted Answer

A)  the Herfindahl index would be significantly higher in that industry because there are more firms in the industry.
B)  the industry is less concentrated than suggested by domestic concentration ratios.
C)  there is a high degree of interindustry competition.
D)  there is a low degree of interindustry competition.

Question 11

Industry Y is dominated by five large firms that hold market shares of 20, 20, 25, 25, and 10.The Herfindahl index for this industry is

Accepted Answer

A)  1,560.
B)  2,150.
C)  2,340.
D)  3,500.

Question 12

A Nash equilibrium can only occur in repeated games.

Accepted Answer

A) True 
 B)False

Question 13

In the United States cartels are

Accepted Answer

A)  quite common in industries that produce nondurable goods.
B)  in violation of the antitrust laws.
C)  concentrated in monopolistically competitive industries.
D)  encouraged by government policy so firms can achieve economies of scale.

Question 14

The term oligopoly indicates

Accepted Answer

A)  a one-firm industry.
B)  many producers of a differentiated product.
C)  a few firms producing either a differentiated or a homogeneous product.
D)  an industry whose four-firm concentration ratio is low.

Question 15

Homogeneous oligopoly exists where a small number of firms are

Accepted Answer

A)  producing virtually identical products.
B)  setting price and output independently.
C)  setting price and output collusively.
D)  producing differentiated products.

Question 16

In a Stackelberg duopoly,

Accepted Answer

A)  leader firms are always dominant.
B)  no Nash equilibrium is possible.
C)  the two firms move simultaneously.
D)  one firm is the leader; the other is the follower.

Question 17

Which two market structures tend to be more commonly observed in the real world?

Accepted Answer

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

Question 18

The U.S.steel industry is an example of homogeneous oligopoly.

Accepted Answer

A) True 
 B)False

Question 19

An empty threat is a statement of coercion that is not believed by the threatened firm.

Accepted Answer

A) True 
 B)False

Question 20

One characteristic of sequential games is that they all have first-mover advantages.

Accepted Answer

A) True 
 B)False

Exam 14: Oligopoly and Strategic Behavior

Potential entry by new firms and competition from imports tend to worsen the economic inefficiency in an oligopoly.

Correct AnswerverifiedShow Answer

Suppose an oligopolistic producer assumes its rivals will ignore a price increase but match a price cut.In this case the firm perceives its

Correct AnswerverifiedShow Answer

Mutual interdependence means that each firm in an oligopoly

Correct AnswerverifiedShow Answer

Industry Y is dominated by five large firms that hold market shares of 20, 20, 25, 25, and 10.The Herfindahl index for this industry is

Correct AnswerverifiedShow Answer

One major problem with four-firm concentration ratios is that they fail to take into account

Correct AnswerverifiedShow Answer

A Nash equilibrium can only occur in repeated games.

Correct AnswerverifiedShow Answer

The term oligopoly indicates

Correct AnswerverifiedShow Answer

All other things equal, the larger the number of firms in an oligopolistic industry, the more difficult it is for those firms to collude.

Correct AnswerverifiedShow Answer

Which two market structures tend to be more commonly observed in the real world?

Correct AnswerverifiedShow Answer

Which of the following industries is an illustration of homogeneous oligopoly?

Correct AnswerverifiedShow Answer

In a Stackelberg duopoly,

Correct AnswerverifiedShow Answer

An empty threat is a statement of coercion that is not believed by the threatened firm.

Correct AnswerverifiedShow Answer

Generally speaking, oligopolistic industries producing raw materials and semifinished goods usually offer differentiated products, while oligopolists producing consumer goods usually offer standardized products.

Correct AnswerverifiedShow Answer

In which set of market models are there the most significant barriers to entry?

Correct AnswerverifiedShow Answer

Homogeneous oligopoly exists where a small number of firms are

Correct AnswerverifiedShow Answer

Assume that an industry is significantly affected by import competition from foreign suppliers.Taking this factor into account, it would mean that

Correct AnswerverifiedShow Answer

In the United States cartels are

Correct AnswerverifiedShow Answer

The U.S.steel industry is an example of homogeneous oligopoly.

Correct AnswerverifiedShow Answer

Interindustry competition refers to the fact that

Correct AnswerverifiedShow Answer

One characteristic of sequential games is that they all have first-mover advantages.

Correct AnswerverifiedShow Answer

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