Deck 15: Oligopoly

Question 1

_____ is a market structure with a few dominate firms that are highly interdependent.

A) A monopoly
B) An oligopoly
C) Monopolistic competition
D) Perfect competition

Answer 1

B

Question 2

A duopoly is an oligopoly with exactly _____ firms.

A) four
B) three
C) two
D) one

Answer 2

C

Question 3

In an oligopoly market structure. there are:

A) many firms selling highly substitutable products.
B) low or no barriers to entry.
C) a few interdependent firms.
D) a few noninterdependent firms.

Answer 3

C

Question 4

In an oligopoly market structure. there are:

A) many firms selling highly substitutable products.
B) low or no barriers to entry.
C) a few interdependent firms.
D) a few noninterdependent firms.

Question 5

In which market structure do the actions of one firm impact the other firms in the market?

A) monopoly
B) oligopoly
C) monopolistic competition
D) perfect competition

Question 6

The existence of _____ is a characteristic of an oligopoly market structure.

A) many firms that sell identical products
B) price takers
C) a few firms that sell only differentiated products
D) some control over price

Question 7

In an oligopoly market structure, firms:

A) sell only standardized products.
B) are independent of each other.
C) sell only homogeneous products.
D) are highly interdependent.

Question 8

Unlike in a monopoly, in an oligopoly:

A) the barriers to entry are high.
B) there is a potential for long-run profits.
C) a few firms control the market.
D) firms have some price-setting ability.

Question 9

Unlike in a monopolistic competitive firm, in an oligopoly:

A) the barriers to entry are high.
B) products can be differentiated.
C) products can be standardized.
D) firms have some price-setting ability.

Question 10

A key characteristic of an oligopoly is that:

A) there are low entry barriers.
B) the behavior of one firm can affect the behavior of another.
C) no economic profit is earned by firms.
D) firms have no price-setting ability.

Question 11

The most common barrier to entry in an oligopoly market structure is:

A) brand loyalty.
B) patents and copyrights.
C) diseconomies of scale.
D) economies of scale.

Question 12

_____ is the percentage of market sales that is accounted for by the few largest firms in the industry.

A) The concentration ratio
B) The Herfindahl-Hirschman index (HHI)
C) Total revenue
D) Marginal revenue

Question 13

If the four largest firms in an industry control 88% of the industry, this market is:

A) perfectly competitive.
B) monopolistically competitive.
C) an oligopoly.
D) a monopoly.

Question 14

_____ is an agreement among rivals to cooperate by limiting price and non-price competition.

A) A merger
B) An acquisition
C) Collusion
D) A cartel

Question 15

_____ is an organization of rival firms with agreements among members to conspire, often by restricting output and increasing prices.

A) A merger
B) An acquisition
C) Collusion
D) A cartel

Question 16

Firms that agree to coordinate pricing and output decisions are members of:

A) a merger.
B) an acquisition.
C) a collusion.
D) a cartel.

Question 17

Joe's Body Shop and Bryan's Body Shop are operating in a duopoly. Joe and Bryan meet and decide to charge the same prices. Joe and Bryan can expect that:

A) eventually they will merge their firms.
B) one will acquire the other.
C) they will earn more with the agreement than they would separately.
D) they will reduce prices for consumers.

Question 18

Joe's Body Shop and Bryan's Body Shop are operating in a duopoly. Joe and Bryan meet and decide to charge the same prices. Joe and Bryan are:

A) illegally colluding.
B) selling their products at a loss.
C) increasing production.
D) merging their firms.

Question 19

The actions of cartels generally result in _____ for consumers.

A) lower prices
B) brand loyalty
C) higher prices
D) increase in supply

Question 20

A profit-maximizing cartel will make pricing and output decisions as if it is:

A) perfectly competitive.
B) monopolistically competitive.
C) an oligopoly.
D) a monopoly.

Question 21

To collude and maximize profits, the two firms must behave as if they were in _____ market.

A) a perfectly competitive
B) a monopolistically competitive
C) an oligopoly
D) a monopoly

Question 22

A _____ occurs when several firms agree on a pricing or output decision.

A) marginal pricing decision
B) cooperative solution
C) duopoly
D) production function

Question 23

The study of strategic behaviors and the ways that individuals (or other entities) make optimal decisions by anticipating how rivals will respond to their actions is known as:

A) game theory.
B) cooperative solution.
C) simultaneous move game.
D) profit matrix.

