Question 1

The number of firms in an oligopolistic industry

Accepted Answer

A)   must be less than 10.
B)   must be less than 20.
C)   must be small enough that firms are interdependent.
D)   must be large enough for firms to be independent.E) B) and C)
F) All of the above

Question 2

Which of the following is an example of a horizontal merger?

Accepted Answer

A)   Northeastern Illinois University merging with McDonald's.
B)   Northeastern Illinois University merging with a training academy for new professors.
C)   Northeastern Illinois University merging with Roosevelt University.
D)   Northeastern Illinois University going from a public to a private university.E) A) and B)
F) A) and D)

Question 3

A game in which players collectively gain is known as a

Accepted Answer

A)   zero-sum game.
B)   positive-sum game.
C)   negative-sum game.
D)   cooperative game.E) None of the above
F) B) and D)

Question 4

Which of the following statements about concentration ratios is correct?

Accepted Answer

A)   A high concentration ratio indicates that the industry is a monopoly.
B)   A high concentration ratio indicates that the industry is monopolistically competitive.
C)   A high concentration ratio suggests that the industry is characterized by strategic independence.
D)   A high concentration ratio suggests that the industry is characterized by strategic dependence.E) A) and D)
F) All of the above

Question 5

-Refer to the above figure. The figure gives the payoff matrix for two individuals who are being accused of robbing a bank together. Which of the following is the outcome with cooperation?

Accepted Answer

A)   Both confess.
B)   Both don't confess.
C)   Bob confesses while Harry does not confess.
D)   Harry confesses while Bo does not confess.E) All of the above
F) C) and D)

Question 6

A reaction function is

Accepted Answer

A)   companies colluding in order to make higher than competitive rates of return.
B)   the manner in which one oligopolist reacts to a change in price made by another oligopolist in the industry.
C)   a game in which firms will not negotiate in any way.
D)   when plans made by firms are known as game strategies.E) None of the above
F) A) and B)

Question 7

A market with many sellers, no influence over price, no barriers to entry, a homogeneous product, and an absence of non-price competition is known as

Accepted Answer

A)   perfect competition.
B)   monopolistic competition.
C)   oligopoly.
D)   monopoly.E) A) and D)
F) A) and B)

Question 8

The analytical framework in which two or more firms compete for certain payoffs that depend on the strategy that the others employ is

Accepted Answer

A)   game theory.
B)   the concentration ratio.
C)   a horizontal merger.
D)   network effect.E) B) and C)
F) A) and D)

Question 9

In an oligopolistic market, each firm

Accepted Answer

A)   has a constant marginal cost.
B)   faces a perfectly elastic demand function.
C)   must consider the reaction of rival firms when making a pricing or output decision.
D)   produces at minimum average cost in the long run.E) All of the above
F) A) and B)

Question 10

If an industry has 25 firms that collectively have $150 million in total sales and the top four firms in this industry account for $90 million in sales, what is the concentration ratio of the top four firms in this industry?

Accepted Answer

A)   42 percent
B)   60 percent
C)   70 percent
D)   80 percentE) A) and B)
F) A) and C)

Question 11

-Refer to the above figure. Ajax and Greenco are oligopolists. Above you are given the payoff matrix for the two firms giving the payoff associated with different pricing strategies. What is the dominant strategy for Greenco?

Accepted Answer

A)   high price
B)   low price
C)   There is no best strategy.
D)   Not enough information is given to determine the best strategy.E) B) and D)
F) A) and D)

Question 12

When Goodyear increases its production when Michelin reduces its production, Goodyear is playing a

Accepted Answer

A)   negative-sum game.
B)   cooperative game.
C)   non-cooperative game.
D)   reaction function game.E) C) and D)
F) A) and B)

Question 13

In the wireless communication industry, firms that provide broadband access to the Internet are best regarded as

Accepted Answer

A)   platforms in a shared-input market.
B)   end users in a shared-input market.
C)   platforms in a matchmaking market.
D)   end users in a matchmaking market.E) A) and D)
F) None of the above

Question 14

A network effect arises whenever

Accepted Answer

A)   firms in an oligopolistic industry engage in limit pricing.
B)   firms in an oligopolistic industry engage in a zero-sum game.
C)   a consumer's willingness to purchase a good or service is influenced by how many others also buy or have bought the item.
D)   a producer's willingness to produce a good or service is influenced by how many other firms also produce or have produced the item.E) A) and D)
F) A) and C)

Question 15

In which market structures do firms earn long-term profits of zero?

Accepted Answer

A)   perfect competition and monopolistic competition
B)   monopolistic competition and oligopoly
C)   oligopoly and monopoly
D)   perfect competition and monopolyE) B) and C)
F) A) and B)

Question 16

If a firm is an oligopolist, which is NOT true?

Accepted Answer

A)   It must pay attention to other firms' prices.
B)   It is one of a relatively small number of firms dominating its industry.
C)   It can sell all the units it wants at the going market price.
D)   It is engaged in a strategic game.E) A) and B)
F) B) and D)

Question 17

A market structure characterized by a small number of interdependent sellers is called a(n)

Accepted Answer

A)   monopoly.
B)   monopolistic competition.
C)   monopsony.
D)   oligopoly.E) A) and B)
F) None of the above

Question 18

The way in which an oligopolist acts in response to a price change by a competitor is known as a

Accepted Answer

A)   zero-sum game.
B)   positive-sum game.
C)   reaction function.
D)   cooperative game.E) A) and B)
F) A) and C)

Question 19

In a "game," strategies are

Accepted Answer

A)   the reactions of firms to the changes in the economy.
B)   the laws regulating the industry.
C)   the plans made by the participants.
D)   the potential returns the participants may get.E) A) and B)
F) B) and C)

Question 20

If Verizon Wireless and T-mobile, another wireless service company, were to merge, this would represent

Accepted Answer

A)   a vertical merger.
B)   a horizontal merger.
C)   a cartel.
D)   an up-and-down merger.E) A) and B)
F) B) and C)

Exam 26: Oligopoly and Strategic Behavior

When Goodyear increases its production when Michelin reduces its production, Goodyear is playing a

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In a "game," strategies are

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A market with many sellers, no influence over price, no barriers to entry, a homogeneous product, and an absence of non-price competition is known as

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A game in which players collectively gain is known as a

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The way in which an oligopolist acts in response to a price change by a competitor is known as a

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If an industry has 25 firms that collectively have $150 million in total sales and the top four firms in this industry account for $90 million in sales, what is the concentration ratio of the top four firms in this industry?

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Which of the following is an example of a horizontal merger?

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The analytical framework in which two or more firms compete for certain payoffs that depend on the strategy that the others employ is

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In the wireless communication industry, firms that provide broadband access to the Internet are best regarded as

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If Verizon Wireless and T-mobile, another wireless service company, were to merge, this would represent

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In which market structures do firms earn long-term profits of zero?

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Which of the following statements about concentration ratios is correct?

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-Refer to the above figure. Ajax and Greenco are oligopolists. Above you are given the payoff matrix for the two firms giving the payoff associated with different pricing strategies. What is the dominant strategy for Greenco?

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A reaction function is

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If a firm is an oligopolist, which is NOT true?

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-Refer to the above figure. The figure gives the payoff matrix for two individuals who are being accused of robbing a bank together. Which of the following is the outcome with cooperation?

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A network effect arises whenever

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A market structure characterized by a small number of interdependent sellers is called a(n)

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The number of firms in an oligopolistic industry

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In an oligopolistic market, each firm

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