Question 1

Mutual interdependence means that each oligopolistic firm

Accepted Answer

A)   faces a perfectly elastic demand for its product.
B)   must consider the reactions of its rivals when it determines its price policy.
C)   produces a product identical to those of its rivals.
D)   produces a product similar but not identical to the products of its rivals.E) A) and C)
F) B) and D)

Question 2

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.E) None of the above
F) All of the above

Question 3

The tablet-computer market is best characterized as a(n)

Accepted Answer

A)   pure competition.
B)   monopolistic competition.
C)   oligopoly.
D)   monopoly.E) A) and C)
F) All of the above

Question 4

The kinked-demand curve model of oligopoly is useful in explaining

Accepted Answer

A)   the way that collusion works.
B)   why oligopolistic prices and outputs are extremely sensitive to changes in marginal cost.
C)   why oligopolistic prices might change infrequently.
D)   the process by which oligopolists merge with one another.E) C) and D)
F) B) and D)

Question 5

The strategy of establishing a price that prevents the entry of new firms is called

Accepted Answer

A)   cartel pricing.
B)   limit pricing.
C)   price leadership.
D)   profit maximizing price.E) A) and C)
F) A) and B)

Question 6

A low concentration ratio means that

Accepted Answer

A)   there is a low probability of entering the industry.
B)   there is a low probability of success in the industry.
C)   each firm accounts for a small market share of the industry.
D)   each firm accounts for a large market share of the industry.E) None of the above
F) A) and D)

Question 7

In game theory, sequential games can be displayed or summarized in two forms,

Accepted Answer

A)   collusive form and strategic form.
B)   strategic form and extensive form.
C)   payoff matrix form and strategic form.
D)   extensive form and game-tree form.E) A) and B)
F) A) and C)

Question 8

The kinked-demand model of oligopoly assumes that

Accepted Answer

A)   rivals will ignore price increases but will match price cuts.
B)   rivals will ignore price cuts but will match price increases.
C)   the oligopolistic firms are colluding.
D)   a firm faces a more elastic demand curve if it cuts its price, and less elastic if it raises its price.E) B) and C)
F) All of the above

Question 9

In repeated games, players may be willing to accept lower payoffs in the short run in exchange for greater net payoffs over the long run.

Accepted Answer

A) True 
 B)False

Question 10

The highest possible value of the Herfindahl index is 1,000.

Accepted Answer

A) True 
 B)False

Question 11

The oligopolist's kinked-demand curve is highly elastic below and highly inelastic above the going product price.

Accepted Answer

A) True 
 B)False

Question 12

In the United States cartels are

Accepted Answer

A)   quite common in industries that produce nondurable goods.
B)   in violation of the antitrust laws.
C)   concentrated in monopolistically competitive industries.
D)   encouraged by government policy so firms can achieve economies of scale.E) None of the above
F) A) and D)

Question 13

Two characteristics of oligopoly pricing that have frequently been observed are that

Accepted Answer

A)   oligopolistic prices tend to be "sticky" or inflexible, and when the firms do change their prices, they tend to do so together.
B)   oligopolistic firms' prices tend to fluctuate a lot, and these prices tend to move together with each other.
C)   oligopolists tend to practice a lot of price discrimination, and there tends to be a wide variance in oligopoly pricing.
D)   oligopolistic firms' prices tend to fluctuate a lot, and there tends to be a wide variance in oligopoly pricing.E) None of the above
F) A) and B)

Question 14

Game theory can be used to demonstrate that oligopolists

Accepted Answer

A)   rarely consider the potential reactions of rivals.
B)   experience economies of scale.
C)   can increase their profits through collusion.
D)   may be either homogeneous or differentiated.E) None of the above
F) All of the above

Question 15

The U.S. breakfast cereal industry is an example of differentiated oligopoly.

Accepted Answer

A) True 
 B)False

Question 16

Two important characteristics of oligopolists are that they have significant control over price and that there is mutual interdependence among them.

Accepted Answer

A) True 
 B)False

Question 17

Game-theory models analyze the interdependence of oligopolists' strategies.

Accepted Answer

A) True 
 B)False

Question 18

(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.E) All of the above
F) A) and C)

Question 19

(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.E) A) and B)
F) None of the above

Question 20

One common factor that often weakens collusion among cartel members is the incentive to cheat.

Accepted Answer

A) True 
 B)False

Exam 14: Oligopoly and Strategic Behavior

Mutual interdependence means that each oligopolistic firm

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In game theory, sequential games can be displayed or summarized in two forms,

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Which of the following statements is true?

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Game theory can be used to demonstrate that oligopolists

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The highest possible value of the Herfindahl index is 1,000.

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Two characteristics of oligopoly pricing that have frequently been observed are that

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The kinked-demand curve model of oligopoly is useful in explaining

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The oligopolist's kinked-demand curve is highly elastic below and highly inelastic above the going product price.

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One common factor that often weakens collusion among cartel members is the incentive to cheat.

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Two important characteristics of oligopolists are that they have significant control over price and that there is mutual interdependence among them.

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The tablet-computer market is best characterized as a(n)

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In repeated games, players may be willing to accept lower payoffs in the short run in exchange for greater net payoffs over the long run.

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The kinked-demand model of oligopoly assumes that

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

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A low concentration ratio means that

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The strategy of establishing a price that prevents the entry of new firms is called

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In the United States cartels are

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The U.S. breakfast cereal industry is an example of differentiated oligopoly.

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Game-theory models analyze the interdependence of oligopolists' strategies.

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

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