Question 1

The Herfindahl index for the industry described in this table is

Accepted Answer

A)  90.
B)  2,750.
C)  greater than it would be if there were only four firms in the industry.
D)  2,700.

Question 2

Advertising may be an efficiency-enhancing activity when it results in the following, except when it

Accepted Answer

A)  enhances competition among sellers.
B)  facilitates the introduction of new products.
C)  increases sales thereby allowing firms to obtain economies of scale.
D)  makes buyers more brand-attached, making their demand less elastic.

Question 3

A major characteristic of oligopolistic firms is that

Accepted Answer

A)  they are price takers.
B)  interdependence exists between it and the other firms in the industry.
C)  they alway produce a differentiated product.
D)  they have a horizontal demand curve.

Question 4

Refer to the game theory matrix, where the numerical data show the profits resulting from alternative combinations of advertising strategies for Ajax and Acme. Ajax's profits are shown in the upper right part of each cell; Acme's profits are shown in the lower left. Without collusion, the outcome of the game

Accepted Answer

A)  maximizes joint profits for the firms.
B)  results in a prisoner's dilemma.
C)  results in greater economic efficiency.
D)  forces one or more firms out of the industry.

Question 5

What two generalizations can be made about the pricing behavior of oligopolists?

Accepted Answer

Two interrelated characteristics of olig...

Question 6

Suppose the Herfindahl indexes for industries A, B, and C are 2,200, 2,000, and 1,600, respectively. These data imply

Accepted Answer

A)  that market power is greatest in industry C.
B)  that market power is greatest in industry B.
C)  that market power is greatest in industry A.
D)  nothing about the degree of concentration across the three industries.

Question 7

A two-player game in which one player's gain is not completely offset by the other player's loss is called a

Accepted Answer

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

Question 8

Which constitutes an obstacle to collusion among oligopolists?

Accepted Answer

A)  a standardized product
B)  a large number of firms
C)  prosperous economic conditions
D)  trademarks and copyrights

Question 9

If a product such as cement or bricks is costly to ship and, therefore, markets are very localized, the national concentration ratio for that industry

Accepted Answer

A)  will be greater than 50 percent.
B)  may understate the degree of monopoly.
C)  may overstate the degree of monopoly.
D)  will yield an accurate impression of the degree of monopoly.

Question 10

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.

Question 11

Generally speaking, oligopolistic industries producing raw materials and semifinished goods usually offer differentiated products, while oligopolists producing consumer goods usually offer standardized products.

Accepted Answer

A) True 
 B)False

Question 12

Cartels are difficult to maintain in the long run because

Accepted Answer

A)  they are illegal in all industrialized countries.
B)  individual members may find it profitable to cheat on agreements.
C)  it is more profitable for the industry to charge a lower price and produce more output.
D)  entry barriers are insignificant in oligopolistic industries.

Question 13

Mutual interdependence means that oligopolistic producers rely primarily on price competition in determining their shares of the total market for their product.

Accepted Answer

A) True 
 B)False

Question 14

Answer the question based on the payoff matrix for a duopoly in which the numbers indicate the profit in thousands of dollars for a high-price or a low-price strategy. If both firms collude to maximize joint profits, the total profits for the two firms will be

Accepted Answer

A)  $1,200,000.
B)  $1,250,000.
C)  $1,400,000.
D)  $1,500,000.

Question 15

If oligopolistic firms facing similar cost and demand conditions successfully collude, price and output results in this industry will be most accurately predicted by which of the following models?

Accepted Answer

A)  the kinked demand curve model of oligopoly
B)  the price-leadership model of oligopoly
C)  the pure monopoly model
D)  the monopolistic competition model

Question 16

Refer to the payoff matrix. Suppose that Speedy Bike and Power Bike are the only two bicycle manufacturing firms serving the market. Both can choose large or small advertising budgets. If this is a repeated game with no cooperation or reciprocity, cell A

Accepted Answer

A)  is not the expected outcome of this game.
B)  is the expected outcome of this game, and it is both a Nash equilibrium and a prisoner's dilemma.
C)  is the expected outcome of this game, but it is neither a Nash equilibrium nor a prisoner's dilemma.
D)  is the expected outcome of this game, and it is a Nash equilibrium but not a prisoner's dilemma.

Question 17

Suppose the only three existing manufacturers of video game players signed a written contract by which each agreed to charge the same price for products and to distribute their products only in the geographical area assigned them in the contract. This best describes

Accepted Answer

A)  cost-plus pricing.
B)  multiproduct pricing.
C)  a cartel.
D)  price leadership.

Question 18

The copper, aluminum, cement, and industrial alcohol industries are examples of

Accepted Answer

A)  interproduct competition.
B)  homogeneous oligopoly.
C)  monopolistic competition.
D)  differentiated oligopoly.

