Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

In repeated games,credible threats are necessary for the players to reach a Nash equilibrium.

Accepted Answer

A) True 
 B)False

Question 3

Firms are more likely to collude when the economy is in a recession.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following best describes a Nash equilibrium?

Accepted Answer

A)   An outcome from which one or both competitors can improve their position by adopting an alternative strategy.
B)   The unstable outcome of a repeated game.
C)   An outcome that is stable only because of credible threats.
D)   An outcome that both competitors see as optimal,given the strategy of their rival.E) A) and D)
F) A) and C)

Question 5

If the number of firms in a monopolistically competitive industry increases and the degree of product differentiation diminishes:

Accepted Answer

A)   the likelihood of realizing economic profits in the long run would be enhanced.
B)   individual firms would now be operating at outputs where their average total costs would be higher.
C)   the industry would more closely approximate pure competition.
D)   the likelihood of collusive pricing would increase.E) C) and D)
F) A) and B)

Question 6

Oligopolistic industries are characterized by:

Accepted Answer

A)   a few dominant firms and substantial entry barriers.
B)   a few dominant firms and no barriers to entry.
C)   a large number of firms and low entry barriers.
D)   a few dominant firms and low entry barriers.E) None of the above
F) A) and B)

Question 7

In long-run equilibrium,a monopolistically competitive producer achieves:

Accepted Answer

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

Question 8

The kinked-demand curve model of oligopoly:

Accepted Answer

A)   assumes a firm's rivals will ignore a price cut but match a price increase.
B)   embodies the possibility that changes in unit costs will have no effect on equilibrium price and output.
C)   assumes a firm's rivals will match any price change it may initiate.
D)   assumes a firm's rivals will ignore any price change it may initiate.E) A) and B)
F) B) and C)

Question 9

The study of how people (or firms) behave in strategic situations is called:

Accepted Answer

A)   cost-benefit analysis.
B)   recursive analysis.
C)   normative economics.
D)   game theory.E) B) and C)
F) A) and C)

Question 10

An industry having a four-firm concentration ratio of 85 percent:

Accepted Answer

A)   approximates pure competition.
B)   is monopolistically competitive.
C)   is a pure monopoly.
D)   is an oligopoly.E) B) and D)
F) B) and C)

Question 11

In the long run,the price charged by a monopolistically competitive firm seeking to maximize profit will:

Accepted Answer

A)   be less than both MC and ATC.
B)   exceed ATC but equal MC.
C)   exceed MC but equal ATC.
D)   exceed both MC and ATC.E) All of the above
F) C) and D)

Question 12

If the four-firm concentration ratio in an oligopolistic industry is 100 percent and each firm has an equal percentage of sales,the Herfindahl index is:

Accepted Answer

A)   10,000.
B)   2,500.
C)   3,750.
D)   1,000.E) B) and C)
F) B) and D)

Question 13

The demand curve of a monopolistically competitive producer is:

Accepted Answer

A)   less elastic than that of either a pure monopolist or a pure competitor.
B)   less elastic than that of a pure monopolist,but more elastic than that of a pure competitor.
C)   more elastic than that of a pure monopolist,but less elastic than that of a pure competitor.
D)   more elastic than that of either a pure monopolist or a pure competitor.E) B) and D)
F) B) and C)

Question 14

In which of these continuums of degrees of competition (highest to lowest) is oligopoly properly placed?

Accepted Answer

A)   Pure competition,oligopoly,pure monopoly,monopolistic competition.
B)   Oligopoly,pure competition,monopolistic competition,pure monopoly.
C)   Monopolistic competition,pure competition,pure monopoly,oligopoly.
D)   Pure competition,monopolistic competition,oligopoly,pure monopoly.E) B) and C)
F) B) and D)

Question 15

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) A) and B)
F) B) and D)

Question 16

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 C)
F) B) and D)

Question 17

(Consider This) The Native American arts and crafts story illustrates the twin ideas of:

Accepted Answer

A)   product differentiation and monopolistic competition.
B)   excess capacity and monopolistic competition.
C)   local oligopoly and strategic behavior.
D)   pure monopoly and price discrimination.E) All of the above
F) A) and D)

Question 18

Differentiated oligopoly exists where a small number of firms are:

Accepted Answer

A)   producing goods that differ in terms of quality and design.
B)   setting price and output collusively.
C)   setting price and output independently.
D)   producing virtually identical products.E) B) and C)
F) C) and D)

Question 19

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) All of the above
F) None of the above

Question 20

The kinked-demand curve of an oligopolist is based on the assumption that:

Accepted Answer

A)   competitors will follow a price cut but ignore a price increase.
B)   competitors will match both price cuts and price increases.
C)   competitors will ignore a price cut but follow a price increase.
D)   there is no product differentiation.E) A) and D)
F) A) and B)

Exam 13: Monopolistic Competition and Oligopoly

Oligopolistic industries are characterized by:

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The kinked-demand curve of an oligopolist is based on the assumption that:

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An industry having a four-firm concentration ratio of 85 percent:

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Differentiated oligopoly exists where a small number of firms are:

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The study of how people (or firms) behave in strategic situations is called:

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In repeated games,credible threats are necessary for the players to reach a Nash equilibrium.

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We would expect a cartel to achieve:

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If the number of firms in a monopolistically competitive industry increases and the degree of product differentiation diminishes:

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Firms are more likely to collude when the economy is in a recession.

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If the four-firm concentration ratio in an oligopolistic industry is 100 percent and each firm has an equal percentage of sales,the Herfindahl index is:

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In the long run,the price charged by a monopolistically competitive firm seeking to maximize profit will:

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Oligopoly is more difficult to analyze than other market models because:

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Which of the following best describes a Nash equilibrium?

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(Consider This) The Native American arts and crafts story illustrates the twin ideas of:

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

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The kinked-demand curve model of oligopoly:

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The demand curve of a monopolistically competitive producer is:

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Interindustry competition means that:

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In which of these continuums of degrees of competition (highest to lowest) is oligopoly properly placed?

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In long-run equilibrium,a monopolistically competitive producer achieves:

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