Question 1

Suppose an industry consists of 20 firms. Each firm's share of total sales in the industry is 5 percent. If two of the firms merge, then the four-firm concentration ratio in the industry will

Accepted Answer

A)   remain unchanged.
B)   decrease as there are fewer firms in the industry.
C)   increase.
D)   depend on the market condition faced by the industry.

Question 2

-Refer to the above table. The four-firm concentration ratio is

Accepted Answer

A)   86.5 percent.
B)   33.3 percent.
C)   13.3 percent.
D)   11.6 percent.

Question 3

A game in which any gains by the group are exactly offset by equal losses by the end of the game is called the

Accepted Answer

A)   negative-sum game.
B)   zero-sum game.
C)   positive-sum game.
D)   cooperative game.

Question 4

Negative market feedback refers to a tendency for

Accepted Answer

A)   one or two firms in an oligopolistic industry to respond to price decreases by initiating efforts to engage in price leadership.
B)   a particular product to fall out of favor with additional consumers because other consumers have stopped purchasing the product.
C)   the dominant firm in an oligopolistic industry to react to competing firms' price increases by decreasing the price of its own product.
D)   price wars to break out in oligopolistic industries in which firms produce products possessing characteristics that make them prone to network effects.

Question 5

-Refer to the above figure. The figure gives the payoff matrix for two individuals who are being accused of robbing a bank together. If Bob does NOT confess, what is the best strategy for Harry?

Accepted Answer

A)   Confess.
B)   Don't confess.
C)   Flip a coin to decide what to do.
D)   There is no best strategy.

Question 6

The market structure of oligopoly is 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 a differentiated product.
D)   there are many producers of a homogeneous product.

Question 7

The outputs of an oligopolistic industry

Accepted Answer

A)   can be homogeneous or differentiated.
B)   must be at high levels so that price exceeds average total cost.
C)   always have excise taxes imposed on them.
D)   have no substitutes on the market.

Question 8

For years, your neighbor insisted she had no desire to own a computer. Recently, however, she purchased one and says she did so because all her relatives have computers and she wants to exchange e-mail with them. Your neighbor's behavior is an example of

Accepted Answer

A)   a switching cost.
B)   the impact of negative market feedback.
C)   limited-pricing behavior.
D)   a network effect.

Question 9

When OPEC meets to set production levels, this organization is playing a

Accepted Answer

A)   negative sum game.
B)   cooperative game.
C)   non-cooperative game.
D)   reaction function game.

Question 10

Frank purchases snickle-dees only because his friends do. This is a

Accepted Answer

A)   dominant strategy
B)   negative-sum game.
C)   positive market feedback.
D)   negative market feedback.

Question 11

In a 20-firm industry, two of the smallest firms merge. Yet the 4-firm concentration ratio and the 8-firm concentration ratio did not change. All things considered, we can say that the industry has

Accepted Answer

A)   moved closer to pure competition because the number of firms decreased.
B)   moved farther away from competition because the number of firms decreased.
C)   experienced no change in competition even though the number of firms decreased.
D)   to be identified first; otherwise there is no way to tell.

Question 12

Suppose that an industry consists of 10 firms, and the top 4 firms have annual sales of $2.5 million, $2 million, $1.5 million, and $1 million, respectively. If the entire industry has annual sales of $10 million, the four-firm concentration ratio is

Accepted Answer

A)   85 percent.
B)   50 percent.
C)   10 percent.
D)   70 percent.

Question 13

The goal of a cartel is to

Accepted Answer

A)   increase competition among members.
B)   maximize industry profits.
C)   increase industry supply.
D)   none of the above.

Question 14

Refer to the above payoff matrix for the profits (in $ millions)  of two firms (X and Y)  making a decision to advertise or not. Which of the following is the outcome of the dominant strategy without cooperation?

