Question 1

Industry Y is dominated by five large firms that hold market shares of 20, 20, 25, 10, and 25 percent. The four-firm concentration ratio for this industry is

Accepted Answer

A)  70 percent.
B)  90 percent.
C)  80 percent.
D)  85 percent.E) B) and D)
F) None of the above

Question 2

Use your basic knowledge and your understanding of market structures to answer this question. Which of the following companies most closely approximates a differentiated oligopolist in a highly concentrated industry?

Accepted Answer

A)  Subway Sandwiches
B)  Pittsburgh Plate Glass
C)  Ford Motor Company
D)  Kaiser AluminumE) B) and C)
F) B) and D)

Question 3

When near-monopolies, like Google in Internet search and Amazon in online shopping, start infringing on each other's turf, what kind of competition results?

Accepted Answer

A)  pure competition
B)  monopolistic competition
C)  oligopolistic competition
D)  legislated competitionE) A) and D)
F) B) and C)

Question 4

In a Stackelberg duopoly,

Accepted Answer

A)  leader firms are always dominant.
B)  no Nash equilibrium is possible.
C)  the two firms move simultaneously.
D)  one firm is the leader; the other is the follower.E) A) and B)
F) A) and C)

Question 5

In a zero-sum game, the gains by one player will be exactly offset by the losses of the other.

Accepted Answer

A) True 
 B)False

Question 6

Mergers of firms in an industry tend to

Accepted Answer

A)  transform monopolistic competition into pure competition.
B)  transform monopolistic competition into oligopoly.
C)  reduce the Herfindahl index for the industry.
D)  break up an oligopoly.E) A) and B)
F) B) and D)

Question 7

Concentration ratios measure the

Accepted Answer

A)  geographic distribution of the largest corporations in each industry.
B)  degree to which a particular firm accounts for sales in a given metropolitan area.
C)  percentage of total industry sales accounted for by the largest firms in the industry.
D)  dependence of an industry on its resource suppliers.E) None of the above
F) C) and D)

Question 8

An industry having a four-firm concentration ratio of 32 percent

Accepted Answer

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

Question 9

Price leadership in an oligopoly entails an implicit or tacit form of collusion.

Accepted Answer

A) True 
 B)False

Question 10

Informal collusion to restrict output and increase prices is sometimes referred to as a

Accepted Answer

A)  merger.
B)  cartel.
C)  tacit understanding.
D)  kinked-demand oligopoly.E) All of the above
F) C) and D)

Question 11

One common factor that often weakens collusion among cartel members is the incentive to cheat.

Accepted Answer

A) True 
 B)False

Question 12

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

Question 13

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) C) and D)
F) A) and C)

Question 14

What is the prisoner's dilemma?

Accepted Answer

The prisoner's dilemma is a famous game ...

Question 15

Suppose that Firm B in this table was found guilty of antitrust violations and split into two firms with equal market share. This would cause the Herfindahl index to

Accepted Answer

A)  rise to 2,500.
B)  fall to 2,500.
C)  fall to 2,450.
D)  rise to 2,450.E) A) and B)
F) A) and C)

Question 16

The payoff matrix represents

Accepted Answer

A)  a zero-sum game.
B)  a negative-sum game.
C)  a positive-sum game.
D)  a game that can only be played in a single time period.E) A) and B)
F) B) and C)

Question 17

Which of the following best describes the efficiency results in oligopoly?

Accepted Answer

A)  P > MC and P = minimum ATC.
B)  P = MC and P > minimum ATC.
C)  P = MC and P = minimum ATC.
D)  P > MC and P > minimum ATC.E) None of the above
F) B) and C)

Question 18

In game theory, the credibility of a threat

Accepted Answer

A)  determines whether or not a Nash equilibrium to a game exists.
B)  influences the degree of cooperation between two rivals.
C)  is relevant only in simultaneous games.
D)  determines whether or not a firm has a dominant strategy.E) A) and B)
F) A) and C)

Question 19

If one player in a game has a dominant strategy, the other player must also have a dominant strategy.

Accepted Answer

A) True 
 B)False

Question 20

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 B)
F) A) and C)

Exam 14: Oligopoly and Strategic Behavior

The payoff matrix represents

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Use your basic knowledge and your understanding of market structures to answer this question. Which of the following companies most closely approximates a differentiated oligopolist in a highly concentrated industry?

Correct AnswerverifiedShow Answer

Price leadership in an oligopoly entails an implicit or tacit form of collusion.

Correct AnswerverifiedShow Answer

Mergers of firms in an industry tend to

Correct AnswerverifiedShow Answer

Suppose that Firm B in this table was found guilty of antitrust violations and split into two firms with equal market share. This would cause the Herfindahl index to

Correct AnswerverifiedShow Answer

In a Stackelberg duopoly,

Correct AnswerverifiedShow Answer

An industry having a four-firm concentration ratio of 32 percent

Correct AnswerverifiedShow Answer

Concentration ratios measure the

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If one player in a game has a dominant strategy, the other player must also have a dominant strategy.

Correct AnswerverifiedShow Answer

In a zero-sum game, the gains by one player will be exactly offset by the losses of the other.

Correct AnswerverifiedShow Answer

When near-monopolies, like Google in Internet search and Amazon in online shopping, start infringing on each other's turf, what kind of competition results?

Correct AnswerverifiedShow Answer

One common factor that often weakens collusion among cartel members is the incentive to cheat.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following best describes the efficiency results in oligopoly?

Correct AnswerverifiedShow Answer

In game theory, the credibility of a threat

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Industry Y is dominated by five large firms that hold market shares of 20, 20, 25, 10, and 25 percent. The four-firm concentration ratio for this industry is

Correct AnswerverifiedShow Answer

What is the prisoner's dilemma?

Correct AnswerverifiedThe prisoner's dilemma is a famous game ...View AnswerShow Answer

A unique feature of an oligopolistic industry is

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Informal collusion to restrict output and increase prices is sometimes referred to as a

Correct AnswerverifiedShow Answer

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The prisoner's dilemma is a famous game ...
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