Question 1

When there is a tendency for a particular product to fall out favor with additional consumers because other consumers have chosen not to purchase the product

Accepted Answer

A)   negative market feedback occurs.
B)   positive market feedback occurs.
C)   the tit-for-tat strategy will begin.
D)   the network effect will increase.

Question 2

When there is a tendency for a particular product to come into favor with additional consumers because other consumers have chosen to purchase the product

Accepted Answer

A)   negative market feedback occurs.
B)   positive market feedback occurs.
C)   there is no dominant strategy.
D)   a price war must result.

Question 3

The manner in which one oligopolist reacts to a change in price, output, or quantity on the part of another oligopolist in the industry is known as

Accepted Answer

A)   a positive-sum game.
B)   the reaction function.
C)   a noncooperative game.
D)   a zero-sum game.

Question 4

After participating members of a cartel form an agreement on common prices and output quotas, then an individual firm can increase its own profits by

Accepted Answer

A)   decreasing production.
B)   decreasing prices.
C)   advertising.
D)   paying its employees higher wages.

Question 5

The success of a cartel rests upon

Accepted Answer

A)   inducing all members to limit their combined output and charge the same price.
B)   inducing all members to differentiate their products and charge different prices.
C)   making exit from the cartel as nearly costless as possible.
D)   discouraging some firms in the market from joining.

Question 6

Managers in oligopoly firms must

Accepted Answer

A)   eliminate any barriers to entry if they hope to make short-run profits.
B)   advertise heavily in order to differentiate their product.
C)   anticipate the reaction of rival firms.
D)   establish many varieties of their products to cover the spectrum of consumer tastes.

Question 7

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.

Question 8

In an industry with network effects and differentiated products, it is possible for the industry to become an oligopoly if

Accepted Answer

A)   they engage in a zero-sum game.
B)   they use a price-leadership model.
C)   they use a kinked demand curve model.
D)   a few firms reap most of the sales gains resulting from positive market feedback.

Question 9

An example of a zero-sum game is

Accepted Answer

A)   exchange.
B)   a consumer purchasing a used car from a used car dealer.
C)   the prisoners' dilemma.
D)   poker.

Question 10

If the four-firm concentration ratio for an industry is 84 percent, then

Accepted Answer

A)   each of the firms account for 21 percent of total sales.
B)   the four largest firms in the industry account for 16 percent of the total sales.
C)   the four largest firms in the industry account for 84 percent of the total sales.
D)   the remaining firms in the industry accounts for 84 percent of the total sales.

Question 11

In general, horizontal mergers will

Accepted Answer

A)   increase the number of firms in an industry.
B)   decrease the number of firms in an industry.
C)   increase competition in an industry.
D)   reduce economic profits in an industry.

Question 12

A local utility is an example of

Accepted Answer

A)   perfect competition.
B)   oligopoly.
C)   monopoly.
D)   monopolistic competition.

Question 13

The college textbooks market is an example of

Accepted Answer

A)   perfect competition.
B)   oligopoly.
C)   monopoly.
D)   monopolistic competition.

Question 14

A situation in which one firm's actions with respect to price, quality, advertising and related changes may be strategically countered by the reactions of one or more other firms in the industry is known as

Accepted Answer

A)   strategic dependence.
B)   economies of scale.
C)   the concentration ratio.
D)   barriers to entry.

Question 15

The joining of firms that are producing or selling a similar product is known as

Accepted Answer

A)   a conglomerate merger.
B)   a horizontal merger.
C)   a vertical merger.
D)   economies to scale.

Question 16

The payoff matrix shows all of the following EXCEPT

Accepted Answer

A)   if both oligopolists choose a high price, each makes $6 million.
B)   if they both choose a low price, each makes $4 million.
C)   if one chooses a low price and the other doesn't, the low priced firm will make $8 million.
D)   if one oligopolist chooses a high price and the other doesn't, the high-priced firm makes $8 million.

Question 17

An example of a positive market feedback is

Accepted Answer

A)   installation of a phone app.
B)   routine maintenance on a car.
C)   the declining use of land-line telephones for long distance calls.
D)   the use of telegraph services in the twenty-first century.

Question 18

Over the past several decades, U.S. firms have faced more competition from overseas firms. Does this have any impact on the market power of U.S. oligopoly firms?

Accepted Answer

A)   no, because domestic firms in oligopoly markets are always so dominant that overseas producers have little or no impact on those markets
B)   no, because the United States government has effectively blocked all imports that might compete with domestic firms in oligopoly industries
C)   Yes, competition from overseas firms can substantially limit domestic firms' market power.
D)   There is no way to know.

Question 19

When managers in oligopolistic firms make decisions that affect output or price, they must

Accepted Answer

A)   also be sure they erect barriers to entry to prevent new entrants from affecting their plans.
B)   anticipate the reactions of their rivals and plan accordingly.
C)   register with the Antitrust Division of the Department of Justice.
D)   inform the regulators of their industry about their plans.

Question 20

When U.S. Steel, a steel producer, bought control of iron ore companies at the beginning of the 20th century, the company was initiating

Accepted Answer

A)   a horizontal merger.
B)   a vertical merger.
C)   a cartel.
D)   an expropriation.

Exam 26: Oligopoly and Strategic Behavior

When there is a tendency for a particular product to fall out favor with additional consumers because other consumers have chosen not to purchase the product

Correct AnswerverifiedShow Answer

A situation in which one firm's actions with respect to price, quality, advertising and related changes may be strategically countered by the reactions of one or more other firms in the industry is known as

Correct AnswerverifiedShow Answer

When there is a tendency for a particular product to come into favor with additional consumers because other consumers have chosen to purchase the product

Correct AnswerverifiedShow Answer

When managers in oligopolistic firms make decisions that affect output or price, they must

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Over the past several decades, U.S. firms have faced more competition from overseas firms. Does this have any impact on the market power of U.S. oligopoly firms?

Correct AnswerverifiedShow Answer

After participating members of a cartel form an agreement on common prices and output quotas, then an individual firm can increase its own profits by

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In an industry with network effects and differentiated products, it is possible for the industry to become an oligopoly if

Correct AnswerverifiedShow Answer

Managers in oligopoly firms must

Correct AnswerverifiedShow Answer

A local utility is an example of

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The success of a cartel rests upon

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The payoff matrix shows all of the following EXCEPT

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The manner in which one oligopolist reacts to a change in price, output, or quantity on the part of another oligopolist in the industry is known as

Correct AnswerverifiedShow Answer

The joining of firms that are producing or selling a similar product is known as

Correct AnswerverifiedShow Answer

When U.S. Steel, a steel producer, bought control of iron ore companies at the beginning of the 20th century, the company was initiating

Correct AnswerverifiedShow Answer

If the four-firm concentration ratio for an industry is 84 percent, then

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In general, horizontal mergers will

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An example of a positive market feedback is

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An example of a zero-sum game is

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The college textbooks market is an example of

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