Question 24

_____ involves all firms making their strategic decisions at the same time, without full knowledge of the actions of their rivals.

A) Game theory
B) A cooperative solution
C) A simultaneous move game
D) A profit matrix

Question 25

_____ is a graphical representation of a simultaneous move game that demonstrates different actions and their potential payoffs.

A) Game theory
B) A decision tree
C) A matrix game
D) A payoff matrix

Question 26

_____ is a strategic decision that is best regardless of the strategic decision made by a rival.

A) A dominant strategy
B) A cooperative solution
C) A Nash equilibrium
D) A non-cooperative solution

Question 27

_____ is an outcome that occurs when players do not collaborate and when each player pursues its own self-interest.

A) A dominant strategy
B) A cooperative solution
C) A Nash equilibrium
D) A non-cooperative solution

Question 28

_____ is an outcome in which no player improves through a unilateral change in strategy.

A) A dominant strategy
B) A cooperative solution
C) A Nash equilibrium
D) A non-cooperative solution

Question 29

In a _____, each player is doing the best that it can, given the actions of rivals.

A) dominant strategy
B) cooperative solution
C) Nash equilibrium
D) non-cooperative solution

Question 30

_____ is an outcome that occurs when collaboration leads to a situation where both players are better off than they are under the non-cooperative solution.

A) A dominant strategy
B) A cooperative solution
C) A Nash equilibrium
D) A non-cooperative solution

Question 31

A _____ occurs when two firms that share industry output are better off under a cooperative solution than the non-cooperative solution and yet each individually gains by cheating.

A) dominant strategy
B) prisoners' dilemma
C) Nash equilibrium
D) duopolists' dilemma

Question 32

_____ is a condition in which two prisoners are jointly better off under a cooperative solution than the non-cooperative solution and yet each individually gains by cheating.

A) A dominant strategy
B) A prisoners' dilemma
C) A Nash equilibrium
D) A duopolists' dilemma

Question 33

In a _____, two firms that can successfully collude on raising price and share the sort of profits that are earned in a monopolistic industry, but the firms find this difficult.

A) dominant strategy
B) prisoners' equilibrium
C) Nash equilibrium
D) duopolists' dilemma

Question 34

In a _____, two firms follow their dominant strategy, where they are better off cooperating but each individually gains by cheating.

A) cooperation agreement
B) prisoners' equilibrium
C) Nash equilibrium
D) duopolists' dilemma

Question 35

In a _____, firms produce a higher output, which lowers price, resulting in industry profit being less than would be shared if they behaved like a monopoly.

A) non-dominant strategy
B) prisoners' equilibrium
C) Nash dilemma
D) duopolists' dilemma

Question 36

Tina's Bakery and Cliff's Cupcakes & More participate in a duopoly and are maximizing profits by cooperating. If Tina decides to increase her production of baked goods, her profits would _____, and Cliff's profits would:

A) increase; increase.
B) increase; decrease.
C) decrease; decrease.
D) decrease; increase.

Question 37

Tina's Bakery and Cliff's Cupcakes & More participate in a duopoly and are maximizing profits by cooperating. If Tina decides to increase her production of baked goods, market price would:

A) not change.
B) increase.
C) decrease.
D) first increase and then decrease.

Question 38

Tina's Bakery and Cliff's Cupcakes & More participate in a duopoly and are maximizing profits. If Tina decides to increase her production of baked goods, the total combined profit of the two firms would:

A) not change.
B) increase.
C) decrease.
D) first increase and then decrease.

Question 39

The duopolists' dilemma is an example of:

A) game theory.
B) monopolistic competition.
C) marginal analysis
D) cooperative cheating.

Question 40

The duopolists' dilemma is a variation of:

A) a monopoly.
B) the prisoners' dilemma.
C) a non-cooperative solution.
D) a cooperative solution.

Question 41

A sequential move game is an example of:

A) a monopoly.
B) game theory.
C) a non-cooperative solution.
D) a cooperative solution.

Question 42

In a _____ game, all firms make their strategic decisions with full knowledge of the prior actions of their rivals.

A) sequential move
B) duopolists' dilemma
C) non-cooperative solution
D) cooperative solution

Question 43

A _____ is a graphical representation of a sequential move game that demonstrates different actions and payoffs.

