Question 1

Predatory pricing is a permanent price reduction designed to alter market shares or drive out competition.

Accepted Answer

A) True 
 B)False

Question 2

- Given the payoff matrix in Table 25.1,if the probability of rivals matching a price reduction is 99 percent,what is the expected payoff for a price cut by Company ABC?

Accepted Answer

A)  $0.
B)  $5.
C)  -$500.D) B) and C)
E) A) and C) B

Question 3

An increase in the market share of one oligopolist will not affect the market share of the other firms in the industry.

Accepted Answer

A) True 
 B)False

Question 4

Concentration ratios tend to overstate the power of some corporations to influence economic outcomes because they measure output

Accepted Answer

A)  For single firms rather than markets.
B)  For the whole United States,which is too large a geographic market for some firms or industries.
C)  Only for domestic production when the true market boundaries are international for some markets.D) A) and B)
E) None of the above

Question 5

Game theory is the study of strategic interaction between rivals.

Accepted Answer

A) True 
 B)False

Question 6

Mergers and acquisitions can act as a barrier to entry.

Accepted Answer

A) True 
 B)False  True

Question 7

Advertising makes it expensive for new firms to enter an industry.

Accepted Answer

A) True 
 B)False

Question 8

The only market structure in which there is significant interdependence among firms with regard to their pricing and output decisions is

Accepted Answer

A)  Monopolistic competition.
B)  Monopoly.
C)  Oligopoly.D) A) and B)
E) A) and C)

Question 9

Advertising cannot serve as a barrier to entry because any firm can advertise its product.

Accepted Answer

A) True 
 B)False

Question 10

The joint and individual interests of oligopolists are to maximize industry profit.

Accepted Answer

A) True 
 B)False

Question 11

Suppose there are 51 firms in a market.The largest firm has sales of $50 million and each of the other firms has sales of $1 million.The Herfindahl-Hirshman Index of this industry is

Accepted Answer

A)  2,500.
B)  2,501.
C)  2,550.D) None of the above
E) B) and C)

Question 12

Patents are a barrier to entry.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following may not characterize an oligopoly?

Accepted Answer

A)  A few firms.
B)  No market power.
C)  High barriers to entry.D) All of the above
E) B) and C)

Question 14

Which of the following industries has the highest concentration ratio?

Accepted Answer

A)  Satellite radio.
B)  Cameras.
C)  Detergents.D) A) and B)
E) All of the above

Question 15

If all of your friends use the same instant messaging service provider,you are likely to use it too.This behavior may create

Accepted Answer

A)  Cartels.
B)  Nonprice competition.
C)  A network economy.D) A) and B)
E) A) and C)

Question 16

Suppose there are three firms in a market.The largest firm has sales of $50 million,and each of the other two firms has sales of $25 million.The Herfindahl-Hirschman Index of this industry is

Accepted Answer

A)  2,500.
B)  3,750.
C)  2,550.D) B) and C)
E) A) and C)

Question 17

Colluding oligopolists face a conflict between maximizing joint market profit or their own market share.

Accepted Answer

A) True 
 B)False

Question 18

Sky-High Skywriters temporarily reduces its price when a new firm called The Sky's the Limit Skywriting enters the industry.Sky-High Skywriters is practicing

Accepted Answer

A)  Retaliation.
B)  Price leadership.
C)  Predatory pricing.D) A) and B)
E) All of the above

Question 19

The kinked demand curve is really a composite of two separate demand curves.

Accepted Answer

A) True 
 B)False

Question 20

1 and D2 both assume that rivals will not match any price changes. B) Demand curves D1 and D2 both assume that rivals match any price changes. C) Demand curve D1 assumes that rivals match any price changes." class="answers-bank-image d-inline" rel="preload" > Refer to Figure 25.1 for an oligopoly firm.Assume that the existing price and quantity are $10 and 2,000 units.Which of the following statements is most likely correct?

Accepted Answer

A)  Demand curves D1 and D2 both assume that rivals will not match any price changes.
B)  Demand curves D1 and D2 both assume that rivals match any price changes.
C)  Demand curve D1 assumes that rivals match any price changes.D) None of the above
E) All of the above C

Exam 25: Oligopoly

Predatory pricing is a permanent price reduction designed to alter market shares or drive out competition.

Correct AnswerverifiedShow Answer

- Given the payoff matrix in Table 25.1,if the probability of rivals matching a price reduction is 99 percent,what is the expected payoff for a price cut by Company ABC?

Correct AnswerverifiedB

An increase in the market share of one oligopolist will not affect the market share of the other firms in the industry.

Correct AnswerverifiedShow Answer

Concentration ratios tend to overstate the power of some corporations to influence economic outcomes because they measure output

Correct AnswerverifiedShow Answer

Game theory is the study of strategic interaction between rivals.

Correct AnswerverifiedShow Answer

Mergers and acquisitions can act as a barrier to entry.

Correct AnswerverifiedTrue

Advertising makes it expensive for new firms to enter an industry.

Correct AnswerverifiedShow Answer

The only market structure in which there is significant interdependence among firms with regard to their pricing and output decisions is

Correct AnswerverifiedShow Answer

Advertising cannot serve as a barrier to entry because any firm can advertise its product.

Correct AnswerverifiedShow Answer

The joint and individual interests of oligopolists are to maximize industry profit.

Correct AnswerverifiedShow Answer

Suppose there are 51 firms in a market.The largest firm has sales of $50 million and each of the other firms has sales of $1 million.The Herfindahl-Hirshman Index of this industry is

Correct AnswerverifiedShow Answer

Patents are a barrier to entry.

Correct AnswerverifiedShow Answer

Which of the following may not characterize an oligopoly?

Correct AnswerverifiedShow Answer

Which of the following industries has the highest concentration ratio?

Correct AnswerverifiedShow Answer

If all of your friends use the same instant messaging service provider,you are likely to use it too.This behavior may create

Correct AnswerverifiedShow Answer

Suppose there are three firms in a market.The largest firm has sales of $50 million,and each of the other two firms has sales of $25 million.The Herfindahl-Hirschman Index of this industry is

Correct AnswerverifiedShow Answer

Colluding oligopolists face a conflict between maximizing joint market profit or their own market share.

Correct AnswerverifiedShow Answer

Sky-High Skywriters temporarily reduces its price when a new firm called The Sky's the Limit Skywriting enters the industry.Sky-High Skywriters is practicing

Correct AnswerverifiedShow Answer

The kinked demand curve is really a composite of two separate demand curves.

Correct AnswerverifiedShow Answer

Refer to Figure 25.1 for an oligopoly firm.Assume that the existing price and quantity are $10 and 2,000 units.Which of the following statements is most likely correct?

Correct AnswerverifiedC

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B

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True

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C