Question 1

If we observe firms earning zero economic profits in the short run, we know that

Accepted Answer

A)   the industry must be perfectly competitive.
B)   the industry must be either perfectly competitive or monopolistically competitive.
C)   there must not be any barriers to entry.
D)   any market structure is possible since firms under any market structure can earn zero profits at some time.E) A) and C)
F) B) and D)

Question 2

Retail trade is an example of

Accepted Answer

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

Question 3

What is oligopoly? How does oligopoly differ from the other kinds of market structure?

Accepted Answer

Oligopoly is an industry characterized b...

Question 4

The combining of First Union National Bank and The National Bank of Memphis is an example of

Accepted Answer

A)   a vertical merger.
B)   a horizontal merger.
C)   a downstream formation.
D)   a conglomerate merger.E) A) and B)
F) A) and C)

Question 5

The manner in which one oligopolist reacts to a change in price, output, or quality made by another oligopolist in the industry is

Accepted Answer

A)   a cooperative game.
B)   the reaction function.
C)   a zero-sum game.
D)   the concentration ratio.E) None of the above
F) A) and B)

Question 6

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) C) and D)
F) All of the above

Question 7

When decisions are guided strictly by short-run gains, this is known as

Accepted Answer

A)   opportunistic behavior.
B)   the prisoners' dilemma.
C)   tit-for-tat strategy.
D)   a positive-sum game.E) None of the above
F) A) and B)

Question 8

Which of the following is not true of an oligopoly?

Accepted Answer

A)   They advertise their product.
B)   The firms recognize their interdependence.
C)   A few firm account for a large portion of the total output.
D)   Firms are price takers.E) A) and C)
F) B) and C)

Question 9

-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) A) and C)
F) None of the above

Question 10

-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 best strategy for Greenco if Ajax decides on charging a high price?

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

Question 11

Credit card companies that operate as intermediary firms between credit card holders and business vendors are best described as

Accepted Answer

A)   platforms in a shared-input market.
B)   end users in a shared-input market.
C)   platforms in a transaction-based market.
D)   end users in a transaction-based market.E) A) and B)
F) All of the above

Question 12

Which of the following statements concerning the prisoner's dilemma is true?

Accepted Answer

A)   The player who moves last will always win.
B)   Confessing is the dominant strategy for both players.
C)   Neither player will pick the dominant strategy.
D)   The player who moves first will always win.E) C) and D)
F) A) and D)

Question 13

All of the following are reasons for an oligopoly to occur EXCEPT

Accepted Answer

A)   economies to scale.
B)   barriers to entry.
C)   independence among firms.
D)   merger.E) A) and D)
F) B) and C)

Question 14

Which of the following is NOT a common characteristic of oligopoly?

Accepted Answer

A)   strategic dependence among firms in the industry
B)   product differentiation
C)   barriers to entry
D)   marginal cost pricing.E) B) and C)
F) A) and D)

Question 15

In which market structures is the firm able to earn long-run economic profits?

Accepted Answer

A)   Perfect competition and monopolistic competition.
B)   Monopolistic competition and oligopoly.
C)   Oligopoly and monopoly.
D)   Monopolistic competition, oligopoly and monopoly.E) B) and C)
F) A) and B)

Question 16

Refer to the above payoff matrix for the profits (in $ millions)  of two firms (A and

Accepted Answer

A)   Both firm A and firm B choose not to advertise.
B)   Both firm A and firm B choose to advertise.
B)   making a decision to advertise or not. Which of the following is the outcome of the dominant strategy without cooperation?
C)   Firm A chooses to advertise while firm B chooses not to advertise.
D)   Firm A chooses not to advertise while firm B chooses to advertise.E) A) and B)
F) A) and D)

Question 17

Oligopolistic industries are characterized by a

Accepted Answer

A)   few large firms and no barriers to entry.
B)   large number of firms and no barriers to entry.
C)   few large firms and substantial barriers to entry.
D)   large number of firms and substantial barriers to entry.E) B) and D)
F) B) and C)

Question 18

The market structure of monopoly exists when

Accepted Answer

A)   there are a small number of interdependent firms that constitute the entire market.
B)   there is a single producer of a product.
C)   there are many producers of differentiated products.
D)   there are many producers of a homogeneous product.E) B) and D)
F) All of the above

Question 19

Firms faced with prisoners' dilemma can always make more profits by engaging in opportunistic behavior. Why is this type of behavior NOT commonly found even in oligopolistic markets?

Accepted Answer

The prisoners' dilemma describes noncoop...

Question 20

The mutual interdependence of oligopolists ensures that each oligopolist has

Accepted Answer

A)   a unique demand curve.
B)   a perfectly elastic demand curve.
C)   a reaction function.
D)   a fundamental dilemma about whether to collude or not.E) All of the above
F) None of the above

Exam 26: Oligopoly and Strategic Behavior

Which of the following is not true of an oligopoly?

Correct AnswerverifiedShow Answer

The mutual interdependence of oligopolists ensures that each oligopolist has

Correct AnswerverifiedShow Answer

Firms faced with prisoners' dilemma can always make more profits by engaging in opportunistic behavior. Why is this type of behavior NOT commonly found even in oligopolistic markets?

Correct AnswerverifiedThe prisoners' dilemma describes noncoop...View AnswerShow Answer

Retail trade is an example of

Correct AnswerverifiedShow Answer

The combining of First Union National Bank and The National Bank of Memphis is an example of

Correct AnswerverifiedShow Answer

The market structure of monopoly exists when

Correct AnswerverifiedShow Answer

-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?

Correct AnswerverifiedShow Answer

Which of the following statements about concentration ratios is correct?

Correct AnswerverifiedShow Answer

The manner in which one oligopolist reacts to a change in price, output, or quality made by another oligopolist in the industry is

Correct AnswerverifiedShow Answer

-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 best strategy for Greenco if Ajax decides on charging a high price?

Correct AnswerverifiedShow Answer

Refer to the above payoff matrix for the profits (in $ millions) of two firms (A and

Correct AnswerverifiedShow Answer

If we observe firms earning zero economic profits in the short run, we know that

Correct AnswerverifiedShow Answer

All of the following are reasons for an oligopoly to occur EXCEPT

Correct AnswerverifiedShow Answer

Which of the following is NOT a common characteristic of oligopoly?

Correct AnswerverifiedShow Answer

Oligopolistic industries are characterized by a

Correct AnswerverifiedShow Answer

Credit card companies that operate as intermediary firms between credit card holders and business vendors are best described as

Correct AnswerverifiedShow Answer

In which market structures is the firm able to earn long-run economic profits?

Correct AnswerverifiedShow Answer

Which of the following statements concerning the prisoner's dilemma is true?

Correct AnswerverifiedShow Answer

When decisions are guided strictly by short-run gains, this is known as

Correct AnswerverifiedShow Answer

What is oligopoly? How does oligopoly differ from the other kinds of market structure?

Correct AnswerverifiedOligopoly is an industry characterized b...View AnswerShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The prisoners' dilemma describes noncoop...
View 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
Oligopoly is an industry characterized b...
View Answer