Question 1

(Last Word)  In the Internet search market,

Accepted Answer

A)  Yahoo, Bing, and Google have roughly equal market shares.
B)  the Herfindahl index value is 10,000.
C)  Google holds about 64 percent of the market, while Bing and Yahoo together hold about 34 percent.
D)  government subsidies ensure that search engines are provided at no cost to all Internet users.E) A) and C)
F) B) and C)

Question 2

The adoption of a limit-pricing strategy by oligopolists would tend to make the price of the product closer to marginal cost.

Accepted Answer

A) True 
 B)False

Question 3

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) None of the above

Question 4

The so-called first-mover advantage may be observed in

Accepted Answer

A)  repeated games.
B)  multi-period games.
C)  sequential games
D)  credible games.E) A) and B)
F) A) and C)

Question 5

In which of the following market models do demand and marginal revenue not diverge?

Accepted Answer

A)  pure competition
B)  monopolistic competition
C)  pure monopoly
D)  oligopolyE) All of the above
F) C) and D)

Question 6

The product in an oligopolistic market

Accepted Answer

A)  is assumed to be homogeneous.
B)  is always differentiated from one firm to another.
C)  may be homogeneous or differentiated.
D)  has very many close substitutes.E) B) and C)
F) All of the above

Question 7

Which of the following is a unique feature of oligopoly?

Accepted Answer

A)  mutual interdependence
B)  advertising expenditures
C)  product differentiation
D)  nonprice competitionE) A) and B)
F) None of the above

Question 8

Collusion among firms always involves formal agreements.

Accepted Answer

A) True 
 B)False

Question 9

Oligopoly is more difficult to analyze than other market models because

Accepted Answer

A)  the number of firms is so large that market behavior cannot be accurately predicted.
B)  the marginal cost and marginal revenue curves of an oligopolist play no part in the determination of equilibrium price and quantity.
C)  of mutual interdependence and the fact that oligopoly outcomes are less certain than in other market models.
D)  unlike the firms of other market models, it cannot be assumed that oligopolists are profit maximizers.E) None of the above
F) B) and D)

Question 10

Firms must consider the possible reaction of rivals to their own decisions and actions in

Accepted Answer

A)  monopolistic competition only.
B)  monopolistic competition and oligopoly.
C)  oligopoly only.
D)  pure competition and oligopoly.E) A) and C)
F) B) and C)

Question 11

Advertising can enhance economic efficiency when it

Accepted Answer

A)  increases brand loyalty.
B)  expands sales such that firms achieve substantial economies of scale.
C)  keeps new firms from entering profitable industries.
D)  is undertaken by pure competitors.E) B) and D)
F) A) and C)

Question 12

In the long run, an oligopoly

Accepted Answer

A)  will produce less than a monopoly.
B)  may be able to earn positive economic profits.
C)  will always produce in the range of decreasing returns to scale.
D)  will produce on the portion of the demand curve where demand is price-inelastic.E) B) and C)
F) None of the above

Question 13

When oligopolists collude, they collectively tend to achieve similar results as a monopolist.

Accepted Answer

A) True 
 B)False

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

You are told that the four-firm concentration ratio in an industry is 20.Based on this information you can conclude that

Accepted Answer

A)  each of the top four firms has 20 percent of industry sales.
B)  the four largest firms account for a combined 80 percent of the industry sales.
C)  the four largest firms account for 20 percent of industry sales.
D)  each of the four largest firms accounts for 5 percent of industry sales.E) A) and C)
F) B) and C)

Question 16

If a particular bank regularly announces changes in its interest rate schedules before its competitors, who then set rates very close to those announced by that bank, this could be described as

Accepted Answer

A)  markup pricing.
B)  predatory pricing.
C)  price leadership.
D)  explicit price collusion.E) B) and C)
F) None of the above

Question 17

Advertising can increase a firm's sales, thereby allowing the firm to gain economies of scale, and that would be good for efficiency.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is not a reason for there being no single standard model of oligopoly?

Accepted Answer

A)  There is great diversity of situations in oligopoly markets.
B)  The products of oligopolistic firms cannot be standardized.
C)  Mutual interdependence complicates the analysis of firm behavior and results.
D)  Firms cannot predict what their rivals' actions and reactions might be.E) A) and D)
F) A) and B)

Question 19

A game where players or firms select their optimal strategies for a single time period without regard for possible interactions in subsequent periods is called a

Accepted Answer

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

Question 20

If there are significant economies of scale in an industry, then

Accepted Answer

A)  a firm that is large may be able to produce at a lower unit cost than can a small firm.
B)  a firm that is large will have to charge a higher price than will a small firm.
C)  entry to that industry will be easy.
D)  firms must differentiate their products to earn economic profits.E) None of the above
F) B) and D)

Exam 14: Oligopoly and Strategic Behavior

Firms must consider the possible reaction of rivals to their own decisions and actions in

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(Last Word) In the Internet search market,

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Oligopoly is more difficult to analyze than other market models because

Correct AnswerverifiedShow Answer

Which of the following is not a reason for there being no single standard model of oligopoly?

Correct AnswerverifiedShow Answer

Collusion among firms always involves formal agreements.

Correct AnswerverifiedShow Answer

When oligopolists collude, they collectively tend to achieve similar results as a monopolist.

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The so-called first-mover advantage may be observed in

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In the long run, an oligopoly

Correct AnswerverifiedShow Answer

A game where players or firms select their optimal strategies for a single time period without regard for possible interactions in subsequent periods is called a

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Which of the following is a unique feature of oligopoly?

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

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The product in an oligopolistic market

Correct AnswerverifiedShow Answer

You are told that the four-firm concentration ratio in an industry is 20.Based on this information you can conclude that

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Advertising can increase a firm's sales, thereby allowing the firm to gain economies of scale, and that would be good for efficiency.

Correct AnswerverifiedShow Answer

If a particular bank regularly announces changes in its interest rate schedules before its competitors, who then set rates very close to those announced by that bank, this could be described as

Correct AnswerverifiedShow Answer

In which of the following market models do demand and marginal revenue not diverge?

Correct AnswerverifiedShow Answer

If there are significant economies of scale in an industry, then

Correct AnswerverifiedShow Answer

Advertising can enhance economic efficiency when it

Correct AnswerverifiedShow Answer

The adoption of a limit-pricing strategy by oligopolists would tend to make the price of the product closer to marginal cost.

Correct AnswerverifiedShow Answer

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