1.In general, oligopolists compete A) on research and development. B) on marketing and advertising. C) on price. D) All of the above are correct. 2. To determine their optimal strategy, oligopolists must ________ to their strategy. A) anticipate the reaction of their customers B) anticipate the reaction of their rivals C) anticipate the reaction of government D) both A and B are correct. 3. A monopolistic industry has A) a homogeneous product and easy entry. B) many differentiated products and easy entry. C) either a standardized product or differentiated products. D) a single, unique product and blocked entry. 4. Which of the following is the best example of an oligopolistic industry? A) passenger airline service B) convenience stores C) public utilities D) clothing manufacturing 5. Products ________ in the oligopolistic market structure. A) are always unique B) may be homogeneous or differentiated C) are always homogeneous D) are always differentiated 6. A concentrated industry has ________ that dominate a market. A) three or fewer firms B) an infinite number of firms C) a relatively small number of firms D) a large number of firms 7. Oligopolistic firms are A) able to influence price only if the oligopolist's products are differentiated. B) unable to influence price regardless of whether or not the product is differentiated or standardized. C) able to influence price only if the oligopolist's products are standardized. D) able to influence price regardless of whether or not the product is differentiated or standardized by virtue of their size. 8. According to the Five Forces Model, the five competitive forces that determine the level of competition and profitability in an industry are A) buyers, suppliers, government, foreign competition, and weather. B) rivals, government, foreign competition, labor, and weather. C) rivals, buyers, suppliers, substitutes, and potential entrants. D) rivals, consumers, labor, weather, and government. The share of ________ by the top firms is known as the concentration ratio. A) monopolistically competitive B) contestable C) blocked D) monopoly 12. An oligopolistic model in which firms produce exactly the same results as would exist if the industry were ________ is called the collusion model. A) difficult. easy B) easy.9. We define a market as contestable if entry into the market is ________ and exit from the market is ________. In ________ markets. difficult D) difficult. A) the labor force employed B) resources used in production C) outstanding shares of stock issued D) industry output in sales or employment accounted for 10. large oligopolistic firms end up behaving like perfectly competitive firms. difficult 11. In which of the following oligopoly models do firms not always produce where price exceeds marginal cost? A) kinked demand curve model B) collusive oligopoly model C) contestable market model D) Cournot model 13. easy C) easy. A) monopolistically competitive B) government regulated C) perfectly competitive D) a monopoly . A) decrease. The firms have identical cost structures.000 packs of chewing gum.000 packs of chewing gum. D) indeterminate output levels from this information.7. 17. The cartel faces the market demand curve given by D. 15. D) P < MR = MC. If the government stops enforcing its collusion laws and oligopolies are now able to collude.000 packs of chewing gum. Four firms that produce chewing gum form a cartel. each firm should produce A) 3.720. the total cost for the cartel is A) $3.800. At the profit-maximizing output. Four chewing gum producing firms form a cartel. Four firms that produce chewing gum form a cartel.7. increase B) increase. D) $0. increase C) decrease.25. If the cartel produces the profit-maximizing output level. B) P < MR > MC. B) $0. C) 12.600. they will ________ the price charged and ________ the total output produced.15.7 14.7 below to answer the questions that follow. C) $0. The cartel faces the market demand curve given by D. B) 4. C) $4. the profit on each pack of gum is A) $0.000. 16.04.Refer to the information provided in Figure 14. Refer to Figure 14. B) $3. At the profit-maximizing output. Refer to Figure 14. decrease .09. A colluding oligopoly will face market demand and produce up until the point at which A) P = MR = MC. C) P > MR = MC. decrease D) increase. 18.7. D) $5. Refer to Figure 14. Figure 14. The demand curve facing a dominant firm in the ________ model is derived by subtracting the amount supplied by the smaller firms from market demand. D) If the first firm cuts price. When a new firm begins production in the ________ model. the second will not follow.and quantity-fixing agreements among producers A) are legal. The cartel aims to raise the price of strawberries and reduce output to increase profits for the strawberry growers. the second firm will follow and if the first raises price.19. higher than C) the same as. lower than B) higher than. A) price leadership B) collusion C) Cournot D) cartel . lower than 20. 