Download Microeconomics - Testbank 1 (Hubbard/O`Brien)

Microeconomics - Testbank 1 (Hubbard/O'Brien)
Chapter 13 Oligopoly: Firms in Less Competitive Markets
d1) An oligopoly firm is in an industry characterized by:
A many independent firms.
)
B a small number of independent firms.
)
C one firm.
)
D a small number of interdependent firms.
)
a2) A four-firm concentration ratio measures:
A the fraction of an industry's sales accounted for by the
) four largest firms.
B the production of any four firms in an industry.
)
C how the four largest firms became so concentrated.
)
D the fraction of employment of the four largest firms in
) an industry.
c3) Oligopolies are difficult to analyze because:
A the firms are so large.
)
B demand and cost curves do not exist for these types of
) industries.
C how oligopoly firms respond to a price change by a rival
) is uncertain.
D oligopolies are a recent development so economists have
) not had time to develop models.
d4) An oligopoly firm's demand curve is:
A identical to that of a perfect competitive firm.
)
B identical to that of a monopolistically competitive firm.
)
C vertical on a price quantity diagram.
)
D unknown because a response of firms to price changes
) by rivals is uncertain.
d5) The value of the four-firm concentration ratio that many
economists consider indicative of the existence of an
oligopoly in a particular industry is:
A anything greater than 10 percent.
)
B anything greater than 20 percent.
)
C anything greater than 30 percent.
)
D anything greater than 40 percent.
)
b6) Oligopolies exist and do not attract new rivals because:
A of competition.
)
B of barriers to entry.
)
C the firms keep profits and prices so low that no rivals are
) attracted.
D all of the above.
)
b7) Which of the following is NOT a barrier to entry?
A Ownership of a key input
)
B Industry lowest pricing
)
C Government imposed restrictions
)
D Economies of scale
)
c8) An example of a barrier to entry is:
A product differentiation.
)
B high profits.
)
C government imposed restrictions.
)
D all of the above.
)
a9) Economies of scale can lead to an oligopoly market structure
because:
A if larger firms have lower costs, new small entrants will
) not be able to produce at the low costs achieved by the
big established firms.
B if economies of scale are insignificant in production
) only a few firms are able to produce at the low costs
achieved by the big established firms.
C a few firms can force rivals to produce at low levels of
) output.
D a few firms can use high profits to keep out new
) entrants.
c10
)
A
n there is more competition among restaurants than is
reaso found in large discount department stores is:
A restaurants produce a differentiate product.
)
B restaurants have to abide by government sanitation
) rules.
C restaurants do not have significant economies of scale.
)
D restaurants have more elastic demand for their product.
)
b1 An example of a government-imposed barrier is:
1)
A economies of scale.
)
B the granting of a patent to a particular firm.
)
C one firm owning a key input.
)
D environmental regulations.
)
a12 Patents, occupational licensing, tariffs and quotas are all
) examples of :
A government-imposed barriers.
)
B economies of scale.
)
C cutthroat competitive pricing.
)
D ownership of a key input.
)
b1 A cartel whose members adhere to the agreement is
3) typically able to:
A breakeven.
)
B earn large profits.
)
C entirely avoid competitive forces.
)
D produce a large amount of output.
)
b1 Game theory is useful in analyzing oligopoly behavior
4) because:
A trying to maximize profits is essentially a game in all
) types of markets.
B interaction among a few large firms are what determines
) the level of profits.
C advertising is so common among oligopoly firms.
)
D it explains why oligopolies fail to make persistent
) profits.
b1 If there are only two firms in a market, it is known as a:
5)
A competitive market.
)
B duopoly.
)
C monopoly.
)
D monopolistically competitive market.
)
d1 Among the characteristics of game theory are:
6)
A rules that determine what actions are allowable.
)
B payoffs that are the results of the interaction among
) players' strategies.
C strategies that players employ to attain their objectives.
)
D all of the above.
)
c17 If the painting firms in a city sign a contract outlining a
) pricing plan, they are involved in:
A price competition.
)
B a legal form of business contract in the United States.
)
C collusion.
)
D price regulation.
)
d1 In an oligopoly market:
8)
A pricing decision of all other firms has no effect on an
) individual firm.
B individual firms pay no attention to the behavior of
) other firms.
C advertising of one firm has no effect on all other firms.
)
D pricing decision of one firm affects all the other firms.
)
d1 Interdependence of firms is most common in:
9)
A perfectly competitive industries.
)
B monopolistic industries.
)
C monopolistically competitive industries.
)
D oligopolistic industries.
)
b2 A characteristic found only in oligopolies is:
0)
A breakeven level of profits.
)
B interdependence of firms.
)
C independence of firms.
)
D products that are slightly different.
)
a21 An oligopolist's business strategy includes all of the below
) EXCEPT:
A meeting worker health and safety standards required of
) all firms.
B deciding the level of total output of a new product.
)
C determining the amount of advertising a new product
) needs.
D Setting the product's price after considering what rivals
) will do.
d2
2)
Collu sion:
A is rampant in perfect competition as all firms charge the
) same price.
B is perfectly legal in the U.S.
)
C is easiest among firms with products and costs that are
) very different.
D is more difficult the more firms there are in an industry.
