Deck 14: Oligopoly: Firms in Less Competitive Markets

Question 1

Which of the following is not part of an oligopolist's business strategy?

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

Answer 1

meeting worker health and safety standards required of all firms

Question 2

In order to cut hair in Pennsylvania, you need to complete a 1,250-hour barbering program that costs thousands of dollars as well as pass two exams. For those who want to cut hair as an occupation in Pennsylvania , the barrier to entry they face is

A) due to economies of scale.
B) due to ownership of a key resource.
C) government imposed.
D) self imposed.

Answer 2

government imposed.

Question 3

In California, you can't trim a tree as a business without having 1,460 hours of training and passing two exams., and is one of only three states that require tree trimmers to be licensed. If California decided to repeal the law that required tree trimmers to be licensed, this would likely result in the revenues of large tree-trimming companies in California to ________ and their profits to ________.

A) rise; increase
B) rise; decrease
C) fall; decrease
D) fall; increase

Answer 3

fall; decrease

Question 4

Each year, Fortune magazine lists the 500 largest U.S. public corporations, ranked by revenue. Of the 500 corporations on the list in 1955, ________ are still on the list today.

A) none
B) only about 10 percent
C) roughly half
D) over 90 percent

Question 5

In 2019, the Educational Testing Service (ETS) charged $64.50 to take the Scholastic Aptitude Test (SAT) but $205 to take the Graduate Record Exam (GRE). One reason for this difference in price is

A) more people took the SAT than the GRE in 2019.
B) the GRE is a longer test with more questions.
C) an average, those who take the GRE have higher incomes than those who take the SAT.
D) the ETS faces competition in the market for the SAT but no competition for the GRE.

Question 6

An indication of how barriers to entry can break down over time, particularly as consumer preferences change and as technological change makes possible the introduction of new products and new ways of making products, is seen by the

A) high failure rates among monopolistically competitive firms such as restaurants, but rarely seen in oligopolistic industries.
B) virtual disappearance of firms that are monopolies.
C) growing number of oligopolistic firms that have become monopolistically competitive.
D) high failure rates even among large oligopolistic firms.

Question 7

Prices of PlayStation 5 game systems are similar at almost every large retailer and little price competition occurs among these retailers. An explanation for this is

A) retailers are all price takers.
B) retailers have lobbied state governments to allow them to collude legally to set the prices of certain products.
C) pricing PlayStation 5 game systems is a repeated game. Over a long period of time, a cooperative equilibrium has been reached where retailers charge high prices for these systems.
D) retailers are in a prisoner's dilemma which causes them to all charge the same price for PlayStation 5 game systems.

Question 8

U.S. auto sales from Asian manufacturers took a big hit in September 2019, and sales from U.S. manufacturers were projected to have fallen as well. Toyota, Honda, Nissan, Lexus, and Infiniti all experienced double-digit sales declines, with sales from Subaru and Hyundai down just below 10 percent. With the slowdown in sales leaving dealers with excess inventories of 2019 models, and with dealers expecting deliveries of new 2020 models very soon, automakers increased incentives in the third quarter to an average of more than $4,100 per vehicle in an attempt to stimulate sales. The severity of the sales decline has reignited fears that a long-anticipated collapse in auto sales may be arriving.
Source: Chester Dawson, Gabrielle Coppola, and Keith Naughton, "Grim Start to U.S. Auto Sales Stirs Alarm That Collapse Is Here," bloomberg.com, October 1, 2019.

-Refer to the Article Summary. When an auto manufacturer offers incentives (such as rebates or low-interest financing) to increase sales and/or reduce inventory, the average total cost for the company will ________ and will, effectively, ________ the profit the manufacturer makes on each car sold.

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