A) payoff matrix
B) decision tree
C) non-cooperative solution
D) cooperative solution

Question 44

(Figure: Strategic Decisions in a Sequential Game) In the figure, if Chelsea decides to make six units and Rose then decides to make six units, the payoff for Rose is:

A) $30.
B) $32.
C) $36.
D) $40.

Question 45

(Figure: Strategic Decisions in a Sequential Game) In the figure, if Chelsea decides to make six units and Rose then decides to make eight units, the payoff for Rose is:

A) $30.
B) $32.
C) $36.
D) $40.

Question 46

(Figure: Strategic Decisions in a Sequential Game) In the figure, if Chelsea decides to make eight units and Rose then decides to make eight units, the payoff for Rose is:

A) $30.
B) $32.
C) $36.
D) $40.

Question 47

(Figure: Strategic Decisions in a Sequential Game) In the figure, if Chelsea decides to make eight units, in the absence of collusion, Rose will likely maximize her profits by producing _____ units with a payoff of:

A) six; $30.
B) eight; $32.
C) six; $36.
D) eight; $40.

Question 48

(Figure: Strategic Decisions in a Sequential Game) In the figure, if Chelsea decides to make six units, in the absence of collusion, Rose will likely maximize her profits by producing _____ units with a payoff of:

A) six; $30.
B) eight; $32.
C) six; $36.
D) eight; $40.

Question 49

(Figure: Strategic Decisions in a Sequential Game) In the figure, if Chelsea decides to make eight units and Rose then decides to make six units, the payoff for Rose is:

A) $30.
B) $32.
C) $36.
D) $40.

Question 50

(Figure: Strategic Decisions in a Sequential Game) In the figure, the payoff for each firm when collusion occurs is:

A) Chelsea $36 and Rose $36.
B) Chelsea $30 and Rose $40.
C) Chelsea $40 and Rose $30.
D) Chelsea $32 and Rose $32.

Question 51

(Figure: Strategic Decisions in a Sequential Game) In the figure, the payoff for each firm when no cooperation occurs is:

A) Chelsea $36 and Rose $36.
B) Chelsea $30 and Rose $40.
C) Chelsea $40 and Rose $30.
D) Chelsea $32 and Rose $32.

Question 52

(Figure: Strategic Decisions in a Sequential Game) In the figure, the quantity produced by each firm when collusion occurs is:

A) Chelsea 6 and Rose 6.
B) Chelsea 6 and Rose 8.
C) Chelsea 8 and Rose 6.
D) Chelsea 8 and Rose 8.

Question 53

(Figure: Strategic Decisions in a Sequential Game) In the figure, the quantity produced by each firm when no cooperation occurs is:

A) Chelsea 6 and Rose 6.
B) Chelsea 6 and Rose 8.
C) Chelsea 8 and Rose 6.
D) Chelsea 8 and Rose 8.

Question 54

(Figure: Strategic Decisions in a Sequential Game) In the figure, the dominant strategy for both Chelsea and Rose is _____, and both would be better off if they select _____ units to produce.

A) eight; eight
B) eight; six
C) six; eight
D) six; six

Question 55

(Figure: Strategic Decisions in a Sequential Game) In the figure, if Chelsea produces six units, Rose is better off making:

A) none.
B) six.
C) eight.
D) 12.

Question 56

(Figure: Strategic Decisions in a Sequential Game) In the figure, if Chelsea produces eight units, Rose is better off making:

A) none.
B) six.
C) eight.
D) 12.

Question 57

(Figure: Simultaneous Move Game) In the figure, if Grace believes that Gavin will price low, Grace will price _____ with a payoff of:

A) low; $20.
B) low; $40.
C) high; $60.
D) high; $80.

Question 58

(Figure: Simultaneous Move Game) In the figure, if Grace believes that Gavin will price high, Grace will price _____ with a payoff of:

A) low; $40.
B) low; $80.
C) high; $20.
D) high; $40.

Question 59

(Figure: Simultaneous Move Game) In the figure, the cooperative solution is for:

A) Gavin to price low.
B) Grace to price high.
C) both Gavin and Grace to price high.
D) both Gavin and Grace to price low.

Question 60

(Figure: Simultaneous Move Game) In the figure, if Gavin believes that Grace will price high, Gavin will price _____ with a payoff of:

A) low; $40.
B) low; $80.
C) high; $20.
D) high; $60.

Question 61

(Figure: Simultaneous Move Game) In the figure, the payoff for the cooperative solution is:

A) $60 for both.
B) $20 for Gavin and $80 for Grace.
C) $80 for Gavin and $20 for Grace.
D) $40 for both.

