Question 1

One inherent factor that tends to destroy collusion among oligopolists is the

Accepted Answer

A)  incentive to cheat.
B)  product differentiation.
C)  mutual interdependence.
D)  leadership of the dominant firm.E) A) and B)
F) All of the above

Question 2

The increased use of plastic bags instead of paper bags in grocery stores and retail shops is an example of

Accepted Answer

A)  overt collusion.
B)  covert collusion.
C)  import competition.
D)  interindustry competition.E) All of the above
F) B) and D)

Question 3

The incentive to cheat within a cartel increases with an increase in the following factors, except

Accepted Answer

A)  the number of firms in the cartel.
B)  economic performance and industry sales.
C)  the number of potential entrants into the industry.
D)  the cost differences among firms.E) All of the above
F) B) and C)

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

A unique feature of an oligopolistic industry is

Accepted Answer

A)  low barriers to entry.
B)  standardized products.
C)  diminishing marginal returns.
D)  mutual interdependence.E) A) and C)
F) None of the above

Question 6

The four-firm concentration ratio for the national industry does not capture the effects of all of the following, except

Accepted Answer

A)  localized markets when transportation costs are high.
B)  interindustry competition.
C)  import competition when there is world trade.
D)  market coverage of the four largest firms.E) C) and D)
F) All of the above

Question 7

Monopolistic competition and oligopoly are more common in the real world than pure competition and monopoly.

Accepted Answer

A) True 
 B)False

Question 8

We would expect a cartel to achieve

Accepted Answer

A)  both allocative efficiency and productive efficiency.
B)  allocative efficiency but not productive efficiency.
C)  productive efficiency but not allocative efficiency.
D)  neither allocative efficiency nor productive efficiency.E) A) and B)
F) A) and C)

Question 9

A major prediction of the kinked demand curve model is

Accepted Answer

A)  price stability in oligopolies.
B)  price instability in oligopolies.
C)  stability of production costs in oligopolies.
D)  instability of costs in oligopolies.E) C) and D)
F) B) and D)

Question 10

Other things equal, cartels and similar collusive arrangements are easier to establish and maintain

Accepted Answer

A)  when there are ample opportunities for the firms to make secret price concessions to selected buyers.
B)  during periods of business-cycle stability and full employment.
C)  when the demand and cost conditions of the participating firms differ substantially.
D)  when the number of firms is relatively large.E) All of the above
F) A) and B)

Question 11

Backward induction in an extensive form game

Accepted Answer

A)  allows the players to alter their strategies as the game is being played.
B)  is used to determine the Nash equilibrium of a game.
C)  is used to identify the decision nodes of a repeated game.
D)  is used primarily to establish whether players should compete or cooperate.E) A) and B)
F) A) and D)

Question 12

Mutual interdependence means that each oligopolistic firm

Accepted Answer

A)  faces a perfectly elastic demand for its product.
B)  must consider the reactions of its rivals when it determines its price policy.
C)  produces a product identical to those of its rivals.
D)  produces a product similar but not identical to the products of its rivals.E) None of the above
F) A) and B)

Question 13

Suppose that an industry is characterized by a few firms and price leadership.We would expect that

Accepted Answer

A)  price would equal marginal cost.
B)  price would equal average total cost.
C)  price would exceed both marginal cost and average total cost.
D)  marginal revenue would exceed marginal cost.E) B) and C)
F) A) and D)

Question 14

If an oligopolist's competitors follow its price cuts but ignore its price increases, the oligopolist would end up holding its price constant even if its marginal cost changes.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following companies was not fined in 2011 for attempting to run an international cartel and fix prices?

Accepted Answer

A)  Intel
B)  Danfoss
C)  Panasonic
D)  WhirlpoolE) B) and C)
F) None of the above

Question 16

If the several oligopolistic firms that compose an industry behave collusively, the resulting price and output will most likely resemble those of

Accepted Answer

A)  bilateral monopoly.
B)  pure monopoly.
C)  monopolistic competition.
D)  pure competition.E) B) and C)
F) All of the above

Question 17

Prices are likely to be least flexible

Accepted Answer

A)  in oligopoly.
B)  in monopolistic competition.
C)  where product demand is inelastic.
D)  in pure competition.E) B) and C)
F) All of the above

Question 18

Game theory, which is used in studying oligopoly behavior, originated from the study of games such as the following, except

Accepted Answer

A)  poker.
B)  solitaire.
C)  chess.
D)  bridge.E) B) and C)
F) A) and C)

Question 19

Game theory

Accepted Answer

A)  is the analysis of how people (or firms)  behave in strategic situations.
B)  is best suited for analyzing purely competitive markets.
C)  reveals that mergers between rival firms are self-defeating.
D)  reveals that price-fixing among firms reduces profits.E) B) and C)
F) All of the above

Question 20

In competing with rivals, oligopolistic firms will tend to use

Accepted Answer

A)  price cuts because they do not add to costs like advertising.
B)  advertising because it is less easily duplicated than price cuts.
C)  collusion because it is a legal way to increase market share.
D)  price wars because they will increase the profits of firms.E) B) and C)
F) B) and D)

Exam 14: Oligopoly and Strategic Behavior

Prices are likely to be least flexible

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Mutual interdependence means that each oligopolistic firm

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If an oligopolist's competitors follow its price cuts but ignore its price increases, the oligopolist would end up holding its price constant even if its marginal cost changes.

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Game theory

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Game theory, which is used in studying oligopoly behavior, originated from the study of games such as the following, except

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One inherent factor that tends to destroy collusion among oligopolists is the

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A unique feature of an oligopolistic industry is

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Monopolistic competition and oligopoly are more common in the real world than pure competition and monopoly.

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The four-firm concentration ratio for the national industry does not capture the effects of all of the following, except

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Which of the following companies was not fined in 2011 for attempting to run an international cartel and fix prices?

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Backward induction in an extensive form game

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In competing with rivals, oligopolistic firms will tend to use

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Other things equal, cartels and similar collusive arrangements are easier to establish and maintain

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The incentive to cheat within a cartel increases with an increase in the following factors, except

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The increased use of plastic bags instead of paper bags in grocery stores and retail shops is an example of

Correct AnswerverifiedShow Answer

If the several oligopolistic firms that compose an industry behave collusively, the resulting price and output will most likely resemble those of

Correct AnswerverifiedShow Answer

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

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A major prediction of the kinked demand curve model is

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Suppose that an industry is characterized by a few firms and price leadership.We would expect that

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We would expect a cartel to achieve

Correct AnswerverifiedShow Answer

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