Exam 18: Oligopoly

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The statement is inc...

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A) price fixing
B) price discrimination
C) resale price maintenance
D) predatory pricing
E) tying arrangements

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A) firms in the industry must enter a cartel in order to earn an economic profit.
B) firms in the industry are most likely to make zero economic profit.
C) the industry is probably an oligopoly.
D) firms in the industry are likely to act independently of each other.
E) the industry is almost surely monopolistic competition.

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A) If the firms play this game repeatedly, one would end up charging $20 and the other $10.
B) If the firms cooperate, both could make $55,000 in economic profit.
C) The Nash equilibrium in this game is for both firms to set P = $20 because that maximizes their combined profit.
D) Firm B's strategy is to always set P = $20 because that gives Firm B the highest possible profit.
E) If Firm B sets P = $20, then Firm A will maximize its profit by setting its P = $20.

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A) i only
B) ii only
C) ii and iii
D) iii only
E) i, ii, and iii

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A) another name for a firm in an oligopoly.
B) a collusive agreement among a number of firms.
C) a government body that regulates an industry.
D) an antitrust law.
E) a type of regulation that focuses on quantities rather than price.

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A) the monopoly price and output
B) the competitive price and output
C) the monopolistically competitive price and output
D) a price higher than the monopoly price and, because there is more than one firm in the industry, more output than the monopoly amount
E) a price lower than the competitive price and, because there are only a few firms in the industry, less output than the competitive amount

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A) i only
B) ii only
C) ii and iii
D) i and iii
E) i, ii, and iii

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A) A firm in oligopoly will charge a price that is lower than the price charged in perfect competition.
B) If firms in oligopoly look only at their own self-interest in deciding the output they should produce, the total market output will exceed that of a monopoly.
C) If one oligopolist reduces the price of its product, its demand curve shifts leftward.
D) Because many producers join to form a cartel, the market becomes monopolistic competition.
E) It is in the self-interest of each firm in an oligopoly to take the actions that maximize all the firms' joint profit.

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A) a monopoly.
B) monopolistic competition.
C) an oligopoly.
D) perfect competition.
E) either monopoly or perfect competition, depending on the existence or absence of barriers to entry.

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A) i only
B) iii only
C) i and iii
D) i and ii
E) i, ii, and iii

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Yes, according to their guidelines the F...

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A) monopoly situations.
B) the expected behavior of others and the recognition of mutual interdependence.
C) the price-taking behavior of oligopolists.
D) non-price competition.
E) that increased demand decreases the market power of the firms in the market.

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A) unexpected; interdependence
B) unexpected; independence
C) expected; interdependence
D) expected; independence
E) random; profit

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A) means that one player has greater market power.
B) occurs when each player takes the best possible action regardless of the strategy chosen by other firms.
C) will always lead to equilibrium in which the firms' total profit is the largest.
D) can occur only if firms cooperate with each other.
E) means that a firm must be able to determine its actions and the actions of its competitor.

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A) an example of a duopoly game.
B) a theory about why firms break the law.
C) competition that can occur among firms in monopolistic competition.
D) an example of the monopolist charging high prices.
E) an example of a game that does not have a Nash equilibrium.

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A) is following marginal cost pricing.
B) is following average cost pricing.
C) sets a low price to drive rivals out of business.
D) has been regulated using a price cap.
E) is guilty of price fixing.

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A) a small number of firms compete in the market.
B) natural or legal barriers prevent the entry of new firms into the market.
C) each firm faces a downward-sloping demand curve.
D) the firms in the market are interdependent.
E) each firm has a large share of the market.

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