Question 1

The kinked-demand curve model helps to explain price rigidity because

Accepted Answer

A)  there is a gap in the marginal revenue curve within which changes in marginal cost will not affect output or price.
B)  demand is inelastic above and elastic below the going price.
C)  the model assumes firms are engaging in some form of collusion.
D)  the associated marginal revenue curve is perfectly elastic at the going price.E) B) and D)
F) A) and C)

Question 2

A cartel is

Accepted Answer

A)  a form of covert collusion.
B)  legal in the United States.
C)  always successful in raising profits.
D)  a formal agreement among firms to collude.E) A) and B)
F) B) and C)

Question 3

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 4

The diagram shows the extensive form version of a strategic game between the two nationally dominant coffee sellers, Corporate Coffee and Jumbo Java, both of whom are considering opening coffee shops in a new town. The payoffs represent, in thousands per month, the profit (or loss) the firm will realize from its decision. Which of the following statements is true about this game?

Accepted Answer

A)  It would be a Stackelberg duopoly if both firms gained from entering the new market.
B)  It represents a Stackelberg duopoly.
C)  It would be a Stackelberg duopoly if Jumbo Java could prevent Corporate Coffee's entry into the market.
D)  It would be a Stackelberg duopoly if the two firms moved simultaneously.E) A) and D)
F) None of the above

Question 5

Microsoft

Accepted Answer

A)  dominates the primary Internet markets.
B)  is attempting to gain market share in the Internet, smartphone, and tablet markets in an effort to offset a shrinking PC market.
C)  has colluded with Amazon and Google to fix online advertising prices.
D)  holds a near-monopoly in the Internet search market.E) All of the above
F) A) and D)

Question 6

Answer the question based on the payoff matrix for a duopoly in which the numbers indicate the profit in millions of dollars for each firm. If the two firms collude to maximize joint profits, the total profits for the two firms will be

Accepted Answer

A)  $350 million.
B)  $400 million.
C)  $500 million.
D)  $525 million.E) A) and C)
F) B) and C)

Question 7

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) A) and B)
F) A) and C)

Question 8

The high concentration ratio for the aluminum industry understates the competition in that industry that comes from the copper industry. This is an example of

Accepted Answer

A)  overt collusion.
B)  covert collusion.
C)  import competition.
D)  interindustry competition.E) A) and B)
F) A) and C)

Question 9

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 10

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

Accepted Answer

A) True 
 B)False

Question 11

Oligopolists use limit pricing to maximize short-run profits.

Accepted Answer

A) True 
 B)False

Question 12

If an oligopolist's demand curve has a "kink" in it, then over some interval,

Accepted Answer

A)  the oligopolist's marginal cost curve will have a break in it.
B)  the oligopolist need not fear entry into the industry by new firms.
C)  the oligopolist's competitors will not react to its price changes, either up or down.
D)  changes in marginal cost will not cause a change in the profit-maximizing price.E) C) and D)
F) A) and B)

Question 13

A strategy that is better than any alternative strategy-regardless of what the other firm does-is called a

Accepted Answer

A)  dominant strategy.
B)  simultaneous strategy.
C)  positive-sum strategy.
D)  one-time strategy.E) B) and C)
F) A) and B)

Question 14

A sequential game can be modeled in two forms: payoff-matrix form and game-tree form.

Accepted Answer

A) True 
 B)False

Question 15

If the four-firm concentration ratio for industry X is 60,

Accepted Answer

A)  the four largest firms account for 60 percent of total sales.
B)  each of the four largest firms accounts for 15 percent of total sales.
C)  the four largest firms account for 60 percent of total advertising expenditures.
D)  the industry is monopolistically competitive, but on the threshold of being an oligopoly.E) A) and B)
F) A) and C)

Question 16

Refer to the payoff matrix. Which cell represents the equilibrium outcome of this game?

Accepted Answer

A)  A
B)  B
C)  C
D)  DE) B) and D)
F) A) and B)

Question 17

Answer the question based on the payoff matrix for a duopoly in which the numbers indicate the profit from either opening a coffee shop in a small town or not opening the coffee shop. If the firms are playing a sequential game, then

Accepted Answer

A)  there is first-mover advantage.
B)  the firm with the first move will choose not to open a coffee shop.
C)  the firm with the first move will choose to open a coffee shop.
D)  both firms will choose not to open a coffee shop, regardless of which firm chooses first.E) B) and D)
F) B) and C)

Question 18

Refer to the payoff matrix. Bob's Burgers and Sam's Sandwiches are competing restaurants in a small town. Both are considering adding pizza to their line of products. If this is a sequential game,