)
b2 Member firms of a cartel like OPEC have incentives to:
3)
A argue for larger production quotas for each member of
) the cartel.
B agree to a low cartel production level and then produce
) more than their quota.
C abide by their individual production quotas.
)
D support equal production quotas for each member.
)
b2 A member of a cartel earns more profits by:
4)
A by producing their quota and selling it at the cartel
) price.
B by producing more than their quota and selling at a price
) lower than the cartel's.
C by producing less than their quota and selling at a price
) higher than the cartel's.
D by producing less than their quota and selling at a price
) equal to the cartel's.
b2
5)
That dically meets to agree to restrict the cartel's oil output and
OPEC yet almost every member of OPEC produces more than their
perio own output quota means OPEC has a:
A cooperative equilibrium.
)
B noncooperative equilibrium.
)
C new potential entrants.
)
D threat of substitute goods.
)
a26 A dominant strategy in a game theory analysis of oligopoly
) behavior is:
A a strategy that is the best for a firm, no matter what
) strategies other firms use.
B the strategy that a firm is forced into following by
) government policy.
C colluding with rivals to maximize joint profits.
)
D deciding what to do after all rivals have chosen their
) own strategies.
b2 A prisoners' dilemma leads to a:
7)
A cooperative equilibrium.
)
B noncooperative equilibrium.
)
C competitive equilibrium.
)
D noncompetitive equilibrium.
)
c28 A Nash equilibrium is:
)
A where demand and supply intersect.
)
B an example of a cooperative equilibrium.
)
C where each player chooses its best strategy, given the
) strategies chosen by the other players.
D a nondominant strategy.
)
a29 A dominant strategy in a gaming situation is to:
)
A adopt the best strategy regardless of what other firms do.
)
B adopt the best strategy to benefit all firms.
)
C collude with other firms.
)
D choose your strategy at random.
)
b3 A cooperative equilibrium results when firms:
0)
A choose the best strategy regardless of what other players
) do.
B choose the strategy that maximizes the total game
) payoff.
C choose the strategy that minimizes the payoff to other
) players.
D choose a strategy by random chance.
)
c31 The prisoners' dilemma results in a noncooperative
) equilibrium because:
A each player had agreed before the game started to
) maximize total payoff.
B each player is uncertain how other players will play the
) game.
C each player has a dominant strategy to play a certain way
) regardless of what other players do.
D none of the above.
)
d3 A decision tree is good at analyzing:
2)
A prisoners' dilemma games.
)
B repeatable games.
)
C cooperative equilibrium games.
)
D sequential games.
)
c33 Some firms are able to earn profits by competing with a
) dominant firm like Walmart by:
A offering the same products and services.
)
B aggressively buying up smaller rivals to match Walmart
) in its buying power.
C finding "niches" that Walmart does not currently occupy.
)
D moving into other industries that sell products that do
) not compete with Walmart.
A3 If a city bows to home builders and requires that all home
4) repair and addition construction be done by licensed
builders, the city has:
A set up an occupational licensing barrier to entry.
)
B increased the quality of home repair and expansion
) work.
C ensures that new entrants to the industry are qualified
) workers.
D none of the above.
)
D3 In the last four decades, the number of new auto makers in
5) the world has been very small compared to the past because:
A the automobile cannot be improved upon in any way by
) new producers.
B new auto makers cannot obtain necessary inputs to
) produce new cars.
C governments restrict who can produce automobiles.
)
D new producers cannot match the economies of scale of
) existing auto makers.
B3 The dominant strategy for a large OPEC producer like Saudi
6) Arabia is:
A to keep crude oil prices low to ensure future growth of
) the demand for oil.
B to keep crude oil prices high and cooperate with other
) members of OPEC.
C producing as much crude oil as possible to promote
) world economic growth.
D producing as little crude oil as possible to keep oil
) reserves in the ground.
A3 The dominant strategy for a small OPEC producer like
7) Nigeria is:
A producing as much crude oil as possible to maximize its
) own earnings.
B producing as little crude oil as possible to cooperate
) with other members of OPEC.
C producing its OPEC determined quota of crude oil.
)
D keeping crude oil prices as low as possible to promote
) world economic growth.
B3 A business uses a decision tree:
8)
A whenever a single decision must be made.
)
B when sequential decisions must be made.
)
C when independent decisions must be made.
)
D when faced with direct competition.
)
D3 As word processing on personal computers expanded, sales
9) of typewriters began to disappear due to:
A the threat of competition from new entrants.
)
B bargaining power of suppliers.
)
C bargaining power of buyers.
)
D competition from substitute goods or services.
)
Refer to Figure 13.1 for the questions below.
Figure 13.1
b4 In figure 13.1, the best Coke and Pepsi can do jointly is:
0)
A both produce a high quantity.
)
B both produce a low quantity.
)
C Coke can produce a high quantity while Pepsi can
) produce a low quantity.
D Coke can produce a low quantity while Pepsi can
) produce a high quantity.
a41 In figure 13.1, Coke's dominant strategy is:
)
A to produce a high quantity.
)
B to produce a low quantity.
)
C to advertise.
)
D to not advertise.
)
a42 In figure 13.1, Pepsi's dominant strategy is:
)
A to produce a high quantity.
)
B to produce a low quantity.
)
C to advertise.
)
D to not advertise.
)