Question 1

Which would be a qualification to the view that oligopoly is allocatively and productively inefficient?

Accepted Answer

A)  Less foreign competition has stimulated more price competition in oligopolies.
B)  Oligopolies are less technologically competitive, so they lose market share.
C)  Oligopolies may purposely keep prices below short-run profit-maximizing levels to bolster barriers to entry.
D)  The more collusive practices of oligopolies lead to more profit-sharing among firms in the industry.E) C) and D)
F) A) and B)

Question 2

Refer to the diagram. Equilibrium output is

Accepted Answer

A)  j.
B)  h.
C)  g.
D)  f.E) A) and B)
F) A) and C)

Question 3

List the four criteria for determining the "World's Top Brands. "

Accepted Answer

The world's top brands are based on four...

Question 4

The Herfindahl index for the industry described in this table is

Accepted Answer

A)  80.
B)  1,800.
C)  greater than it would be if there were only four firms in the industry.
D)  1,600.E) B) and D)
F) None of the above

Question 5

The four-firm concentration ratio for an industry measures the

Accepted Answer

A)  profitability of the four largest firms in the industry.
B)  extent to which the four largest firms dominate the sales of a good.
C)  percentage of the industry's workforce employed by the four largest firms.
D)  degree of product variation in the industry.E) All of the above
F) A) and D)

Question 6

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 C)

Question 7

Secret conspiracies to fix prices are examples of

Accepted Answer

A)  cartels.
B)  price leadership.
C)  overt collusion.
D)  covert collusion.E) A) and D)
F) All of the above

Question 8

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) None of the above
F) B) and C)

Question 9

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) B) and C)
F) None of the above

Question 10

The primary advantage of displaying a game in extensive form instead of strategic form is that extensive form allows one to

Accepted Answer

A)  display the order in which decisions are made; strategic form does not.
B)  analyze repeated games; strategic form does not.
C)  determine the existence of a Nash equilibrium; strategic form does not.
D)  determine whether credible threats are possible; strategic form does not.E) A) and C)
F) A) and B)

Question 11

A defining characteristic of an oligopolistic market is that there are

Accepted Answer

A)  many buyers.
B)  few buyers.
C)  few sellers.
D)  many sellers.E) A) and B)
F) A) and C)

Question 12

Interindustry competition means that

Accepted Answer

A)  in oligopolistic industries, a few large firms compete with one another in bidding down product price.
B)  in some markets, the producers of a particular product might face competition from products produced by other industries.
C)  firms that sell a product at one stage of production are faced with firms that buy the product at the next stage of production.
D)  in most industries, there are usually a number of firms producing identical products.E) A) and B)
F) A) and C)

Question 13

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. If firm A chooses its dominant strategy and firm B chooses a strategy that is not dominant, then the payoffs will be

Accepted Answer

A)  $3M for both firms.
B)  $17M for both firms.
C)  $15 for firm A and $5 for firm B.
D)  $5 for firm A and $15 for firm B.E) B) and D)
F) C) and D)

Question 14

Refer to the payoff matrix. Which of the following statements is true regarding the outcome of this game?

Accepted Answer

A)  Both firms will price high, and this outcome is a prisoner's dilemma.
B)  Both firms will price low, and this outcome is a prisoner's dilemma.
C)  Both firms will price high, but this outcome is not a prisoner's dilemma.
D)  Both firms will price low, but this outcome is not a prisoner's dilemma.E) B) and C)
F) A) and D)

Question 15

Homogeneous oligopolists tend to advertise more than do differentiated oligopolists.

Accepted Answer

A) True 
 B)False

Question 16

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 combination of payoffs would represent a Nash equilibrium?

Accepted Answer

A)  $3M for both firms.
B)  $17M for both firms.
C)  $15 for firm A and $5 for firm B.
D)  $5 for firm A and $15 for firm B.E) None of the above
F) A) and D)

Question 17

A two-player or firm game in which one firm's gain must equal the other firm's loss is called a

Accepted Answer

A)  positive-sum game.
B)  zero-sum game.
C)  negative-sum game.
D)  one-time game.E) A) and C)
F) B) and C)

Question 18

In some games, one player or firm moves first and commits to a strategy to which the rival player or firm will subsequently respond. Such games are called

Accepted Answer

A)  repeated games.
B)  multi-period games.
C)  sequential games.
D)  credible games.E) None of the above
F) A) and B)

Question 19

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

Question 20

If the four-firm concentration ratio in an oligopolistic five-firm industry is 80 percent, and each firm has an equal percentage of sales, the Herfindahl index is

Accepted Answer

A)  8,000.
B)  2,000.
C)  2,500.
D)  1,600.E) C) and D)
F) None of the above

Exam 14: Oligopoly and Strategic Behavior

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 combination of payoffs would represent a Nash equilibrium?

Correct AnswerverifiedShow Answer

List the four criteria for determining the "World's Top Brands. "

Correct AnswerverifiedThe world's top brands are based on four...View AnswerShow Answer

Secret conspiracies to fix prices are examples of

Correct AnswerverifiedShow Answer

The primary advantage of displaying a game in extensive form instead of strategic form is that extensive form allows one to

Correct AnswerverifiedShow Answer

The smaller the Herfindahl index, the

Correct AnswerverifiedShow Answer

The larger the Herfindahl index, the

Correct AnswerverifiedShow Answer

Refer to the diagram. Equilibrium output is

Correct AnswerverifiedShow Answer

The Herfindahl index for the industry described in this table is

Correct AnswerverifiedShow Answer

The four-firm concentration ratio for an industry measures the

Correct AnswerverifiedShow Answer

Backward induction in an extensive form game

Correct AnswerverifiedShow Answer

Which would be a qualification to the view that oligopoly is allocatively and productively inefficient?

Correct AnswerverifiedShow Answer

Advertising can enhance economic efficiency when it

Correct AnswerverifiedShow Answer

A two-player or firm game in which one firm's gain must equal the other firm's loss is called a

Correct AnswerverifiedShow Answer

Homogeneous oligopolists tend to advertise more than do differentiated oligopolists.

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. If firm A chooses its dominant strategy and firm B chooses a strategy that is not dominant, then the payoffs will be

Correct AnswerverifiedShow Answer

Refer to the payoff matrix. Which of the following statements is true regarding the outcome of this game?

Correct AnswerverifiedShow Answer

Interindustry competition means that

Correct AnswerverifiedShow Answer

If the four-firm concentration ratio in an oligopolistic five-firm industry is 80 percent, and each firm has an equal percentage of sales, the Herfindahl index is

Correct AnswerverifiedShow Answer

In some games, one player or firm moves first and commits to a strategy to which the rival player or firm will subsequently respond. Such games are called

Correct AnswerverifiedShow Answer

A defining characteristic of an oligopolistic market is that there are

Correct AnswerverifiedShow Answer

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The world's top brands are based on four...
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