Question 1

Which of the following best describes the basic characteristics of noncooperative oligopoly models?

Accepted Answer

A)   Managers make decisions based on the strategy they think their rivals will pursue.
B)   Managers attempt to deliberately mislead their rivals regarding the strategy they will pursue.
C)   When making decisions, managers basically ignore the mutual interdependence that exists among rivals.
D)   Managers refuse to negotiate with their rivals when it comes to such decisions as what price to charge.E) None of the above
F) B) and D)

Question 2

One of the surprising conclusions of many of the noncooperative models of oligopoly is that firms end up better off with the noncooperative outcome than they would by cooperating with one another.

Accepted Answer

A) True 
 B)False

Question 3

In comparing an oligopolistic firm to a perfectly competitive firm it is generally assumed that the price charged by the competitive firm will be higher than the price charged by the oligopolistic firm.

Accepted Answer

A) True 
 B)False

Question 4

All else constant, a cartel agreement will become more difficult to enforce as the number of firms competing the market increases and the members of the cartel produce a differentiated product.

Accepted Answer

A) True 
 B)False

Question 5

Pepsi and Coke have competed in the market for bottled water primarily on the basis of convenience and product differentiation as a means to avoid the negative effects on revenue that result from price competition.

Accepted Answer

A) True 
 B)False

Question 6

Firms have tried a number of different strategies to reduce the negative effects of competition on their ability to earn economic profits. Which of the following strategies is most desirable from the viewpoint of economic efficiency and consumer well being?

Accepted Answer

A)   Collusion.
B)   Price leadership.
C)   Formation of cartels.
D)   Investment in research and development.E) B) and C)
F) A) and B)

Question 7

Assume the four major grocery stores in a large metropolitan area decide to meet secretly to fix prices for meat. It would be easiest to maintain this arrangement when:

Accepted Answer

A)   the number of additional competitors is very small.
B)   the cost conditions for the four firms differ substantially.
C)   individual firms are able to offer secret price discounts to selected buyers.
D)   demand for meat and fresh vegetables is falling.E) All of the above
F) C) and D)

Question 8

In game theory, a Nash equilibrium is the set of strategies each of the players chooses by selecting the strategy that maximizes her payoff independent of what the other players might choose.

Accepted Answer

A) True 
 B)False

Question 9

Mutual interdependence among firms is one of the key characteristics of an oligopoly market that distinguishes it from the other three major market structures.

Accepted Answer

A) True 
 B)False

Question 10

From the airlines' perspective, amenities competition is preferable to price competition because revenues are not adversely affected and it is easier to determine the strategies of one's competitors.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following statements is correct?

Accepted Answer

A)   A firm with high fixed costs tends to decrease prices more and output less in the face of declining demand than a firm with relatively low fixed costs.
B)   A firm with high fixed costs tends to decrease prices less and output more in the face of declining demand than a firm with relatively low fixed costs.
C)   A firm with high fixed costs tends to decrease prices and output more in the face of declining demand than a firm with relatively low fixed costs.
D)   A firm with high fixed costs tends to decrease prices and output less in the face of declining demand than a firm with relatively low fixed costs.E) B) and C)
F) B) and D)

Question 12

In the case of Matsushita v. Zenith, the fact that the foreign television manufacturers were able to charge lower prices than their domestic competitors in the U.S. market for televisions was sufficient evidence to conclude that the Japanese firms were engaged in predatory pricing.

Accepted Answer

A) True 
 B)False

Question 13

The fact that the firms in an oligopoly are mutually interdependent means that each firm:

Accepted Answer

A)   must consider the reactions of its competitors when it sets the price for its output.
B)   produces a product that is similar, but not identical, to the products of its competitors.
C)   produces a product that is identical to the products of its competitors.
D)   faces a perfectly elastic demand curve for its product.E) A) and B)
F) C) and D)

Question 14

Which of the following is an example of strategic entry deterrence?

Accepted Answer

A)   Marginal cost pricing.
B)   Limit pricing.
C)   Price leadership.
D)   Mark-up pricing.E) None of the above
F) A) and D)

Question 15

Assume firm X is one of the three largest firms in an oligopolistic industry. Firm X is currently considering a vertical merger with another firm that is the sole supplier of an input used by all of the firms that compete with firm X. If the merger goes through, firm X would be able to operate much like:

Accepted Answer

A)   a perfectly competitive firm.
B)   a monopolistically competitive firm.
C)   an oligopolist.
D)   a monopolist.E) All of the above
F) B) and C)

Question 16

The primary objective of a cartel is to:

Accepted Answer

A)   maximize the amount of profit received by each member of the organization.
B)   maximize the joint profits of the members of the organization.
C)   ensure each member of the organization some minimum amount of profit.
D)   maximize the average profits of the members of the organization.E) All of the above
F) A) and C)

Question 17

Assume two firms are currently competing in a market. If one of the two firms wants to try to eliminate the other firm as a competitor, should it undertake a strategy of limit pricing or predatory pricing? Why? In addition, describe the conditions under which the strategy you have selected will be most successful.

Accepted Answer

The firm should adopt a strategy of pred...

Question 18

It is reasonable to expect that if one firm in an oligopolistic market raises price, the its competitors will do the same so that all firms can earn increased revenues.

Accepted Answer

A) True 
 B)False

Question 19

The ability to make a credible commitment is necessary for the first mover to gain an advantage in a sequential game.

Accepted Answer

A) True 
 B)False

Question 20

Suppose an oligopolistic firm raises the price of its output. Demand for the firm's output will be relatively price if the other dominant firms in the market .

