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1 | |
Which one of the following statements about oligopolistic markets is incorrect? |
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| | A) | An oligopolist will generally be a price taker in the output market. |
| | B) | In an oligopolistic market, there are only a few sellers. |
| | C) | An oligopolist is a price setter in the output market. |
| | D) | In an oligopolistic industry, barriers to entry into the market may be quite high. |
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2 | |
All of the following promote the existence of oligopolies except: |
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| | A) | The possibility of firms in the industry making economic profits. |
| | B) | Many producers in the industry producing a similar product. |
| | C) | Barriers to entry into the industry. |
| | D) | Pronounced economies of scale. |
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3 | |
Suppose that it is relatively easy for new firms to enter into an industry. We would expect: |
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| | A) | It to be relatively easy for the firms to form a cartel. |
| | B) | The likelihood of the firms making oligopoly profits to be reduced. |
| | C) | The industry to exhibit strong economies of scale. |
| | D) | The firms to charge the monopoly price and produce the monopoly output. |
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4 | |
If it is possible for the existing firms in an industry to cooperate completely, then we would expect this cooperation to lead to: |
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| | A) | A market price established close to the competitive price. |
| | B) | The production of a monopoly level of output and the establishment of a monopoly price. |
| | C) | Only a normal profit to be earned by the firms. |
| | D) | The firms to produce that output level which corresponds to minimum LAC. |
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5 | |
A problem often encountered when oligopolists try to cooperate is that: |
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| | A) | The number of firms in the industry is too small. |
| | B) | Most oligopolists produce highly differentiated products. |
| | C) | Some firms might cheat on the established market price. |
| | D) | Firms really are not interested in cooperating with their competitors. |
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6 | |
A natural oligopoly exists when: |
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| | A) | All firms in the industry are large. |
| | B) | The most efficient size of operation requires that the firm be large and the market can support only a few firms. |
| | C) | There is one dominant firm and a competitive fringe. |
| | D) | There are not enough profits for all firms in the industry. |
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7 | |
Which one of the following statements is incorrect? |
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| | A) | There is no single theory that completely describes oligopoly pricing. |
| | B) | It is in the firm's best interest to fix prices and set an established price that results in maximum individual profit. |
| | C) | Collusion among firms pulls the market toward the competitive price and output levels. |
| | D) | At times, oligopolistic firms may cooperate, whereas at other times, they may not. |
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8 | |
Suppose that there are only two firms in an industry, firms A and B. According to the oligopolists' dilemma, both firms would: |
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| | A) | Firm A raised its price and firm B did not. |
| | B) | Firm B raised its price and firm A did not. |
| | C) | Both firm A and B raise their price. |
| | D) | Both firm A and B lower their price. |
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9 | |
When oligopolists do not cooperate, one result is that: |
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| | A) | The market is established at the monopoly price. |
| | B) | The output is established at the level that would occur if the oligopolists practiced perfect collusion. |
| | C) | The firms try to guess the actions of competing firms. |
| | D) | It is relatively easy for one firm to assume the role of the price leader. |
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10 | |
The kinked demand curve pricing model is based upon the assumption that: |
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| | A) | A firm's competitors match both its price increases and price decreases. |
| | B) | One firm in the industry sets price for all other firms. |
| | C) | A firm's competitors match its price reductions but ignore its price increases. |
| | D) | Prices can either rise or fall; it depends on what happens to a firm's competitors' prices. |
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11 | |
The minimum efficient scale can be an entry barrier. |
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| | A) | TRUE |
| | B) | FALSE |
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12 | |
The existence of sunk costs will lead to a contestable market. |
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| | A) | TRUE |
| | B) | FALSE |
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13 | |
Two firms will bid against each other for a contract once a month for 12 months. They will cooperate, rather than compete during each bid. |
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| | A) | TRUE |
| | B) | FALSE |
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14 | |
If a market becomes more contestable, firms will only earn normal profits. |
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| | A) | TRUE |
| | B) | FALSE |
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15 | |
The kinked demand curve illustrates strategic interdependence. |
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| | A) | TRUE |
| | B) | FALSE |
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16 | |
For the kinked demand curve, demand is _________ above the equilibrium price and ________ below the equilibrium price. |
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| | A) | Inelastic, Elastic |
| | B) | Elastic, Inelastic |
| | C) | Strong, weak |
| | D) | Weak, strong |
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17 | |
In a ________equilibrium each firm makes an optimal response given the potential response of its rival. |
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| | A) | Price |
| | B) | Cartel |
| | C) | Cooperative |
| | D) | Nash |
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18 | |
Strategic entry barriers can stem from ________ costs. |
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| | A) | Total |
| | B) | Variable |
| | C) | Endogenous |
| | D) | Exogenous |
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19 | |
Advertising can represent a ________ cost. |
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| | A) | Large |
| | B) | Worthwhile |
| | C) | Variable |
| | D) | Sunk |
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20 | |
Strategic interaction only occurs in _________. |
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| | A) | Perfect Competition |
| | B) | Monopoly |
| | C) | Oligopoly |
| | D) | Short run |