Question 1

The kinked-demand curve model applies to a noncollusive oligopoly situation.

Accepted Answer

A) True 
 B)False

Question 2

Which statement concerning the kinked demand curve model of oligopoly is false?

Accepted Answer

A)  It addresses the question of price "stickiness."
B)  It assumes when one oligopolist raises the price, all others will follow.
C)  The portion of the demand curve above the "kink" is more elastic than the portion below.
D)  The firm's marginal costs can sometimes shift without changing the profit-maximizing price and output.E) B) and C)
F) A) and B)

Question 3

In game theory, a "payoff matrix" is a table that shows the following, except

Accepted Answer

A)  the profits to each firm or player that would result from various strategy combinations.
B)  the target payoffs that each firm or player is aiming for in their different strategies.
C)  the interdependence of the firms' or players' profits, based on their alternative actions.
D)  the alternative results that the firms or players would get, based on their actions and those of others.E) B) and C)
F) A) and D)

Question 4

A game where players or firms select their optimal strategies for a single time period without regard for possible interactions in subsequent periods is called a

Accepted Answer

A)  positive-sum game.
B)  zero-sum game.
C)  simultaneous game.
D)  one-time game.E) B) and C)
F) C) and D)

Question 5

Refer to the diagram. This firm's demand and marginal revenue curves are based on the assumption that

Accepted Answer

A)  the firm has no immediate rivals.
B)  rivals will match both a price increase and a price decrease.
C)  rivals will match a price increase but ignore a price decrease.
D)  rivals will ignore a price increase but match a price decrease.E) A) and C)
F) B) and D)

Question 6

We would expect a cartel to achieve

Accepted Answer

A)  both allocative efficiency and productive efficiency.
B)  allocative efficiency but not productive efficiency.
C)  productive efficiency but not allocative efficiency.
D)  neither allocative efficiency nor productive efficiency.E) B) and C)
F) B) and D)

Question 7

Concentration ratios

Accepted Answer

A)  may overstate the degree of competition because they ignore imported products.
B)  may overstate the degree of competition because interindustry competition is ignored.
C)  may understate the degree of competition because they ignore imported products.
D)  provide detailed insights as to the price and output behavior of firms that compose the various industries.E) A) and B)
F) A) and C)

Question 8

Suppose that Firm C in this table was found guilty of antitrust violations and split into two firms with equal market share. This would cause the Herfindahl index to

Accepted Answer

A)  rise to 2,064.
B)  fall to 2,064.
C)  fall to 1,936.
D)  rise to 1,936.E) B) and D)
F) A) and B)

Question 9

Game-theory models analyze the interdependence of oligopolists' strategies.

Accepted Answer

A) True 
 B)False

Question 10

The kinked-demand curve of an oligopolist is based on the assumption that

Accepted Answer

A)  competitors will follow a price cut but ignore a price increase.
B)  competitors will match both price cuts and price increases.
C)  competitors will ignore a price cut but follow a price increase.
D)  there is no product differentiation.E) A) and B)
F) B) and D)

Question 11

Evaluate the statement: "A market that produces an identical product cannot be an oligopoly. "

Accepted Answer

This statement is incorrect. T...

Question 12

You are told that the four-firm concentration ratio in an industry is 16. Based on this information you can conclude that

Accepted Answer

A)  each of the top four firms has, on average, 16 percent of industry sales.
B)  this industry's market structure is oligopoly.
C)  the four largest firms account for 16 percent of industry sales.
D)  each of the four largest firms accounts for 4 percent of industry sales.E) All of the above
F) A) and C)

Question 13

Two important characteristics of oligopolists are that they have significant control over price and that there is mutual interdependence among them.

Accepted Answer

A) True 
 B)False

Question 14

A zero-sum game is one where a player will always end up gaining nothing, regardless of his strategy.

Accepted Answer

A) True 
 B)False

Question 15

In the United States cartels are

Accepted Answer

A)  quite common in industries that produce nondurable goods.
B)  in violation of the antitrust laws.
C)  concentrated in monopolistically competitive industries.
D)  encouraged by government policy so firms can achieve economies of scale.E) A) and B)
F) A) and C)

Question 16

A simultaneous game is said to exist when

Accepted Answer

A)  firms are playing pricing games in different markets at the same time.
B)  firms choose their strategies at the same time as their rivals.
C)  firms can set multiple prices for the same good at the same time.
D)  strategies are set without regard to possible interactions in future time periods.E) A) and B)
F) A) and C)

Question 17

Oligopolistic firms engage in collusion to

Accepted Answer

A)  minimize unit costs of production.
B)  realize allocative efficiency, that is, the P = MC level of output.
C)  earn greater profits.
D)  increase production.E) A) and D)
F) B) and C)

Question 18

Homogeneous oligopoly exists where a small number of firms are

Accepted Answer

A)  producing virtually identical products.
B)  setting price and output independently.
C)  setting price and output collusively.
D)  producing differentiated products.E) A) and C)
F) B) and C)

Question 19

A game has a Nash equilibrium when the two players' dominant strategies

Accepted Answer

A)  depend on what the other player does.
B)  intersect in a specific cell of the payoff matrix.
C)  result in the largest total payoff for the two players combined.
D)  result in no loss for either player.E) A) and D)
F) A) and C)

Question 20

Refer to the payoff matrix. Bob's Burgers and Sam's Sandwiches are competing restaurants in a small town. Both are considering adding pizza to their line of products. If this is a one-time simultaneous game,

Accepted Answer

A)  both firms have a dominant strategy to add pizza to their menu.
B)  both firms have a dominant strategy to not add pizza to their menu.
C)  a Nash equilibrium occurs either when both add pizza or both do not add pizza.
D)  neither firm has a dominant strategy.E) A) and D)
F) A) and B)

Exam 14: Oligopoly and Strategic Behavior

In game theory, a "payoff matrix" is a table that shows the following, except

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A game has a Nash equilibrium when the two players' dominant strategies

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Concentration ratios

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In the United States cartels are

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Refer to the diagram. This firm's demand and marginal revenue curves are based on the assumption that

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Oligopolistic firms engage in collusion to

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The kinked-demand curve model applies to a noncollusive oligopoly situation.

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You are told that the four-firm concentration ratio in an industry is 16. Based on this information you can conclude that

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Homogeneous oligopoly exists where a small number of firms are

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Evaluate the statement: "A market that produces an identical product cannot be an oligopoly. "

Correct AnswerverifiedThis statement is incorrect. T...View AnswerShow Answer

A game where players or firms select their optimal strategies for a single time period without regard for possible interactions in subsequent periods is called a

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The kinked-demand curve of an oligopolist is based on the assumption that

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Which statement concerning the kinked demand curve model of oligopoly is false?

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Game-theory models analyze the interdependence of oligopolists' strategies.

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Suppose that Firm C in this table was found guilty of antitrust violations and split into two firms with equal market share. This would cause the Herfindahl index to

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A zero-sum game is one where a player will always end up gaining nothing, regardless of his strategy.

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Two important characteristics of oligopolists are that they have significant control over price and that there is mutual interdependence among them.

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We would expect a cartel to achieve

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A simultaneous game is said to exist when

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Refer to the payoff matrix. Bob's Burgers and Sam's Sandwiches are competing restaurants in a small town. Both are considering adding pizza to their line of products. If this is a one-time simultaneous game,

Correct AnswerverifiedShow Answer

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This statement is incorrect. T...
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