Question 19

Refer to the game theory matrix, where the numerical data show the profits resulting from alternative combinations of advertising strategies for Ajax and Acme. Ajax's profits are shown in the upper right part of each cell; Acme's profits are shown in the lower left. With collusion and no cheating, the outcome of the game is cell

Accepted Answer

A)  A.
B)  B.
C)  C.
D)  D.

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 14: Oligopoly and Strategic Behavior

The Herfindahl index for the industry described in this table is

Correct Answer
verified

Which constitutes an obstacle to collusion among oligopolists?

Correct Answer
verified

The copper, aluminum, cement, and industrial alcohol industries are examples of

Correct Answer
verified

A major characteristic of oligopolistic firms is that

Correct Answer
verified

Suppose the Herfindahl indexes for industries A, B, and C are 2,200, 2,000, and 1,600, respectively. These data imply

Correct Answer
verified

Cartels are difficult to maintain in the long run because

Correct Answer
verified

Mutual interdependence means that oligopolistic producers rely primarily on price competition in determining their shares of the total market for their product.

Correct Answer
verified

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

Correct Answer
verified

Suppose the only three existing manufacturers of video game players signed a written contract by which each agreed to charge the same price for products and to distribute their products only in the geographical area assigned them in the contract. This best describes

Correct Answer
verified

If oligopolistic firms facing similar cost and demand conditions successfully collude, price and output results in this industry will be most accurately predicted by which of the following models?

Correct Answer
verified

Refer to the payoff matrix. Suppose that Speedy Bike and Power Bike are the only two bicycle manufacturing firms serving the market. Both can choose large or small advertising budgets. If this is a repeated game with no cooperation or reciprocity, cell A

Correct Answer
verified

Advertising may be an efficiency-enhancing activity when it results in the following, except when it

Correct Answer
verified

Answer the question based on the payoff matrix for a duopoly in which the numbers indicate the profit in thousands of dollars for a high-price or a low-price strategy. If both firms collude to maximize joint profits, the total profits for the two firms will be

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Generally speaking, oligopolistic industries producing raw materials and semifinished goods usually offer differentiated products, while oligopolists producing consumer goods usually offer standardized products.

Correct Answer
verified

A two-player game in which one player's gain is not completely offset by the other player's loss is called a

Correct Answer
verified

What two generalizations can be made about the pricing behavior of oligopolists?

Correct Answer
verified
Two interrelated characteristics of olig...
View Answer

If a product such as cement or bricks is costly to ship and, therefore, markets are very localized, the national concentration ratio for that industry

Correct Answer
verified

Oligopolistic industries are characterized by

Correct Answer
verified

Exam 14: Oligopoly and Strategic Behavior

The Herfindahl index for the industry described in this table is

Correct AnswerverifiedShow Answer

Which constitutes an obstacle to collusion among oligopolists?

Correct AnswerverifiedShow Answer

The copper, aluminum, cement, and industrial alcohol industries are examples of

Correct AnswerverifiedShow Answer

A major characteristic of oligopolistic firms is that

Correct AnswerverifiedShow Answer

Suppose the Herfindahl indexes for industries A, B, and C are 2,200, 2,000, and 1,600, respectively. These data imply

Correct AnswerverifiedShow Answer

Cartels are difficult to maintain in the long run because

Correct AnswerverifiedShow Answer

Mutual interdependence means that oligopolistic producers rely primarily on price competition in determining their shares of the total market for their product.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose the only three existing manufacturers of video game players signed a written contract by which each agreed to charge the same price for products and to distribute their products only in the geographical area assigned them in the contract. This best describes

Correct AnswerverifiedShow Answer

If oligopolistic firms facing similar cost and demand conditions successfully collude, price and output results in this industry will be most accurately predicted by which of the following models?

Correct AnswerverifiedShow Answer

Refer to the payoff matrix. Suppose that Speedy Bike and Power Bike are the only two bicycle manufacturing firms serving the market. Both can choose large or small advertising budgets. If this is a repeated game with no cooperation or reciprocity, cell A

Correct AnswerverifiedShow Answer

Advertising may be an efficiency-enhancing activity when it results in the following, except when it

Correct AnswerverifiedShow Answer

Answer the question based on the payoff matrix for a duopoly in which the numbers indicate the profit in thousands of dollars for a high-price or a low-price strategy. If both firms collude to maximize joint profits, the total profits for the two firms will be

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Generally speaking, oligopolistic industries producing raw materials and semifinished goods usually offer differentiated products, while oligopolists producing consumer goods usually offer standardized products.

Correct AnswerverifiedShow Answer

A two-player game in which one player's gain is not completely offset by the other player's loss is called a

Correct AnswerverifiedShow Answer

What two generalizations can be made about the pricing behavior of oligopolists?

Correct AnswerverifiedTwo interrelated characteristics of olig...View AnswerShow Answer

If a product such as cement or bricks is costly to ship and, therefore, markets are very localized, the national concentration ratio for that industry

Correct AnswerverifiedShow Answer

Oligopolistic industries are characterized by

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Two interrelated characteristics of olig...
View Answer

Correct Answer
verified

Correct Answer
verified