Question 1

In game theory, each player is assumed to have the following, except

Accepted Answer

A)  alternative strategies or actions.
B)  alternative outcomes or results.
C)  alternative payoffs or earnings.
D)  alternative partners or coplayers.E) None of the above
F) A) and C)

Question 2

Describe the negative effects of advertising.

Accepted Answer

Negative effects of advertising include:...

Question 3

This industry shown in this table illustrates

Accepted Answer

A)  pure competition.
B)  monopolistic competition.
C)  oligopoly.
D)  pure monopoly.E) C) and D)
F) A) and D)

Question 4

Refer to the diagram, where the numerical data show profits in millions of dollars. Beta's profits are shown in the northeast corner and Alpha's profits in the southwest corner of each cell. Which cell represents a Nash equilibrium?

Accepted Answer

A)  The two firms will be maximizing joint profits.
B)  Y would find it advantageous to raise its price if it were certain X would not alter its price.
C)  X would find it advantageous to raise its price if it were certain Y would not alter its price.
D)  both firms would find it advantageous to collude to raise their prices by $1 each.E) B) and D)
F) All of the above

Question 5

Price wars among oligopolists tend to

Accepted Answer

A)  strengthen the price leadership model.
B)  reduce profits for the firms.
C)  hurt the buyers of the product.
D)  occur when sales growth in the industry is strong.E) B) and C)
F) A) and D)

Question 6

Which of the following industries is an illustration of homogeneous oligopoly?

Accepted Answer

A)  household laundry products
B)  personal computers
C)  aluminum
D)  the auto industryE) A) and B)
F) C) and D)

Question 7

Which of the following is an illustration of differentiated oligopoly?

Accepted Answer

A)  the aluminum industry
B)  the steel industry
C)  the soft drink industry
D)  retail stores in large citiesE) A) and C)
F) A) and D)

Question 8

Game theory can be used to demonstrate that oligopolists

Accepted Answer

A)  adopting a high-price policy.
B)  adopting a low-price policy.
C)  adopting a low-price policy, but only if Beta formally agrees to do the same.
D)  engaging in nonprice competition only.E) None of the above
F) A) and C)

Question 9

Prices are likely to be least flexible

Accepted Answer

A)  in oligopoly.
B)  in monopolistic competition.
C)  where product demand is inelastic.
D)  in pure competition.E) All of the above
F) A) and B)

Question 10

The four-firm concentration ratio for the national industry does not capture the effects of all of the following, except

Accepted Answer

A)  localized markets when transportation costs are high.
B)  interindustry competition.
C)  import competition when there is world trade.
D)  market coverage of the four largest firms.E) A) and D)
F) B) and C)

Question 11

What obstacles might a group of oligopolists encounter in forming a cartel?

Accepted Answer

There are several barriers to collusion:...

Question 12

The incentive to cheat within a cartel increases with an increase in the following factors, except

Accepted Answer

A)  the number of firms in the cartel.
B)  economic performance and industry sales.
C)  the number of potential entrants into the industry.
D)  the cost differences among firms.E) B) and D)
F) None of the above

Question 13

One would expect that collusion among oligopolistic producers would be easiest to achieve in which of the following cases?

Accepted Answer

A)  a rather large number of firms producing a differentiated product
B)  a very small number of firms producing a differentiated product
C)  a rather large number of firms producing a homogeneous product
D)  a very small number of firms producing a homogeneous productE) All of the above
F) A) and B)

Question 14

List the three main models of oligopoly pricing and output.

Accepted Answer

There are three distinct prici...

Question 15

Refer to the payoff matrix. Suppose that Alpha and Beta agree that they will both pursue a high-price strategy. If Beta then cheats on the agreement in order to increase profits, which of the following is true?