Accepted Answer

A)   elastic; do not raise price
B)   unit elastic; do not raise price
C)   inelastic; also raise price
D)   cannot be determinedE) A) and C)
F) B) and D)

Exam 9: Market Structure: Oligopoly

Mutual interdependence among firms is one of the key characteristics of an oligopoly market that distinguishes it from the other three major market structures.

Correct Answer
verified

In the case of Matsushita v. Zenith, the fact that the foreign television manufacturers were able to charge lower prices than their domestic competitors in the U.S. market for televisions was sufficient evidence to conclude that the Japanese firms were engaged in predatory pricing.

Correct Answer
verified

The fact that the firms in an oligopoly are mutually interdependent means that each firm:

Correct Answer
verified

Correct Answer
verified

Firms have tried a number of different strategies to reduce the negative effects of competition on their ability to earn economic profits. Which of the following strategies is most desirable from the viewpoint of economic efficiency and consumer well being?

Correct Answer
verified

Which of the following is an example of strategic entry deterrence?

Correct Answer
verified

It is reasonable to expect that if one firm in an oligopolistic market raises price, the its competitors will do the same so that all firms can earn increased revenues.

Correct Answer
verified

Suppose an oligopolistic firm raises the price of its output. Demand for the firm's output will be relatively price if the other dominant firms in the market .

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
verified

In game theory, a Nash equilibrium is the set of strategies each of the players chooses by selecting the strategy that maximizes her payoff independent of what the other players might choose.

Correct Answer
verified

Assume the four major grocery stores in a large metropolitan area decide to meet secretly to fix prices for meat. It would be easiest to maintain this arrangement when:

Correct Answer
verified

In comparing an oligopolistic firm to a perfectly competitive firm it is generally assumed that the price charged by the competitive firm will be higher than the price charged by the oligopolistic firm.

Correct Answer
verified

The ability to make a credible commitment is necessary for the first mover to gain an advantage in a sequential game.

Correct Answer
verified

The primary objective of a cartel is to:

Correct Answer
verified

One of the surprising conclusions of many of the noncooperative models of oligopoly is that firms end up better off with the noncooperative outcome than they would by cooperating with one another.

Correct Answer
verified

Which of the following best describes the basic characteristics of noncooperative oligopoly models?

Correct Answer
verified

From the airlines' perspective, amenities competition is preferable to price competition because revenues are not adversely affected and it is easier to determine the strategies of one's competitors.

Correct Answer
verified

All else constant, a cartel agreement will become more difficult to enforce as the number of firms competing the market increases and the members of the cartel produce a differentiated product.

Correct Answer
verified

Pepsi and Coke have competed in the market for bottled water primarily on the basis of convenience and product differentiation as a means to avoid the negative effects on revenue that result from price competition.

Correct Answer
verified

Correct Answer
verified
The firm should adopt a strategy of pred...
View Answer

Exam 9: Market Structure: Oligopoly

Mutual interdependence among firms is one of the key characteristics of an oligopoly market that distinguishes it from the other three major market structures.

Correct AnswerverifiedShow Answer

In the case of Matsushita v. Zenith, the fact that the foreign television manufacturers were able to charge lower prices than their domestic competitors in the U.S. market for televisions was sufficient evidence to conclude that the Japanese firms were engaged in predatory pricing.

Correct AnswerverifiedShow Answer

The fact that the firms in an oligopoly are mutually interdependent means that each firm:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Firms have tried a number of different strategies to reduce the negative effects of competition on their ability to earn economic profits. Which of the following strategies is most desirable from the viewpoint of economic efficiency and consumer well being?

Correct AnswerverifiedShow Answer

Which of the following is an example of strategic entry deterrence?

Correct AnswerverifiedShow Answer

It is reasonable to expect that if one firm in an oligopolistic market raises price, the its competitors will do the same so that all firms can earn increased revenues.

Correct AnswerverifiedShow Answer

Suppose an oligopolistic firm raises the price of its output. Demand for the firm's output will be relatively price if the other dominant firms in the market .

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

In game theory, a Nash equilibrium is the set of strategies each of the players chooses by selecting the strategy that maximizes her payoff independent of what the other players might choose.

Correct AnswerverifiedShow Answer

Assume the four major grocery stores in a large metropolitan area decide to meet secretly to fix prices for meat. It would be easiest to maintain this arrangement when:

Correct AnswerverifiedShow Answer

In comparing an oligopolistic firm to a perfectly competitive firm it is generally assumed that the price charged by the competitive firm will be higher than the price charged by the oligopolistic firm.

Correct AnswerverifiedShow Answer

The ability to make a credible commitment is necessary for the first mover to gain an advantage in a sequential game.

Correct AnswerverifiedShow Answer

The primary objective of a cartel is to:

Correct AnswerverifiedShow Answer

One of the surprising conclusions of many of the noncooperative models of oligopoly is that firms end up better off with the noncooperative outcome than they would by cooperating with one another.

Correct AnswerverifiedShow Answer

Which of the following best describes the basic characteristics of noncooperative oligopoly models?

Correct AnswerverifiedShow Answer

From the airlines' perspective, amenities competition is preferable to price competition because revenues are not adversely affected and it is easier to determine the strategies of one's competitors.

Correct AnswerverifiedShow Answer

All else constant, a cartel agreement will become more difficult to enforce as the number of firms competing the market increases and the members of the cartel produce a differentiated product.

Correct AnswerverifiedShow Answer

Pepsi and Coke have competed in the market for bottled water primarily on the basis of convenience and product differentiation as a means to avoid the negative effects on revenue that result from price competition.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe firm should adopt a strategy of pred...View AnswerShow Answer

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Correct Answer
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Correct Answer
verified
The firm should adopt a strategy of pred...
View Answer