Question 1

Which is the most accurate statement?

Accepted Answer

This statement is the most accurate because it acknowledges that there are different types of oligopolies, ranging from collusive behavior (cartels) to cutthroat competition. Option A is not completely accurate as while product differentiation is important in some oligopolies, it may not be the case for all. Option B is not true as there can be more than five firms in an oligopolistic industry. Option C is not true as there are several well-known oligopolies such as the airline, automobile, and telecommunications industries in the US.

Question 2

If the market share of the largest firm in an industry is 50%,then theoretically,the highest possible Herfindahl-Hirschman Index for this industry would be

Accepted Answer

The answer of If the market share of the largest...

Question 3

Theoretically,what is the highest possible Herfindahl Index?

Accepted Answer

The Herfindahl Index ranges from 0 to 10,000, where 10,000 indicates a monopoly (100^2) or the highest level of market concentration.

Question 4

An industry with four firms each having a 25% market share would have a Herfindahl-Hirschman Index (HHI)of

Accepted Answer

The answer of An industry with four firms each having...

Question 5

Statement I.Collusion is most likely to succeed when there are many firms in the industry.
Statement II.Firms in an industry that divide a market by territory make price and output decisions similar to the way a monopolist would operate.

Accepted Answer

Statement I is false because collusion is easier to maintain when there are fewer firms in the industry. With more firms, it becomes harder to enforce and monitor collusion agreements. 
Statement II is true because territorial division allows firms to act as monopolies in their respective regions and make pricing and output decisions as if they were a single dominant firm.

Question 6

The most important fact about an oligopolized industry is that

Accepted Answer

An oligopolized industry is characterized by a small number of firms that have significant market power. While these firms may produce either a differentiated or identical product, the most important factor is the limited number of competitors.

Question 7

Which statement is the most accurate?

Accepted Answer

When we talk about big business in the U.S., we usually refer to oligopoly, which is a market structure characterized by few dominant firms. This statement is accurate because oligopoly is a market structure where a few firms dominate the industry due to barriers to entry, economies of scale, and other factors. In an oligopolistic market, the firms have significant power to affect the price, output, and quality of products.

Question 8

$~~~~~{ \text { Industry } \mathbf { X } } ~~~~~~~~~~~~~ { \text { Industry } \mathbf { Y } } \
\begin{array} { c c c c } 
& \text { Market }& & { \text { Market } } \
\text { Firm } &\text { Share } & \text { Firm } & \text { Share } \
1 & .40 & 1 & .30 \
2 & .20 & 2 & .30 \
3 & .10 & 3 & .30 \
4 & .10 & 4 & .05 \
5 & .10 & 5 & .03 \
6 & .10 & 6 & .02
\end{array}$
-Using concentration ratios,which is the more concentrated industry?

Accepted Answer

Industry Y has a higher concentration ratio because the top three firms control a larger share of the market (90%) than the top three firms in Industry X (70%).

Question 9

$~~~~~{ \text { Industry } \mathbf { X } } ~~~~~~~~~~~~~ { \text { Industry } \mathbf { Y } } \
\begin{array} { c c c c } 
& \text { Market }& & { \text { Market } } \
\text { Firm } &\text { Share } & \text { Firm } & \text { Share } \
1 & .40 & 1 & .30 \
2 & .20 & 2 & .30 \
3 & .10 & 3 & .30 \
4 & .10 & 4 & .05 \
5 & .10 & 5 & .03 \
6 & .10 & 6 & .02
\end{array}$
-Which statement is true?

Accepted Answer

The Herfindahl-Hirschman Index (HHI) is calculated by summing the squares of the market shares of all firms in the industry. For Industry Y: $0.30^2 + 0.30^2 + 0.30^2 + 0.05^2 + 0.03^2 + 0.02^2 = 0.09 + 0.09 + 0.09 + 0.0025 + 0.0009 + 0.0004 = 0.2738$. When multiplied by 10,000, the HHI is 2,738.

Question 10

The largest firm in Industry J has a 90% market share,while the remaining ten firms each has a one percent share.The largest firm in industry K has a 80% market share,while the other two firms each has a 10% share.Which statement is true?

Accepted Answer

The concentration ratio is the percentage of market share held by the largest firm or firms in the industry. In Industry J, the largest firm has a 90% market share, which alone makes up the concentration ratio for the industry. In contrast, Industry K's largest firm has a 80% market share, leaving the remaining 20% to be divided between two other firms. Therefore, Industry J has a higher concentration ratio than Industry K.

Question 11

Which statement is true?

Accepted Answer

The concentration ratio measures the market share of the largest firms in an industry. In an oligopoly, there are only a few dominant firms that control a significant portion of the market. Therefore, the higher the concentration ratio (the larger the market share of the largest firms), the higher the degree of oligopolization.

Question 12

$~~~~~{ \text { Industry } \mathbf { X } } ~~~~~~~~~~~~~ { \text { Industry } \mathbf { Y } } \
\begin{array} { c c c c } 
& \text { Market }& & { \text { Market } } \
\text { Firm } &\text { Share } & \text { Firm } & \text { Share } \
1 & .40 & 1 & .30 \
2 & .20 & 2 & .30 \
3 & .10 & 3 & .30 \
4 & .10 & 4 & .05 \
5 & .10 & 5 & .03 \
6 & .10 & 6 & .02
\end{array}$
-Which statement is true?

