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Exam 11: Imperfect Competition and Strategic Behaviour

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Question 61

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Consider the three largest cell- phone service providers in Canada - Bell,Telus,and Rogers.If we observe that all three companies increase their monthly service fees simultaneously,we might conclude that

A) they are engaged in predatory pricing.
B) these firms have monopolized the industry.
C) they are creating entry barriers to prevent entry by new firms.
D) they are perfect competitors and they are unable to set the price.
E) there is tacit collusion among these firms.

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Question 62

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The diagram below shows selected cost and revenue curves for a firm in a monopolistically competitive industry. FIGURE 11- 1 -An imperfectly competitive industry is often allocatively inefficient when compared to the performance of a competitive industry,because imperfect competitors

A) make profits.
B) operate in the global economy.
C) set price above the marginal cost.
D) obtain economies of scale.
E) maximize profits.

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Question 63

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By calculating a concentration ratio,economists measure the

The presence of significant scale economies in an industry implies that

FIGURE 11- 2 -Assume that the world's largest smart- phone producers (Apple,Nokia,Samsung,etc.) operate in an oligopolistic industry.In the long run,which of the following is the most important form of competition between these firms?

Of the following,which is the best example of a monopolistically competitive firm?

The table below shows the market shares for the only firms in a domestic cement market. $\begin{array} { | l | c | } \hline & \text { Market Share } \\\hline \text { Firm A } & 45 \% \\\hline \text { Firm B } & 22 \% \\\hline \text { Firm C } & 10 \% \\\hline \text { Firm D } & 8 \% \\\hline \text { Firm E } & 7 \% \\\hline \text { Firm F } & 5 \% \\\hline \text { Firm G } & 2 \% \\\hline \text { Firm H } & 1 \% \\\hline\end{array}$ TABLE 11- 1 -Refer to Table 11- 1.The eight- firm concentration ratio in this industry is %.

The diagram below shows demand and cost curves for a monopolistically competitive firm. FIGURE 11- 3 -The following statements describe a cooperative equilibrium in an oligopoly where the firms are jointly maximizing profits by restricting output.Which statement is false?

"Brand proliferation" in an oligopolistic industry

Suppose the 2- firm concentration ratio (measuring output) in a Canadian manufacturing industry is over 90%.Why might the market power of these 2 firms be less than the concentration ratio suggests?

The table below shows the market shares for the only firms in a domestic cement market. $\begin{array} { | l | c | } \hline & \text { Market Share } \\\hline \text { Firm A } & 45 \% \\\hline \text { Firm B } & 22 \% \\\hline \text { Firm C } & 10 \% \\\hline \text { Firm D } & 8 \% \\\hline \text { Firm E } & 7 \% \\\hline \text { Firm F } & 5 \% \\\hline \text { Firm G } & 2 \% \\\hline \text { Firm H } & 1 \% \\\hline\end{array}$ TABLE 11- 1 -Oligopolists make decisions after taking into account the expected reaction of their competitors.In doing this,oligopolists are exhibiting

$\begin{array}{c}&\text { Firm B }\\\text { Firm A }&\begin{array}{l|cc} & \text { Cooperate } & \text { Cheat } \\\hline \text { Cooperat } & (30,30) & (10, x) \\\text { Cheat }& (x, 10) & (20,20) \\\end{array}\end{array}$ $\text { TABLE 11-2 }$ $\begin{array}{c}&\text { Firm B }\\\text { Firm A }&\begin{array}{l|cc} & \text { Cooperate } & \text { Cheat } \\\hline \text { Cooperat } & (30,30) & (10, x) \\\text { Cheat }& (x, 10) & (20,20) \\\end{array}\end{array}$ $\text { TABLE 11-2 }$ -Refer to Table 11- 2.If Firm A is indifferent between cheating or cooperating when Firm B chooses to cooperate,x must be equal to

The diagram below shows demand and cost curves for a monopolistically competitive firm. FIGURE 11- 3 -Refer to Figure 11- 3.A monopolistically competitive firm is allocatively inefficient because in the long- run equilibrium

Suppose there are many independent dry cleaners in your city,each of which provides essentially the same service.However,one offers local delivery,another offers free coffee in the shop,while another offers one- hour dry cleaning.Which of the following statements explains what is happening in this market?

FIGURE 11- 2 -Consider the following characteristics of a particular industry: - the four- firm concentration ratio is 78% (in the relevant market) - each firm produces output where P > MC - the products are highly differentiated This industry is likely to be