Question 62

(Figure: Simultaneous Move Game) In the figure, the payoff for the non-cooperative solution is:

A) $60 for both.
B) $20 for Gavin and $80 for Grace.
C) $80 for Gavin and $20 for Grace.
D) $40 for both.

Question 63

(Figure: Simultaneous Move Game) In the figure, if Gavin believes that Grace will price low, Gavin will price _____ with a payoff of:

A) low; $40.
B) low; $80.
C) high; $20.
D) high; $40.

Question 64

(Figure: Simultaneous Move Game) In the figure, the non-cooperative solution is for:

A) Gavin to price low.
B) Grace to price high.
C) both Gavin and Grace to price high.
D) both Gavin and Grace to price low.

Question 65

_____ is collusion that is achieved by rivals when they agree to a set price.

A) Cooperative demand
B) Price fixing
C) Target price
D) Sales target

Question 66

Price fixing is most prevalent in the _____ market structure.

A) perfect competition
B) monopolistic competition
C) oligopoly
D) monopoly

Question 67

Collusion is most prevalent in the _____ market structure.

A) perfect competition
B) monopolistic competition
C) oligopoly
D) monopoly

Question 68

_____ is an implicit pricing agreement in which one firm in the oligopoly establishes a price that the other firms then adopt.

A) Price fixing
B) Collusion
C) Price leadership
D) Economy pricing

Question 69

Hope and Henry compete in a local duopoly. Hope has noticed that every time she changes her pricing strategy, Henry follows her. This is an example of _____ by Hope.

A) price fixing
B) collusion
C) price leadership
D) economy pricing

Question 70

A low-price guarantee eliminates the risk of _____ by one's rivals.

A) price fixing
B) being underpriced
C) collusion
D) price-skimming

Question 71

A _____ results in a cooperative solution and overcomes the duopolists' dilemma.

A) price-fixing model
B) low-price guarantee
C) differentiation strategy
D) price-skimming strategy

Question 72

A _____ strategy is a game theory strategy whereby a player cooperates on the first move and then copies what the other player does on all subsequent moves.

A) price leadership
B) low-price guarantee
C) tit-for-tat
D) price-skimming strategy

Question 73

Adelaide's Bakery initially prices high and hopes that her rival, Judith's Baked Goods, follows suit. From then on, Adelaide copies the strategy played by Judith in the prior period. This is an example of the _____ strategy.

A) repeated
B) low-price guarantee
C) tit-for-tat
D) price-skimming

Question 74

The _____ strategy is effective in repeated games.

A) collusion
B) low-price guarantee
C) tit-for-tat
D) price skimming

Question 75

A tit-for-tat strategy in repeated games may result in:

A) an effective cooperative solution.
B) a perfectly competitive market.
C) non-cooperative pricing.
D) price skimming.

Question 76

Low-price guarantees are a kind of _____ strategy.

A) tit-for-tat
B) implicit cooperative pricing
C) price leadership
D) price-skimming

Question 77

(Figure: Low Price Guarantee) What is the outcome in the figure above in the absence of a low price guarantee?

A) Both Lowe's and Home Depot will price high.
B) Lowe's will price high and Home Depot will price low.
C) Both Lowe's and Home Depot will price low.
D) Lowe's will price low and Home Depot will price high.

Question 78

(Figure: Low Price Guarantee) What is the outcome in the figure above in the absence of a low price guarantee?

A) Lowe's will earn $150 and Home Depot will earn $150.
B) Lowe's will earn $50 and Home Depot will earn $200.
C) Lowe's will earn $200 and Home Depot will earn $50.
D) Lowe's will earn $100 and Home Depot will earn $100.

Question 79

(Figure: Low Price Guarantee) What is the outcome in the figure above if Lowe's has a low price guarantee?

A) Both Lowe's and Home Depot will price high.
B) Lowe's will price high and Home Depot will price low.
C) Both Lowe's and Home Depot will price low.
D) Lowe's will price low and Home Depot will price high.

Question 80

(Figure: Low Price Guarantee) What is the outcome in the figure above if Lowe's has a low price guarantee?

A) Lowe's will earn $150 and Home Depot will earn $150.
B) Lowe's will earn $50 and Home Depot will earn $200.
C) Lowe's will earn $200 and Home Depot will earn $50.
D) Lowe's will earn $100 and Home Depot will earn $100.