Question 1

If a market changes from oligopoly to perfect competition,then as a result

Accepted Answer

A)  Output should increase in the long run.
B)  Fewer resources will be allocated to the market.
C)  Profitability should rise in the long run.D) A) and B)
E) A) and C)

Question 2

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) A) and C)
E) B) and C)

Question 3

A nationwide concentration ratio is likely to understate market power when

Accepted Answer

A)  Firms sell nationally.
B)  The true markets are local and small.
C)  There is extensive foreign competition.D) A) and B)
E) B) and C)

Question 4

The most common form of nonprice competition is

Accepted Answer

A)  Collusion.
B)  Advertising.
C)  Patents.D) A) and C)
E) All of the above

Question 5

Oligopolistic behavior includes

Accepted Answer

A)  Tacit collusion.
B)  High concentration ratios.
C)  High barriers to entry.D) A) and B)
E) None of the above

Question 6

Suppose there are only three firms in a market.The largest firm has sales of $500 million,the second-largest has sales of $300 million,and the smallest has sales of $200 million.The market share of the largest firm is

Accepted Answer

A)  50 percent.
B)  100 percent.
C)  60 percent.D) All of the above
E) None of the above

Question 7

Discuss specific firm behavior that reduced the level of competition in an industry.What are the opportunity costs of greater concentration?

Accepted Answer

Firms in an oligopoly market can engage ...

Question 8

Since there are many college bookstores in the United States,college bookstores have no power to influence book prices on campus.

Accepted Answer

A) True 
 B)False

Question 9

The potential for maximizing total industry profits is greater in oligopolies than in perfect competition because

Accepted Answer

A)  There are fewer firms and each is dependent on the actions of rivals.
B)  Firms in an oligopoly are more profitable.
C)  There are independent firms in an oligopoly.D) All of the above
E) B) and C)

Question 10

Market share is the percentage of total output produced by a single firm.

Accepted Answer

A) True 
 B)False

Question 11

An imperfection in the market mechanism that prevents optimal outcomes is called

Accepted Answer

A)  Antitrust behavior.
B)  Collusion.
C)  Market failure.D) A) and B)
E) A) and C)

Question 12

The kinked demand curve demonstrates that if an oligopolist raises its prices,it is likely to gain market share.

Accepted Answer

A) True 
 B)False

Question 13

Price leadership is a method by which oligopolies can

Accepted Answer

A)  Increase prices without explicit price-fixing.
B)  Illegally raise prices.
C)  Maintain the "kink" in their demand curves.D) None of the above
E) A) and B)

Question 14

A payoff matrix shows

Accepted Answer

A)  The profits or losses that result from strategic decisions of one firm and another firm.
B)  The payoffs of one firm always choosing to price low.
C)  What companies will do no matter what the other firm does.D) A) and B)
E) B) and C)

Question 15

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) A) and C)
E) All of the above

Question 16

Which of the following is the critical determinant of market power?

Accepted Answer

A)  The number of producers.
B)  The size of each firm.
C)  The extent of barriers to entry.D) B) and C)
E) A) and C)

Question 17

The demand curve will be kinked if rival oligopolists

Accepted Answer

A)  Match price increases but not price reductions.
B)  Match price reductions but not price increases.
C)  Match both price increase and price reductions.D) A) and B)
E) A) and C)

Question 18

Product differentiation is used by an oligopoly in an effort to gain market share.

Accepted Answer

A) True 
 B)False

Question 19

When firms are interdependent,

Accepted Answer

A)  One firm can ignore other companies in the market when making decisions.
B)  The profit of one firm depends on how its rivals respond to its strategic decisions.
C)  They can act independently of one another.D) All of the above
E) A) and B)

Question 20

Suppose the larger firm of a duopoly has sales of $400 million and the smaller firm has sales of $100 million.The market share of the larger firm is

Accepted Answer

A)  80 percent.
B)  40 percent.
C)  20 percent.D) None of the above
E) All of the above

Exam 25: Oligopoly

Oligopolistic behavior includes

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The demand curve will be kinked if rival oligopolists

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The most common form of nonprice competition is

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The kinked demand curve demonstrates that if an oligopolist raises its prices,it is likely to gain market share.

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Since there are many college bookstores in the United States,college bookstores have no power to influence book prices on campus.

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A nationwide concentration ratio is likely to understate market power when

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Discuss specific firm behavior that reduced the level of competition in an industry.What are the opportunity costs of greater concentration?

Correct AnswerverifiedFirms in an oligopoly market can engage ...View AnswerShow Answer

When firms are interdependent,

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Suppose there are only three firms in a market.The largest firm has sales of $500 million,the second-largest has sales of $300 million,and the smallest has sales of $200 million.The market share of the largest firm is

Correct AnswerverifiedShow Answer

Market power leads to market failure when it results in

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An imperfection in the market mechanism that prevents optimal outcomes is called

Correct AnswerverifiedShow Answer

If a market changes from oligopoly to perfect competition,then as a result

Correct AnswerverifiedShow Answer

The potential for maximizing total industry profits is greater in oligopolies than in perfect competition because

Correct AnswerverifiedShow Answer

Product differentiation is used by an oligopoly in an effort to gain market share.

Correct AnswerverifiedShow Answer

Market share is the percentage of total output produced by a single firm.

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

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Which of the following is the critical determinant of market power?

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Suppose the larger firm of a duopoly has sales of $400 million and the smaller firm has sales of $100 million.The market share of the larger firm is

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A payoff matrix shows

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Price leadership is a method by which oligopolies can

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Firms in an oligopoly market can engage ...
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