Accepted Answer

A)  If this is a repeated game, Alpha can be expected to pursue a low-price strategy in future games.
B)  If this is a one-time game, a Nash equilibrium will result.
C)  A Nash equilibrium cannot be reached through repeated playing of this game.
D)  The game is a negative-sum game.E) A) and B)
F) A) and C)

Question 16

Collusive control over price may permit oligopolists to

Accepted Answer

A)  use new technology, achieve economies of scale, and get government subsidies.
B)  achieve economies of scale, reduce costs, and prevent price cheating.
C)  increase product demand, increase product supply, and lower cost.
D)  reduce uncertainty, increase profits, and possibly limit entry of new firms.E) B) and C)
F) A) and C)

Question 17

Suppose the Herfindahl indexes for industries A, B, and C are 7,200, 5,000, and 1,500, respectively. These data imply

Accepted Answer

A)  that market power is greatest in industry C.
B)  that market power is greatest in industry B.
C)  that market power is greatest in industry A.
D)  nothing about the degree of concentration across the three industries.E) B) and D)
F) A) and D)

Question 18

Other things equal, cartels and similar collusive arrangements are easier to establish and maintain

Accepted Answer

A)  when there are ample opportunities for the firms to make secret price concessions to selected buyers.
B)  during periods of business-cycle stability and full employment.
C)  when the demand and cost conditions of the participating firms differ substantially.
D)  when the number of firms is relatively large.E) A) and B)
F) All of the above

Question 19

Industry Y is dominated by five large firms that hold market shares of 20, 20, 25, 25, and 10. The Herfindahl index for this industry is

Accepted Answer

A)  1,560.
B)  2,150.
C)  2,340.
D)  3,500.E) All of the above
F) None of the above

Question 20

A cartel of four firms that controls 100 percent of the sales in a market, and faces the same cost schedules of a monopolist, will set a price somewhat lower than the monopoly price for its product.

Accepted Answer

A) True 
 B)False

Exam 14: Oligopoly and Strategic Behavior

Refer to the payoff matrix. Suppose that Alpha and Beta agree that they will both pursue a high-price strategy. If Beta then cheats on the agreement in order to increase profits, which of the following is true?

Correct AnswerverifiedShow Answer

The four-firm concentration ratio for the national industry does not capture the effects of all of the following, except

Correct AnswerverifiedShow Answer

One would expect that collusion among oligopolistic producers would be easiest to achieve in which of the following cases?

Correct AnswerverifiedShow Answer

Price wars among oligopolists tend to

Correct AnswerverifiedShow Answer

Other things equal, cartels and similar collusive arrangements are easier to establish and maintain

Correct AnswerverifiedShow Answer

Industry Y is dominated by five large firms that hold market shares of 20, 20, 25, 25, and 10. The Herfindahl index for this industry is

Correct AnswerverifiedShow Answer

Which of the following is an illustration of differentiated oligopoly?

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Game theory can be used to demonstrate that oligopolists

Correct AnswerverifiedShow Answer

What obstacles might a group of oligopolists encounter in forming a cartel?

Correct AnswerverifiedThere are several barriers to collusion:...View AnswerShow Answer

Describe the negative effects of advertising.

Correct AnswerverifiedNegative effects of advertising include:...View AnswerShow Answer

The incentive to cheat within a cartel increases with an increase in the following factors, except

Correct AnswerverifiedShow Answer

Suppose the Herfindahl indexes for industries A, B, and C are 7,200, 5,000, and 1,500, respectively. These data imply

Correct AnswerverifiedShow Answer

Collusive control over price may permit oligopolists to

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Which of the following industries is an illustration of homogeneous oligopoly?

Correct AnswerverifiedShow Answer

This industry shown in this table illustrates

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A cartel of four firms that controls 100 percent of the sales in a market, and faces the same cost schedules of a monopolist, will set a price somewhat lower than the monopoly price for its product.

Correct AnswerverifiedShow Answer

List the three main models of oligopoly pricing and output.

Correct AnswerverifiedThere are three distinct prici...View AnswerShow Answer

Prices are likely to be least flexible

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In game theory, each player is assumed to have the following, except

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Refer to the diagram, where the numerical data show profits in millions of dollars. Beta's profits are shown in the northeast corner and Alpha's profits in the southwest corner of each cell. Which cell represents a Nash equilibrium?

Correct AnswerverifiedShow Answer

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There are several barriers to collusion:...
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Negative effects of advertising include:...
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There are three distinct prici...
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