Question 1

Which of the following best describes the efficiency results in oligopoly?

Accepted Answer

A)  P > MC and P = minimum ATC.
B)  P = MC and P > minimum ATC.
C)  P = MC and P = minimum ATC.
D)  P > MC and P > minimum ATC.E) A) and B)
F) A) and C)

Question 2

Advertising can enhance economic efficiency when it

Accepted Answer

A)  increases brand loyalty.
B)  raises entry barriers.
C)  increases consumer awareness of substitute products.
D)  boosts average total cost.E) A) and B)
F) B) and D)

Question 3

Which statement concerning the kinked demand curve model of oligopoly is false?

Accepted Answer

A)  It addresses the question of price "stickiness."
B)  It assumes when one oligopolist raises the price, all others will follow.
C)  The portion of the demand curve above the "kink" is more elastic than the portion below.
D)  The firm's marginal costs can sometimes shift without changing the profit-maximizing price and output.E) C) and D)
F) B) and D)

Question 4

The larger the Herfindahl index, the

Accepted Answer

A)  less the degree of import competition in an industry.
B)  greater the degree of import competition in an industry.
C)  less the degree of market power in an industry.
D)  greater the degree of market power in an industry.E) C) and D)
F) A) and D)

Question 5

Two industries that have the same four-firm concentration ratio can have significantly different Herfindahl indexes.

Accepted Answer

A) True 
 B)False

Question 6

Which cannot be a characteristic of an oligopolistic industry?

Accepted Answer

A)  differentiated products
B)  a large number of consumers
C)  significant barriers to entry
D)  a perfectly elastic firm demand curveE) B) and C)
F) A) and B)

Question 7

In game theory, a repeated game is one

Accepted Answer

A)  where a pair of players mimic the actions of another pair of players.
B)  that recurs more than once between two players.
C)  where the payoff matrix shows equal payoffs for two players.
D)  that is replicated in other parts of the market.E) A) and C)
F) B) and C)

Question 8

Prices in oligopolistic industries are predicted to fluctuate widely and frequently compared to other market structures.

Accepted Answer

A) True 
 B)False

Question 9

In an oligopoly, producers' agreements to restrict output tend to be unstable because each firm has an incentive to

Accepted Answer

A)  produce more than its output quota.
B)  lower both its price and its output.
C)  raise its price above the cooperative price.
D)  establish competitive price and output levels.E) A) and C)
F) None of the above

Question 10

Price leadership in an oligopoly entails an implicit or tacit form of collusion.

Accepted Answer

A) True 
 B)False

Question 11

A zero-sum game is one where a player will always end up gaining nothing, regardless of his strategy.

Accepted Answer

A) True 
 B)False

Question 12

The Herfindahl index for an industry is 2,550.Which of the following sets of market shares and industry with four firms would produce such an index?

Accepted Answer

A)  20, 20, 30, and 30
B)  25, 25, 25, and 25
C)  20, 25, 25, and 30
D)  10, 20, 30, and 40E) None of the above
F) B) and D)

Question 13

In an oligopolistic market,

Accepted Answer

A)  one firm is always dominant.
B)  products may be standardized or differentiated.
C)  the four largest firms account for 20 percent or less of total sales.
D)  the industry is monopolistically competitive.E) A) and B)
F) A) and C)

Question 14

As a general rule, oligopoly exists when the four-firm concentration ratio

Accepted Answer

A)  equals the Herfindahl index.
B)  yields a Herfindahl index below 500.
C)  is 40 percent or more.
D)  is 50 percent or more.E) A) and B)
F) A) and C)

Question 15

This industry shown in this table illustrates

Accepted Answer

A)  pure competition.
B)  monopolistic competition.
C)  oligopoly.
D)  pure monopoly.E) None of the above
F) A) and D)

Question 16

Other things being equal, a firm in a cartel will most likely cheat on a price-fixing agreement by

Accepted Answer

A)  increasing price and restricting its output.
B)  organizing promotions of the product.
C)  secretly increasing sales to a large number of small customers.
D)  secretly lowering price and increasing sales to a few customers.E) A) and B)
F) A) and C)

Question 17

Advertising can impede economic efficiency when it

Accepted Answer

A)  increases entry barriers.
B)  reduces brand loyalty.
C)  enables firms to achieve substantial economies of scale.
D)  increases consumer awareness of substitute products.E) B) and C)
F) A) and B)

Question 18

A positive effect of advertising for society is that it

Accepted Answer

A)  increases market share for the dominant firm in the industry.
B)  provides useful information to reduce search cost for consumers.
C)  raises barriers to entry into the industry and protects existing firms.
D)  creates price leadership and gives firms guidance in dealing with rivals.E) B) and C)
F) C) and D)

Question 19

Industry Y is dominated by five large firms that hold market shares of 20, 25, 15, 10, and 25 percent.The four-firm concentration ratio for this industry is

Accepted Answer

A)  70 percent.
B)  80 percent.
C)  85 percent.
D)  90 percent.E) A) and D)
F) B) and C)

Question 20

The copper, aluminum, cement, and industrial alcohol industries are examples of

Accepted Answer

A)  interproduct competition.
B)  homogeneous oligopoly.
C)  monopolistic competition.
D)  differentiated oligopoly.E) B) and C)
F) A) and D)

Exam 14: Oligopoly and Strategic Behavior

The larger the Herfindahl index, the

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In game theory, a repeated game is one

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Which of the following best describes the efficiency results in oligopoly?

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The Herfindahl index for an industry is 2,550.Which of the following sets of market shares and industry with four firms would produce such an index?

Correct AnswerverifiedShow Answer

Which statement concerning the kinked demand curve model of oligopoly is false?

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As a general rule, oligopoly exists when the four-firm concentration ratio

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A positive effect of advertising for society is that it

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Two industries that have the same four-firm concentration ratio can have significantly different Herfindahl indexes.

Correct AnswerverifiedShow Answer

Advertising can enhance economic efficiency when it

Correct AnswerverifiedShow Answer

Industry Y is dominated by five large firms that hold market shares of 20, 25, 15, 10, and 25 percent.The four-firm concentration ratio for this industry is

Correct AnswerverifiedShow Answer

Prices in oligopolistic industries are predicted to fluctuate widely and frequently compared to other market structures.

Correct AnswerverifiedShow Answer

A zero-sum game is one where a player will always end up gaining nothing, regardless of his strategy.

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Price leadership in an oligopoly entails an implicit or tacit form of collusion.

Correct AnswerverifiedShow Answer

In an oligopoly, producers' agreements to restrict output tend to be unstable because each firm has an incentive to

Correct AnswerverifiedShow Answer

Other things being equal, a firm in a cartel will most likely cheat on a price-fixing agreement by

Correct AnswerverifiedShow Answer

This industry shown in this table illustrates

Correct AnswerverifiedShow Answer

The copper, aluminum, cement, and industrial alcohol industries are examples of

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Which cannot be a characteristic of an oligopolistic industry?

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In an oligopolistic market,

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Advertising can impede economic efficiency when it

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