Accepted Answer

The Herfindahl-Hirschman Index (HHI) is calculated by squaring the market share of each firm competing in the market and then summing the resulting numbers. For Industry X: $HHI = 0.40^2 + 0.20^2 + 0.10^2 + 0.10^2 + 0.10^2 + 0.10^2 = 0.16 + 0.04 + 0.01 + 0.01 + 0.01 + 0.01 = 0.24$ or 2400 when expressed as per the usual convention (multiplying by 10,000).

Question 13

Statement I.The automobile industry is an oligopoly.
Statement II.The cigarette industry is an oligopoly.

Accepted Answer

An oligopoly is a market structure characterized by a small number of large firms dominating the market. Both the automobile and cigarette industries meet this criteria, as a few big companies such as General Motors, Ford, and Toyota in the automobile industry and Philip Morris, RJ Reynolds, and British American tobacco in the cigarette industry control most of the market share. Therefore, both statements are true.

Question 14

Which is the most accurate statement?

Accepted Answer

The answer of Which is the most accurate statement?
...

Question 15

At one end of the competitive spectrum is cutthroat competition.At the other end is (the)

Accepted Answer

A cartel is a group of independent market participants who collude with each other in order to improve their profits and dominate the market, representing the opposite end of the spectrum from cutthroat competition, where there is no cooperation among competitors.

Question 16

As foreign imports become a greater percentage of sales in oligopolized industries,the concentration ratio

Accepted Answer

As foreign imports become a greater percentage of sales in oligopolized industries, the concentration ratio becomes less accurate as a measure of concentration. This is because the concentration ratio only takes into account the market share of domestic firms, and therefore does not fully capture the competitive dynamics and market power of foreign firms.

Question 17

A concentration ratio of 100 would imply that the industry has __________.

Accepted Answer

The answer of A concentration ratio of 100 would imply...

Question 18

Corporate concentration can be measured by

Accepted Answer

Corporate concentration can be measured by both the concentration ratio and the Herfindahl-Hirschman index. The concentration ratio measures the market share of the largest firms in an industry, while the Herfindahl-Hirschman index takes into account the market share of all the firms in the industry. Using both measures provides a more complete picture of the level of concentration in the industry.

Question 19

$~~~~~{ \text { Industry } \mathbf { X } } ~~~~~~~~~~~~~ { \text { Industry } \mathbf { Y } } \
\begin{array} { c c c c } 
& \text { Market }& & { \text { Market } } \
\text { Firm } &\text { Share } & \text { Firm } & \text { Share } \
1 & .40 & 1 & .30 \
2 & .20 & 2 & .30 \
3 & .10 & 3 & .30 \
4 & .10 & 4 & .05 \
5 & .10 & 5 & .03 \
6 & .10 & 6 & .02
\end{array}$
-According to the Herfindahl-Hirschman Index,which is the more concentrated industry?

Accepted Answer

The Herfindahl-Hirschman Index (HHI) is calculated by squaring the market share of each firm and then summing the squares. For Industry X, HHI = $0.4^2 + 0.2^2 + 0.1^2 + 0.1^2 + 0.1^2 + 0.1^2 = 0.16 + 0.04 + 0.01 + 0.01 + 0.01 + 0.01 = 0.24$, or 2,400 when multiplied by 10,000. For Industry Y, HHI = $0.3^2 + 0.3^2 + 0.3^2 + 0.05^2 + 0.03^2 + 0.02^2 = 0.09 + 0.09 + 0.09 + 0.0025 + 0.0009 + 0.0004 = 0.2738$, or 2,738 when multiplied by 10,000. Therefore, Industry Y is more concentrated.

Question 20

Statement I.Most cars sold in the United States were made in Japan or assembled in the United States by Japanese-owned companies.
Statement II.Imports of fuel-efficient cars made in Japan reduced the concentration ratio in the United States that was dominated by G.M. ,Ford,and Chrysler.

Accepted Answer

The answer of Statement I.Most cars sold in the United...

Quiz 24: Oligopoly

Which is the most accurate statement?

If the market share of the largest firm in an industry is 50%,then theoretically,the highest possible Herfindahl-Hirschman Index for this industry would be

Theoretically,what is the highest possible Herfindahl Index?

An industry with four firms each having a 25% market share would have a Herfindahl-Hirschman Index (HHI) of

Statement I.Collusion is most likely to succeed when there are many firms in the industry. Statement II.Firms in an industry that divide a market by territory make price and output decisions similar to the way a monopolist would operate.

The most important fact about an oligopolized industry is that

Which statement is the most accurate?

The largest firm in Industry J has a 90% market share,while the remaining ten firms each has a one percent share.The largest firm in industry K has a 80% market share,while the other two firms each has a 10% share.Which statement is true?

Which statement is true?

Statement I.The automobile industry is an oligopoly. Statement II.The cigarette industry is an oligopoly.

Which is the most accurate statement?

At one end of the competitive spectrum is cutthroat competition.At the other end is (the)

As foreign imports become a greater percentage of sales in oligopolized industries,the concentration ratio

A concentration ratio of 100 would imply that the industry has __________.

Corporate concentration can be measured by

Statement I.Most cars sold in the United States were made in Japan or assembled in the United States by Japanese-owned companies. Statement II.Imports of fuel-efficient cars made in Japan reduced the concentration ratio in the United States that was dominated by G.M. ,Ford,and Chrysler.