Question 1

In oligopoly firms sometimes agree on prices. This is called:&#10;A) Delusion&#10;B) Illusion&#10;C) Solution&#10;D) Collusion

Accepted Answer

Collusion is the correct term for when firms in an oligopoly agree on prices or other market behaviors. This is often done to reduce competition and increase profits for the colluding parties.

Question 2

In oligopoly:&#10;A) A few firms dominate the industry.&#10;B) There are many firms of a similar size.&#10;C) One firm dominates the industry.&#10;D) All products are homogeneous.

Accepted Answer

In an oligopoly, a few firms dominate the industry, controlling a significant portion of the market share and often engaging in strategic interactions with each other.

Question 3

In oligopoly:&#10;A) Non-price competition is likely.&#10;B) Every firm is small relative to the market as a whole.&#10;C) Each firm is a price taker.&#10;D) Price is equal to average cost.

Accepted Answer

In an oligopoly, a few large firms dominate the market, leading to strategic interactions among them. Non-price competition, such as advertising and product differentiation, is common as firms seek to gain market share without engaging in price wars, which can be detrimental to all firms involved. Choices B, C, and D describe characteristics more typical of perfect competition or monopolistic competition, not oligopoly.

Question 4

In the Kinked Demand Curve model of oligopoly it is assumed that:&#10;A) An increase in price will be followed by other firms.&#10;B) A decrease in price will not be followed by other firms.&#10;C) An increase in price is not followed by other firms.&#10;D) Price competition is common in the industry.

Accepted Answer

In the Kinked Demand Curve model, it is assumed that if a firm increases its price, other firms will not follow, leading to a loss of market share for the firm that increased its prices.

Question 5

A quota for members of an oligopoly is:&#10;A) A limit on the amount produced&#10;B) A limit on the price charged&#10;C) A limit on the profits made&#10;D) A limit on the number of firms in a market

Accepted Answer

A quota for members of an oligopoly refers to a limit on the amount produced by each firm within the oligopoly to prevent oversupply and maintain prices at a profitable level.

Question 6

Predatory pricing (or a price war) occurs when:&#10;A) Firms agree to fix the price.&#10;B) One firm tries to undercut the competition and force them out of the market.&#10;C) A firm sets a high price to generate the highest profit possible.&#10;D) Firms agree to limit the amount they produce.

Accepted Answer

Predatory pricing refers to the strategy where a firm deliberately lowers its prices to a level that is not sustainable in the long term, with the intention of driving competitors out of the market. Once the competition is weakened or eliminated, the firm can then increase prices to recoup losses.

Question 7

Oligopoly differs from perfect competition in that in oligopoly:&#10;A) There are few large firms.&#10;B) There is always freedom of entry and exit.&#10;C) Firms face an upward sloping demand curve.&#10;D) Abnormal profits can only be earned in the short term.

Accepted Answer

In an oligopoly, there are few large firms that dominate the market, unlike perfect competition where there are many small firms.

Question 8

The Kinked Demand Curve model of oligopoly is based on a collusive model of oligopoly.

Accepted Answer

The Kinked Demand Curve model of oligopoly assumes that firms in an oligopoly are non-collusive and make decisions based on the expected reactions of other firms to changes in price, leading to price rigidity.

Question 9

In a cartel the firms in an oligopoly join together and may set the same price and overall quantity as a monopolist.

Accepted Answer

In a cartel, firms in an oligopoly collaborate to control prices and output in a similar manner to a single monopolist, effectively reducing competition and maximizing collective profits.

Question 10

If a limit is set on the amount that each member of a cartel can produce, this is called a _____.

Accepted Answer

The answer of If a limit is set on the...

Question 11

Which of the following is most likely to be associated with an oligopolistic structure?&#10;A) Restaurants&#10;B) Supermarkets&#10;C) Commodities&#10;D) Hairdressers

Accepted Answer

The answer of Which of the following is most likely...

Question 12

In an oligopoly market structure, a firms' behaviour is said to be:&#10;A) Unrelated to other firms&#10;B) Independent&#10;C) Interdependent&#10;D) None of the above

Accepted Answer

The answer of In an oligopoly market structure, a firms'...

Question 13

The n firm concentration ratio measures:&#10;A) The profits of the largest n firms&#10;B) The employees of the largest n firms&#10;C) The market share of the largest n firms&#10;D) The number of stores of the largest n firms

Accepted Answer

The answer of The n firm concentration ratio measures:&#10;A) The...

Question 14

Within the confectionery market, before changing its prices Nestl&#233; should consider the likely behaviour of:&#10;A) BP&#10;B) Mars&#10;C) Marks and Spencer&#10;D) Heinz

Accepted Answer

The answer of Within the confectionery market, before changing its...

Question 15

Firms who join together to behave like a monopoly are said to be in:&#10;A) A partnership&#10;B) A cartel&#10;C) A joint venture&#10;D) A quasi monopsony

Accepted Answer

The answer of Firms who join together to behave like...

Deck 14: Oligopoly