Accepted Answer

A)  whoever moves first to add pizza will discourage the other from adding pizza.
B)  neither firm will add pizza, regardless of who moves first.
C)  both firms will add pizza, regardless of who moves first.
D)  there is only one possible Nash equilibrium for this game.E) A) and D)
F) B) and D)

Question 19

If an oligopolist is faced with a marginal revenue curve that has a gap in it, we may assume that

Accepted Answer

A)  it is colluding with its rivals to maximize joint profits.
B)  its demand curve is kinked.
C)  it is selling a standardized product.
D)  it is selling a differentiated product.E) A) and C)
F) B) and C)

Question 20

Game-theory analyzes oligopoly behavior by using concepts derived from the study of games-of-chance such as dice games, solitaire, and roulette.

Accepted Answer

A) True 
 B)False

Exam 14: Oligopoly and Strategic Behavior

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

Correct Answer
verified

If an oligopolist is faced with a marginal revenue curve that has a gap in it, we may assume that

Correct Answer
verified

A sequential game can be modeled in two forms: payoff-matrix form and game-tree form.

Correct Answer
verified

If an oligopolist's demand curve has a "kink" in it, then over some interval,

Correct Answer
verified

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

Correct Answer
verified

Game-theory analyzes oligopoly behavior by using concepts derived from the study of games-of-chance such as dice games, solitaire, and roulette.

Correct Answer
verified

The high concentration ratio for the aluminum industry understates the competition in that industry that comes from the copper industry. This is an example of

Correct Answer
verified

Answer the question based on the payoff matrix for a duopoly in which the numbers indicate the profit from either opening a coffee shop in a small town or not opening the coffee shop. If the firms are playing a sequential game, then

Correct Answer
verified

Refer to the payoff matrix. Bob's Burgers and Sam's Sandwiches are competing restaurants in a small town. Both are considering adding pizza to their line of products. If this is a sequential game,

Correct Answer
verified

Oligopolists use limit pricing to maximize short-run profits.

Correct Answer
verified

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 Answer
verified

The kinked-demand curve model helps to explain price rigidity because

Correct Answer
verified

If the four-firm concentration ratio for industry X is 60,

Correct Answer
verified

Microsoft

Correct Answer
verified

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.

Correct Answer
verified

Correct Answer
verified

A cartel is

Correct Answer
verified

Answer the question based on the payoff matrix for a duopoly in which the numbers indicate the profit in millions of dollars for each firm. If the two firms collude to maximize joint profits, the total profits for the two firms will be

Correct Answer
verified

A strategy that is better than any alternative strategy-regardless of what the other firm does-is called a

Correct Answer
verified

Refer to the payoff matrix. Which cell represents the equilibrium outcome of this game?

Correct Answer
verified

Exam 14: Oligopoly and Strategic Behavior

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

Correct AnswerverifiedShow Answer

If an oligopolist is faced with a marginal revenue curve that has a gap in it, we may assume that

Correct AnswerverifiedShow Answer

A sequential game can be modeled in two forms: payoff-matrix form and game-tree form.

Correct AnswerverifiedShow Answer

If an oligopolist's demand curve has a "kink" in it, then over some interval,

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Game-theory analyzes oligopoly behavior by using concepts derived from the study of games-of-chance such as dice games, solitaire, and roulette.

Correct AnswerverifiedShow Answer

The high concentration ratio for the aluminum industry understates the competition in that industry that comes from the copper industry. This is an example of

Correct AnswerverifiedShow Answer

Answer the question based on the payoff matrix for a duopoly in which the numbers indicate the profit from either opening a coffee shop in a small town or not opening the coffee shop. If the firms are playing a sequential game, then

Correct AnswerverifiedShow Answer

Refer to the payoff matrix. Bob's Burgers and Sam's Sandwiches are competing restaurants in a small town. Both are considering adding pizza to their line of products. If this is a sequential game,

Correct AnswerverifiedShow Answer

Oligopolists use limit pricing to maximize short-run profits.

Correct AnswerverifiedShow Answer

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

The kinked-demand curve model helps to explain price rigidity because

Correct AnswerverifiedShow Answer

If the four-firm concentration ratio for industry X is 60,

Correct AnswerverifiedShow Answer

Microsoft

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A cartel is

Correct AnswerverifiedShow Answer

Answer the question based on the payoff matrix for a duopoly in which the numbers indicate the profit in millions of dollars for each firm. If the two firms collude to maximize joint profits, the total profits for the two firms will be

Correct AnswerverifiedShow Answer

A strategy that is better than any alternative strategy-regardless of what the other firm does-is called a

Correct AnswerverifiedShow Answer

Refer to the payoff matrix. Which cell represents the equilibrium outcome of this game?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified