Question 1

A demand curve will be kinked if rivals match price reductions but not price increases.

Accepted Answer

A) True 
 B)False

Question 2

When a business advertises that its product has unique features that make it superior to other similar products, it is engaging in

Accepted Answer

A)  Price competition.
B)  Predatory pricing.
C)  Product differentiation.
D)  Contestable market advertising.

Question 3

Oligopolistic behavior includes

Accepted Answer

A)  Tacit collusion.
B)  High concentration ratios.
C)  High barriers to entry.
D)  Independent pricing.

Question 4

Given the payoff matrix in Table 25.1, if the probability of rivals matching a price reduction is 99 percent, what is the expected payoff for a price cut by Company ABC?

Accepted Answer

A)  $0.
B)  $5.
C)  -$500.
D)  -$5,000.

Question 5

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 6

Which of the following market structures is characterized by the absence of market power?

Accepted Answer

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

Question 7

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 8

Market share is the percentage of total

Accepted Answer

A)  Market output produced by the largest firm in an industry.
B)  Market output produced by a single firm.
C)  Market output produced by the four largest firms in an industry.
D)  Industry profit earned by a single firm.

Question 9

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 10

How might an oligopolist increase total revenue without changing price?

Accepted Answer

A)  Reduce output.
B)  Reduce marketing efforts.
C)  Through nonprice competition.
D)  Reduce costs.

Question 11

Patents are a barrier to entry.

Accepted Answer

A) True 
 B)False

Question 12

In the article "ATamp;T Plan to Buy T-Mobile Means Higher Prices, Fewer Phones," the opportunity cost of the merger between ATamp;T and T-Mobile is

Accepted Answer

A)  Better service quality.
B)  Increased coverage.
C)  Reduced phone selection.
D)  T-Mobile customers will be able to get iPhones.

Question 13

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 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

If an oligopolist is going to change its price or output, its initial concern is

Accepted Answer

A)  The response of its competitors.
B)  A change in its cost structure.
C)  The concentration ratio.
D)  The response of the Federal Trade Commission.

Question 16

When oligopoly firms collude to raise prices,

Accepted Answer

A)  Each firm benefits, but society loses.
B)  Both the colluding firms and society benefit.
C)  Everyone is eventually a loser.
D)  Only the price leader benefits while other firms and society lose.

Question 17

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 18

The concentration ratio measures the

Accepted Answer

A)  Number of plants owned by an oligopoly.
B)  Percentage of total profits made by a firm in a specific market.
C)  Proportion of total output produced by the four largest producers in a specific market.
D)  Relative size of a firm compared to other industries.

Question 19

An oligopolistic market may be difficult to enter because of government regulation or the expense of nonprice competition.

Accepted Answer

A) True 
 B)False

Question 20

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 match any price changes. D) Demand curve D2 assumes that rivals match any 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 match any price changes.
D)  Demand curve D2 assumes that rivals match any price changes.

Exam 11: Oligopoly

Oligopolistic behavior includes

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An oligopolistic market may be difficult to enter because of government regulation or the expense of nonprice competition.

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In the article "ATamp;T Plan to Buy T-Mobile Means Higher Prices, Fewer Phones," the opportunity cost of the merger between ATamp;T and T-Mobile is

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

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RC Cola lost market share in the 1980s due to

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Which of the following market structures is characterized by the absence of market power?

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How might an oligopolist increase total revenue without changing price?

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

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If an oligopolist is going to change its price or output, its initial concern is

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Patents are a barrier to entry.

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When a business advertises that its product has unique features that make it superior to other similar products, it is engaging in

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A kinked demand curve indicates that rival oligopolists match all

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Market share is the percentage of total

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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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When oligopoly firms collude to raise prices,

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Market power leads to market failure when it results in

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Given the payoff matrix in Table 25.1, if the probability of rivals matching a price reduction is 99 percent, what is the expected payoff for a price cut by Company ABC?

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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 demand curve will be kinked if rivals match price reductions but not price increases.

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The concentration ratio measures the

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