Question 1

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) All of the above

Question 2

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.E) A) and C)
F) A) and B)

Question 3

A defining characteristic of an oligopolistic market is that there are

Accepted Answer

A)  many buyers.
B)  few buyers.
C)  few sellers.
D)  many sellers.E) B) and C)
F) A) and B)

Question 4

The characteristic most closely associated with oligopoly is

Accepted Answer

A)  easy entry into the industry.
B)  a few large producers.
C)  product standardization.
D)  no control over price.E) All of the above
F) B) and C)

Question 5

Three major means of collusion by oligopolists are

Accepted Answer

A)  cartels, informal understandings, and price leadership.
B)  market sharing, mutual interdependence, and product differentiation.
C)  cartels, kinked-demand pricing, and product differentiation.
D)  informal understandings, P = MC pricing, and mutual interdependence.E) B) and D)
F) A) and D)

Question 6

OPEC provides an example of

Accepted Answer

A)  an unwritten, informal understanding.
B)  noncollusive oligopoly.
C)  an international cartel.
D)  a monopolistically competitive industry.E) B) and C)
F) None of the above

Question 7

A game has a Nash equilibrium when the two players' dominant strategies

Accepted Answer

A)  depend on what the other player does.
B)  intersect in a specific cell of the payoff matrix.
C)  result in the largest total payoff for the two players combined.
D)  result in no loss for either player.E) A) and B)
F) C) and D)

Question 8

If output is set at the kink of the kinked-demand model, then there

Accepted Answer

A)  is a strong incentive for rivals to decrease prices.
B)  is a strong incentive for rivals to increase prices.
C)  is one price at which marginal revenue equals marginal cost.
D)  are several prices at which marginal revenue equals marginal cost.E) A) and C)
F) B) and D)

Question 9

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.E) A) and D)
F) B) and D)

Question 10

A prediction from the kinked demand curve model of oligopoly is that, for an individual firm, small changes in

Accepted Answer

A)  demand will lead to changes in price or output.
B)  marginal revenue will lead to changes in price and output.
C)  marginal cost will lead to changes in price and output.
D)  marginal cost will not lead to changes in price or output.E) A) and B)
F) A) and C)

Question 11

Game-theory analyzes oligopoly behavior by using concepts derived from the study of games-of-chance such as dice games, solitaire, and roulette.

Accepted Answer

A) True 
 B)False

Question 12

The study of how people behave and decide in strategic situations is called

Accepted Answer

A)  game theory.
B)  collusion.
C)  market structure.
D)  product differentiation.E) B) and D)
F) A) and C)

Question 13

If an oligopolist is faced with a marginal revenue curve that has a gap in it, we may assume that

Accepted Answer

A)  it is colluding with its rivals to maximize joint profits.
B)  its demand curve is kinked.
C)  it is selling a standardized product.
D)  it is selling a differentiated product.E) None of the above
F) All of the above

Question 14

OPEC functions as a classic example of a kinked demand curve oligopoly.

Accepted Answer

A) True 
 B)False

Question 15

The Herfindahl index is a measure of

Accepted Answer

A)  profitability in an industry.
B)  the price level in an industry.
C)  the costs in an industry.
D)  market power in an industry.E) A) and B)
F) A) and C)

Question 16

A player is said to have a dominant strategy when one of the options available is superior, regardless of what strategy the other player chooses.

Accepted Answer

A) True 
 B)False

Question 17

Collusive control over price may permit oligopolists to

Accepted Answer

A)  use new technology, achieve economies of scale, and get government subsidies.
B)  achieve economies of scale, reduce costs, and prevent price cheating.
C)  increase product demand, increase product supply, and lower cost.
D)  reduce uncertainty, increase profits, and possibly limit entry of new firms.E) A) and D)
F) All of the above

Question 18

If firms E and Fin this table merged into a single firm, the Herfindahl index would

Accepted Answer

A)  not change.
B)  rise, as would the four-firm concentration ratio.
C)  rise, but the four-firm concentration ratio would remain unchanged.
D)  fall.E) A) and C)
F) A) and B)

Question 19

(Last Word)  Which market structure best characterizes the various Internet markets?

Accepted Answer

A)  differentiated oligopoly
B)  homogeneous oligopoly
C)  monopolistic competition
D)  pure monopolyE) All of the above
F) A) and D)

Question 20

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.E) A) and D)
F) B) and D)

Exam 14: Oligopoly and Strategic Behavior

The Herfindahl index is a measure of

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The study of how people behave and decide in strategic situations is called

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If an oligopolist is faced with a marginal revenue curve that has a gap in it, we may assume that

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A prediction from the kinked demand curve model of oligopoly is that, for an individual firm, small changes in

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A game has a Nash equilibrium when the two players' dominant strategies

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If output is set at the kink of the kinked-demand model, then there

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A defining characteristic of an oligopolistic market is that there are

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OPEC functions as a classic example of a kinked demand curve oligopoly.

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

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Collusive control over price may permit oligopolists to

Correct AnswerverifiedShow Answer

OPEC provides an example of

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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

Three major means of collusion by oligopolists are

Correct AnswerverifiedShow Answer

Cartels are difficult to maintain in the long run because

Correct AnswerverifiedShow Answer

Game-theory analyzes oligopoly behavior by using concepts derived from the study of games-of-chance such as dice games, solitaire, and roulette.

Correct AnswerverifiedShow Answer

A player is said to have a dominant strategy when one of the options available is superior, regardless of what strategy the other player chooses.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If firms E and Fin this table merged into a single firm, the Herfindahl index would

Correct AnswerverifiedShow Answer

(Last Word) Which market structure best characterizes the various Internet markets?

Correct AnswerverifiedShow Answer

The characteristic most closely associated with oligopoly is

Correct AnswerverifiedShow Answer

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