Question 1

1 and D2 both assume that rivals will not match any price changes. B)  Demand curves D1 and D2 both assume that rivals match any price changes. C)  Demand curve D1 assumes that rivals do not match price changes. D)  Demand curve D2 assumes that rivals do not match price changes." class="answers-bank-image d-inline" rel="preload" > Refer to Figure 25.1 for an oligopoly firm.Assume that the existing price and quantity are $10 and 2,000 units.Which of the following statements is most likely correct?

Accepted Answer

A)   Demand curves D1 and D2 both assume that rivals will not match any price changes.
B)   Demand curves D1 and D2 both assume that rivals match any price changes.
C)   Demand curve D1 assumes that rivals do not match price changes.
D)   Demand curve D2 assumes that rivals do not match price changes.

Question 2

Concentration ratios tend to overstate the power of some corporations to influence economic outcomes because they measure output

Accepted Answer

A)   For single firms rather than markets.
B)   For the whole United States, which is too large a geographic market for some firms or industries.
C)   Only for domestic production when the true market boundaries are international for some markets.
D)   Over many industries rather than a single market.

Question 3

The kinked demand curve demonstrates that if an oligopolist raises its prices, it is likely to gain market share.

Accepted Answer

A) True 
 B)False

Question 4

In an oligopolistic market structure, other firms will not notice if one firm experiences increased sales.

Accepted Answer

A) True 
 B)False

Question 5

According to "Coke and Pepsi May Call Off Pricing Battle," price discounting (price wars)  can destroy oligopoly profits.When profit destruction occurs,

Accepted Answer

A)   Firms are powerless to change prices.
B)   Firms will wait for one firm to increase prices.
C)   Rival oligopolists seek to end it as quickly as possible.
D)   The entire industry will always collapse.

Question 6

A firm cannot maintain above-normal profits over the long run

Accepted Answer

A)   Without the existence of a cartel.
B)   Unless barriers to entry exist.
C)   Unless predatory pricing occurs.
D)   Without retaliation occurring.

Question 7

Oligopolists consider the possible responses of rivals when making decisions.

Accepted Answer

A) True 
 B)False

Question 8

Temporary price reductions intended to drive out competition are referred to as

Accepted Answer

A)   Predatory pricing.
B)   Price-fixing.
C)   Price leadership.
D)   Retaliation.

Question 9

Market power is the ability of a firm to

Accepted Answer

A)   Advertise.
B)   Act as a price taker.
C)   Control the price and quantity supplied.
D)   Increase the number of substitute goods.

Question 10

According to "OPEC Agrees to Maintain Its Oil Output Ceiling at 30 Million Barrels per Day," OPEC wants to behave like a monopoly, choosing a rate of industry output that maximizes total industry profit.The challenges for all cartels, OPEC in particular, include all of the following except

Accepted Answer

A)   Preventing some members from decreasing production.
B)   Allocating market share.
C)   Coordination.
D)   Replicating monopoly outcomes.

Question 11

Sky-High Skywriters raises its price, and the other four firms in the industry raise their prices in response.Coordination in this industry is accomplished by

Accepted Answer

A)   Predatory pricing.
B)   Price leadership.
C)   Price-fixing.
D)   Retaliation.

Question 12

In an effort to maximize profits, oligopolists could participate in all of the following but

Accepted Answer

A)   Price leadership.
B)   Price-fixing.
C)   Cartels.
D)   Self-destructive behavior.

Question 13

When U.S.government regulations that prevent goods from being imported are relaxed, this

Accepted Answer

A)   Causes oligopoly profits to increase.
B)   Causes U.S. cartels to become even stronger.
C)   Reduces the barriers to entry into U.S. markets.
D)   Creates an environment conducive to predatory pricing.

Question 14

Market power leads to market failure when it results in

Accepted Answer

A)   Decreased market output.
B)   Lower market prices.
C)   Normal economic profits.
D)   The demise of the industry.

Question 15

A kinked demand curve indicates that rival oligopolists match all

Accepted Answer

A)   Increased advertising.
B)   Advertising reductions.
C)   Price increases.
D)   Price reductions.

Question 16

If an oligopoly market is contestable and new firms enter, the

Accepted Answer

A)   Market power of the former oligopolists will be reduced.
B)   Number of firms in the industry will decrease.
C)   Former oligopolists will raise their prices.
D)   Profitability of the industry will increase.

Question 17

If oligopolists start cutting prices to capture a larger market share, the result will be

Accepted Answer

A)   Lower prices, decreased output, and larger profits.
B)   Higher prices, increased output, and larger profits.
C)   Lower prices, increased output, and larger profits.
D)   Lower prices, increased output, and smaller profits.

Question 18

Market share is the percentage of total output produced by a single firm.

Accepted Answer

A) True 
 B)False

Question 19

RC Cola lost market share in the 1980s due to

Accepted Answer

A)   Its decision not to advertise.
B)   Consumers not liking the taste of its colas.
C)   Wasting precious resources on advertising.
D)   Its lack of shelf space at supermarkets.

Question 20

In which of the following market structures are entry barriers the highest?

Accepted Answer

A)   Perfect competition.
B)   Monopolistic competition.
C)   Oligopoly.
D)   Monopoly.

Exam 11: Oligopoly

When U.S.government regulations that prevent goods from being imported are relaxed, this

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Refer to Figure 25.1 for an oligopoly firm.Assume that the existing price and quantity are $10 and 2,000 units.Which of the following statements is most likely correct?

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A firm cannot maintain above-normal profits over the long run

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If oligopolists start cutting prices to capture a larger market share, the result will be

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Temporary price reductions intended to drive out competition are referred to as

Correct AnswerverifiedShow Answer

Market power leads to market failure when it results in

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Market power is the ability of a firm to

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Concentration ratios tend to overstate the power of some corporations to influence economic outcomes because they measure output

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Market share is the percentage of total output produced by a single firm.

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The kinked demand curve demonstrates that if an oligopolist raises its prices, it is likely to gain market share.

Correct AnswerverifiedShow Answer

RC Cola lost market share in the 1980s due to

Correct AnswerverifiedShow Answer

In an effort to maximize profits, oligopolists could participate in all of the following but

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Sky-High Skywriters raises its price, and the other four firms in the industry raise their prices in response.Coordination in this industry is accomplished by

Correct AnswerverifiedShow Answer

In an oligopolistic market structure, other firms will not notice if one firm experiences increased sales.

Correct AnswerverifiedShow Answer

According to "Coke and Pepsi May Call Off Pricing Battle," price discounting (price wars) can destroy oligopoly profits.When profit destruction occurs,

Correct AnswerverifiedShow Answer

According to "OPEC Agrees to Maintain Its Oil Output Ceiling at 30 Million Barrels per Day," OPEC wants to behave like a monopoly, choosing a rate of industry output that maximizes total industry profit.The challenges for all cartels, OPEC in particular, include all of the following except

Correct AnswerverifiedShow Answer

A kinked demand curve indicates that rival oligopolists match all

Correct AnswerverifiedShow Answer

If an oligopoly market is contestable and new firms enter, the

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In which of the following market structures are entry barriers the highest?

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Oligopolists consider the possible responses of rivals when making decisions.

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