Accepted Answer

A)   Both firm X and firm Y choose not to advertise.
B)   There is no dominant strategy in this scenario.
C)   Firm X chooses to advertise while firm Y chooses not to advertise.
D)   Firm X chooses not to advertise while firm Y chooses to advertise.

Question 15

Collusion always involves firms engaging in a

Accepted Answer

A)   vertical merger.
B)   horizontal merger.
C)   cooperative game.
D)   noncooperative game.

Question 16

If three firms of similar sizes join to form a cartel, then it is most likely that

Accepted Answer

A)   they will charge a common, higher market price.
B)   they will collectively produce more than before.
C)   all three firms will stop producing.
D)   all three firms will earn zero profits.

Question 17

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.

Question 18

A tendency for a good to come into favor with consumers because other consumers have chosen to buy the item is

Accepted Answer

A)   price-leadership.
B)   a negative-sum game.
C)   positive market feedback.
D)   negative market feedback.

Question 19

Why would Apple subsidize developers of mobile applications that operate with its iPhone's operating system?

Accepted Answer

A)   There is a positive market feedback from the mobile applications to consumer's willingness to buy iPhones.
B)   Apple attempts to ensure that all developers of mobile applications are profitable.
C)   Apple thinks iPhones are too cheap for consumers.
D)   Applies attempts to create competition among developers of its mobile applications.

Question 20

-Refer to the above figure. The figure gives the payoff matrix for two individuals who are being accused of robbing a bank together. Which of the following is the outcome of the dominant strategy without cooperation?

Accepted Answer

A)   Both confess.
B)   Both don't confess.
C)   Bob confesses while Harry does not confess.
D)   Harry confesses while Bo does not confess.

Exam 26: Oligopoly and Strategic Behavior

A tendency for a good to come into favor with consumers because other consumers have chosen to buy the item is

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-Refer to the above figure. The figure gives the payoff matrix for two individuals who are being accused of robbing a bank together. Which of the following is the outcome of the dominant strategy without cooperation?

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Collusion always involves firms engaging in a

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Frank purchases snickle-dees only because his friends do. This is a

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A game in which any gains by the group are exactly offset by equal losses by the end of the game is called the

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Suppose an industry consists of 20 firms. Each firm's share of total sales in the industry is 5 percent. If two of the firms merge, then the four-firm concentration ratio in the industry will

Correct AnswerverifiedShow Answer

When OPEC meets to set production levels, this organization is playing a

Correct AnswerverifiedShow Answer

The outputs of an oligopolistic industry

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Negative market feedback refers to a tendency for

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In a 20-firm industry, two of the smallest firms merge. Yet the 4-firm concentration ratio and the 8-firm concentration ratio did not change. All things considered, we can say that the industry has

Correct AnswerverifiedShow Answer

For years, your neighbor insisted she had no desire to own a computer. Recently, however, she purchased one and says she did so because all her relatives have computers and she wants to exchange e-mail with them. Your neighbor's behavior is an example of

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The goal of a cartel is to

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Which of the following is NOT true of an oligopoly?

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The market structure of oligopoly is when

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-Refer to the above figure. The figure gives the payoff matrix for two individuals who are being accused of robbing a bank together. If Bob does NOT confess, what is the best strategy for Harry?

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Why would Apple subsidize developers of mobile applications that operate with its iPhone's operating system?

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Suppose that an industry consists of 10 firms, and the top 4 firms have annual sales of $2.5 million, $2 million, $1.5 million, and $1 million, respectively. If the entire industry has annual sales of $10 million, the four-firm concentration ratio is

Correct AnswerverifiedShow Answer

If three firms of similar sizes join to form a cartel, then it is most likely that

Correct AnswerverifiedShow Answer

Refer to the above payoff matrix for the profits (in $ millions) of two firms (X and Y) making a decision to advertise or not. Which of the following is the outcome of the dominant strategy without cooperation?

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-Refer to the above table. The four-firm concentration ratio is

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