Questions:
1) Which of the following does NOT help explain why oligopolies exist?
A) Economies of scale
B) Mergers
C) Product homogeneity
D) Barriers to entry
2) A merger between firms that are in the same industry is called a
A) conglomerate merger.
B) horizontal merger.
C) vertical merger.
D) none of the above.
3) Strategic behavior and game theory are features of which market structure?
A) Perfect competition
B) Monopoly
C) Monopolistic competition
D) Oligopoly
4) In oligopoly, any action by one firm to change price, output, or quality causes
A) a reaction by other firms.
B) no reaction from the other firms.
C) a profit gain for the other firms.
D) loss of market share by the acting firm.
5) Within a game theory model, if a change in decision-making raises corporation A's profits by $50 and lowers corporation B's profits by $50, the gameis a
A) negative-sum game.
B) zero-sum game.
C) positive-sum game.
D) cooperative game.
6) Within a game theory model, if a change in decision-making raises corporation A's profits by $50 and lowers corporation B's profits by $40, the game is a
A) negative-sum game.
B) zero-sum game.
C) positive-sum game.
D) cooperative game.
7) A noncooperative game would refer to a situation in which oligopoly firms
A) are too small to be interdependent.
B) do not engage in collusive behavior together.
C) are made worse off by their actions.
D) behave as a joint monopoly.
8) In a zero-sum game
A) both players are better off at the end of the game.
B) both players are worse off at the end of the game.
C) one player's losses are exactly offset by another player's gains.
D) both players collude to make both of them better off.
9) A group of firms that try to work together to earn monopoly profits is called a(n)
A) patent.
B) public enterprise.
C) cartel.
D) natural monopoly.
10) An example of a cooperative game would be
A) oligopoly.
B) monopolistic competition.
C) a cartel.
D) perfect competition.
11) Which of the following is not true about a cartel?
A) Members earn economic profits.
B) Members experience large economies to scale relative to industry demand.
C) Cartels will set common prices for their members.
D) Members of a cartel will have production quotas.
12) Which of the following is LEAST likely to be a reason for firms to form a cartel?
A) to maximize profits of the cartel
B) to raise competition among firms in the cartel
C) to cut back output of the cartel
D) to set common prices among firms in the cartel
13) When a consumer's willingness to buy a good or service is influenced by the number of people who have purchased that good or service, this is called
A) a switching cost.
B) an opportunity cost.
C) a network effect.
D) an advertising gimmick.
14) A network effect arises whenever
A) firms in an oligopolistic industry engage in limit pricing.
B) firms in an oligopolistic industry engage in a zero-sum game.
C) a consumer's willingness to purchase a good or service is influenced by how many others also buy or have bought the item.
D) a producer's willingness to produce a good or service is influenced by how many other firms also produce or have produced the item.
15) In an industry with network effects and differentiated products, it is possible for the industry to become an oligopoly if
A) they engage in a zero-sum game.
B) they use a price-leadership model.
C) they use a kinked demand curve model.
D) a few firms reap most of the sales gains resulting from positive market feedback.