Question 1

The mutual interdependence that characterizes oligopoly arises because

Accepted Answer

A)  the products of various firms are homogeneous.
B)  the products of various firms are differentiated.
C)  each firm in an oligopoly depends on its own pricing strategy and that of its rivals.
D)  the demand curves of firms are kinked at the prevailing price.

Question 2

A high concentration ratio indicates that

Accepted Answer

A)  the industry is highly profitable.
B)  the industry is highly competitive.
C)  many firms produce most of the output in an industry.
D)  few firms produce most of the output in an industry.

Question 3

Oligopolists use limit pricing to maximize short-run profits.

Accepted Answer

A) True 
 B)False

Question 4

If advertising succeeds in enhancing brand loyalty among consumers, it tends to enhance the monopoly power of the seller.

Accepted Answer

A) True 
 B)False

Question 5

The tablet-computer market is best characterized as a(n)

Accepted Answer

A)  pure competition.
B)  monopolistic competition.
C)  oligopoly.
D)  monopoly.

Question 6

Which of the following terms best defines the choices available to the players of a game?

Accepted Answer

A)  terminal nodes
B)  backward induction
C)  decision nodes
D)  subgame perfect Nash equilibrium

Question 7

A firm in a cartel typically cheats on its collusive agreement by raising its price and restricting output more than it agreed to with other cartel members.

Accepted Answer

A) True 
 B)False

Question 8

Mutual interdependence refers to the situation when entry by new firms into an industry will tend to shrink the profits of existing firms.

Accepted Answer

A) True 
 B)False

Question 9

One would expect that collusion among oligopolistic producers would be easiest to achieve in which of the following cases?

Accepted Answer

A)  a rather large number of firms producing a differentiated product
B)  a very small number of firms producing a differentiated product
C)  a rather large number of firms producing a homogeneous product
D)  a very small number of firms producing a homogeneous product

Question 10

Price leadership represents a situation where oligopolistic firms

Accepted Answer

A)  reduce their reliance on nonprice competition.
B)  form a cartel.
C)  face a kinked demand curve.
D)  tacitly collude.

Question 11

In 2014, advertising expenditures in the United States were

Accepted Answer

A)  10 to 12 percent of GDP.
B)  about $103 billion.
C)  about $141 billion.
D)  about $539 billion.

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

The kinked-demand model of oligopoly assumes that

Accepted Answer

A)  rivals will ignore price increases but will match price cuts.
B)  rivals will ignore price cuts but will match price increases.
C)  the oligopolistic firms are colluding.
D)  a firm faces a more elastic demand curve if it cuts its price, and less elastic if it raises its price.

Question 14

In game theory, sequential games can be displayed or summarized in two forms,

Accepted Answer

A)  collusive form and strategic form.
B)  strategic form and extensive form.
C)  payoff matrix form and strategic form.
D)  extensive form and game-tree form.

Question 15

The economic inefficiency in an oligopoly may be reduced by the following, except

Accepted Answer

A)  increased competition from foreign producers.
B)  limit pricing due to potential entrants.
C)  economic profits used to fund technological advance.
D)  aggressive advertising by rivals.

Question 16

A dominant strategy is a player's move or action that

Accepted Answer

A)  is better than any alternative option, regardless of what the other player does.
B)  yields her a higher payoff than the other player.
C)  results in the highest possible payoff, assuming a specific action by the other player.
D)  gives the largest total payoff for the two players combined.

Question 17

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 competition

Question 18

The oligopolist's kinked-demand curve is highly elastic below and highly inelastic above the going product price.

Accepted Answer

A) True 
 B)False

Question 19

Price wars among oligopolists tend to

Accepted Answer

A)  strengthen the price leadership model.
B)  reduce profits for the firms.
C)  hurt the buyers of the product.
D)  occur when sales growth in the industry is strong.

Question 20

Which would make it easier to maintain an effective collusive agreement in a cartel?

Accepted Answer

A)  the emergence of a number of potential entrant firms
B)  a decrease in the elasticity of demand for the cartel's product
C)  an increase in the number of substitutes for products produced by the cartel
D)  a new method of pricing that makes it more difficult for firms in the cartel to determine the prices at which other cartel members are selling their product

Exam 14: Oligopoly and Strategic Behavior

The mutual interdependence that characterizes oligopoly arises because

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The tablet-computer market is best characterized as a(n)

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Oligopolists use limit pricing to maximize short-run profits.

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In game theory, sequential games can be displayed or summarized in two forms,

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Price wars among oligopolists tend to

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Which of the following terms best defines the choices available to the players of a game?

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A high concentration ratio indicates that

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Which would make it easier to maintain an effective collusive agreement in a cartel?

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If advertising succeeds in enhancing brand loyalty among consumers, it tends to enhance the monopoly power of the seller.

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In 2014, advertising expenditures in the United States were

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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?

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

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The oligopolist's kinked-demand curve is highly elastic below and highly inelastic above the going product price.

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The economic inefficiency in an oligopoly may be reduced by the following, except

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Mutual interdependence refers to the situation when entry by new firms into an industry will tend to shrink the profits of existing firms.

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One would expect that collusion among oligopolistic producers would be easiest to achieve in which of the following cases?

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The kinked-demand model of oligopoly assumes that

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A firm in a cartel typically cheats on its collusive agreement by raising its price and restricting output more than it agreed to with other cartel members.

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A dominant strategy is a player's move or action that

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Price leadership represents a situation where oligopolistic firms

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