21. the price firms charge would be ________. C) The firms behave so as to maximize their profits. C) be successful because it will be very easy to enforce the rules among only 40 firms. All of the following are assumptions of the Cournot model EXCEPT: A) Each firm takes the output of the other firm as given. D) be successful because the demand for strawberries is very elastic. Tacit collusion is ________ to be successful in increasing industry profits when there are ________ similar firms in the industry. a few B) more likely. B) not be successful because there are too few firms that are trying to organize the cartel. You predict that this cartel will probably A) not be successful because the number of firms is unmanageable and there are a number of good substitutes for strawberries. B) are implicit. many 23. A) price leadership B) Cournot C) cartel D) collusion 24. 22. B) There are two firms in an industry. You read that 40 firms that grow and export strawberries to the United States decide to form a cartel. D) are nonexistent. A) higher than. it assumes its demand curve is the market demand less the amount the other firm is selling. 25. Tacit collusion occurs when price. C) are explicit. the same as D) lower than. if the industry were a monopoly. no D) more likely. and the quantity they produce would be ________. A) less likely. In an oligopolistic industry where the oligopolists collude. a few C) always. 1.1 B's Strategy Don't Raise Price A's profit $20. Raise Price Raise Price A's profit $6.1 below to answer the question that follows. Refer to the information provided in Table 14. Don't Raise Price) B) (Don't Raise Price. Predatory pricing occurs when a large.000 B's profit $20. Because the players are prevented from cooperating.1. If both firms follow a maximin strategy. B) permanently selling at an artificially low price. C) permanently selling at an artificially high price. A) (Raise Price. B) Demand elasticity in response to an increase in price is different from the demand elasticity in response to a price cut.000 B's profit $30. Raise Price) C) (Raise Price.26.000 B's profit $10. powerful firm drives smaller firms out of the market by A) temporarily selling at an artificially low price.000 A's Strategy 28. 27. as no information is provided on Firm A's risk preference. Refer to Table 14. D) temporarily selling at an artificially high price. C) A dominant firm maximizes profit. Raise Price) D) (Don't Raise Price. A) them both worse off B) them both better off C) the first player to confess better off and the other player worse off D) the first player to confess worse off and the other player better off . Don't Raise Price) B) (Don't Raise Price. Raise Price) C) (Don't Raise Price. 30.000 Don't Raise A's profit $30. Firm A's optimal strategy is A) dependent on what Firm B does.000 B's profit $6. C) to raise the price of its product. the equilibrium in the game is ________.1. Refer to Table 14. B) to not raise the price of its product. Don't Raise Price) D) Both A and B are correct. D) indeterminate from this information. Refer to Table 14. 29.000 Table 14. The Nash equilibrium in the game is ________. A) (Raise Price. D) The industry is made up of one large firm and a number of smaller. each player in a prisoners' dilemma game has a dominant strategy that leaves ________ than if they could cooperate. Don't Raise Price) 31. The price-leadership model assumes all of the following EXCEPT: A) A dominant firm allows the smaller firms to sell all they want at the price the leader has set.000 A's profit $10. competitive firms. increased D) large. increased 37. responds in kind to Refer to the information provided in Table 14. Answer: True False 36. Refer to Table 14. If the Herfindahl-Hirschman Index of an industry is greater than 1. Firm A's dominant strategy is to not advertise. D) before their competitors do. A) tit-for-tat B) Cournot C) prisoners' dilemma D) maximin 34. D) will challenge any merger that raises the index by more than 50 points.32.2 B's Strategy Advertise Don't Advertise A's profit $200 million A's profit $400 million B's profit $200 million B's profit $100 million Don't Advertise A's profit $100 million A's profit $150 million B's profit $400 million B's profit $150 million A's Strategy 35. in which a relatively ________ number of firms control the market place. A player chooses a ________ strategy to maximize the minimum gain the player can earn. responds in kind to C) single.2 below to answer the question that follows. actually ________ the rate of technological advance. decreased C) small.2. Tit-for-tat is a ________ game strategy in which a player ________ an opponent's play.800. A) small. ignores D) repeated. decreased B) large. A) repeated. ignores B) single. C) only if their competitors are unaware of their strategies. The economist Joseph Schumpeter argued that industrial concentration. B) considers the industry moderately concentrated. . Advertise Table 14. B) without knowing what their competitors do. 33. then the Antitrust Division of the Justice Department A) will not challenge any merger. C) considers the industry unconcentrated. A Nash equilibrium occurs if all players in a game play their best strategies A) given what their competitors do. D) 100.000. C) 5.000. If there are four firms in an industry and each has a 25 percent market share. D) 6.800.38. C) 10.500.600. B) 2.000. then the Herfindahl-Hirschman Index equals A) 2.000.000. . A pure monopoly has an HHI value of A) 1. 39. B) 5.