Question 1

(Last Word)  Which of the following statements best describes the Internet market structure?

Accepted Answer

A)  It is highly competitive, with many providers and no firms in a dominant position.
B)  There are a few large firms, such as Google, Facebook, and Amazon, but they each occupy their own niche and don't infringe on the others' territories.
C)  There are a few large firms, such as Google, Facebook, and Amazon, each dominating a particular sector but always trying to gain market share in another sector.
D)  It comprises firms that have been granted monopolies by the government and are highly regulated.

Question 2

(Consider This)  The story about three sellers of Native American arts and crafts best illustrates the idea of

Accepted Answer

A)  strategic behavior.
B)  excess capacity.
C)  the role of advertising.
D)  product differentiation.

Question 3

Advertising can impede economic efficiency when it

Accepted Answer

A)  reduces entry barriers.
B)  reduces brand loyalty.
C)  leads to greater monopoly power.
D)  provides consumers with useful information about product quality.

Question 4

Mutual interdependence means that oligopolistic producers rely primarily on price competition in determining their shares of the total market for their product.

Accepted Answer

A) True 
 B)False

Question 5

Which statement about oligopoly is false?

Accepted Answer

A)  Oligopolistic firms recognize their interdependence.
B)  Prices in oligopoly are predicted to fluctuate widely and frequently.
C)  A few firms play an important role in the sale of a product.
D)  One firm's behavior is a function of what its rivals do.

Question 6

A strategy that is better than any alternative strategy-regardless of what the other firm does-is called a

Accepted Answer

A)  dominant strategy.
B)  simultaneous strategy.
C)  positive-sum strategy.
D)  one-time strategy.

Question 7

A game where players choose their strategies at the same time is called a

Accepted Answer

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

Question 8

(Consider This)  The prisoner's dilemma is generally demonstrated through

Accepted Answer

A)  the kinked-demand model.
B)  game theory.
C)  monopolistic competition.
D)  a tightly knit cartel.

Question 9

Both collusive and noncollusive oligopoly models suggest that price changes will be relatively infrequent in these types of industries.

Accepted Answer

A) True 
 B)False

Question 10

The Organization of Petroleum Exporting Countries (OPEC)  is an international cartel.If the cartel were to hire a consulting firm to monitor the production rates of member countries, the economic reason for this monitoring would be to

Accepted Answer

A)  make sure that each member country is producing at an output level at which price equals marginal cost.
B)  make sure all the member countries produce at least their quotas so that there will be no oil shortage.
C)  detect those member countries that are depressing prices by producing more than their assigned quotas.
D)  make sure that the marginal revenue for the last barrel of oil sold by each member country is less than its price.

Question 11

(Consider This)  The Native American arts and crafts story illustrates the twin ideas of

Accepted Answer

A)  product differentiation and monopolistic competition.
B)  excess capacity and monopolistic competition.
C)  local oligopoly and strategic behavior.
D)  pure monopoly and price discrimination.

Question 12

A cartel is

Accepted Answer

A)  a form of covert collusion.
B)  legal in the United States.
C)  always successful in raising profits.
D)  a formal agreement among firms to collude.

Question 13

Which of the following factors tends to foster the development of an oligopoly?

Accepted Answer

A)  economies of scale
B)  foreign competition
C)  antitrust legislation
D)  low barriers to entry

Question 14

A major distinction between a monopolistically competitive firm and an oligopolistic firm is that

Accepted Answer

A)  one is a price taker and the other is a price maker.
B)  a recognized interdependence exists between firms in one industry but not in the other.
C)  one always produces differentiated products and the other always produces a homogeneous product.
D)  one necessarily faces a downward-sloping demand curve and the other a horizontal demand curve.

Question 15

Nash equilibrium is an outcome of a game from which neither rival will want to deviate.

Accepted Answer

A) True 
 B)False

Question 16

Aluminum competes with copper in the market for power transmission lines.This illustrates

Accepted Answer

A)  mutual interdependence.
B)  differentiated oligopoly.
C)  interindustry competition.
D)  homogeneous oligopoly.

Question 17

The study of how people (or firms)  behave in strategic situations is called

Accepted Answer

A)  cost-benefit analysis.
B)  recursive analysis.
C)  normative economics.
D)  game theory.

Question 18

Which of the following statements is true?

Accepted Answer

A)  Nash equilibriums exist only in games with dominant strategies.
B)  Dominant strategies do not exist in repeated games.
C)  Collusive agreements will always break down in repeated games.
D)  Games with a known ending date undermine reciprocity strategies.

Question 19

Collusion refers to a situation where rival firms decide to

Accepted Answer

A)  compete aggressively against each other.
B)  cheat on each other.
C)  agree with each other to set prices and output.
D)  combine their operations and merge with each other.

Question 20

Mutual interdependence means that

Accepted Answer

A)  a firm's behavior is affected by other firms' actions.
B)  a firm's profits are affected by other firms' entry or exit.
C)  a firm's costs are affected by other firms' costs.
D)  a firm's revenues are affected by other firms' demand for its product.

Exam 14: Oligopoly and Strategic Behavior

(Last Word) Which of the following statements best describes the Internet market structure?

Correct AnswerverifiedShow Answer

Mutual interdependence means that

Correct AnswerverifiedShow Answer

A major distinction between a monopolistically competitive firm and an oligopolistic firm is that

Correct AnswerverifiedShow Answer

Aluminum competes with copper in the market for power transmission lines.This illustrates

Correct AnswerverifiedShow Answer

(Consider This) The prisoner's dilemma is generally demonstrated through

Correct AnswerverifiedShow Answer

(Consider This) The Native American arts and crafts story illustrates the twin ideas of

Correct AnswerverifiedShow Answer

Advertising can impede economic efficiency when it

Correct AnswerverifiedShow Answer

(Consider This) The story about three sellers of Native American arts and crafts best illustrates the idea of

Correct AnswerverifiedShow Answer

The Organization of Petroleum Exporting Countries (OPEC) is an international cartel.If the cartel were to hire a consulting firm to monitor the production rates of member countries, the economic reason for this monitoring would be to

Correct AnswerverifiedShow Answer

Which statement about oligopoly is false?

Correct AnswerverifiedShow Answer

Which of the following factors tends to foster the development of an oligopoly?

Correct AnswerverifiedShow Answer

A strategy that is better than any alternative strategy-regardless of what the other firm does-is called a

Correct AnswerverifiedShow Answer

Collusion refers to a situation where rival firms decide to

Correct AnswerverifiedShow Answer

Both collusive and noncollusive oligopoly models suggest that price changes will be relatively infrequent in these types of industries.

Correct AnswerverifiedShow Answer

Nash equilibrium is an outcome of a game from which neither rival will want to deviate.

Correct AnswerverifiedShow Answer

A cartel is

Correct AnswerverifiedShow Answer

Which of the following statements is true?

Correct AnswerverifiedShow Answer

The study of how people (or firms) behave in strategic situations is called

Correct AnswerverifiedShow Answer

Mutual interdependence means that oligopolistic producers rely primarily on price competition in determining their shares of the total market for their product.

Correct AnswerverifiedShow Answer

A game where players choose their strategies at the same time is called a

Correct AnswerverifiedShow Answer

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