Question 1

Which of the following is a unique feature of oligopoly?

Accepted Answer

Mutual interdependence is a unique feature of oligopoly where each firm's decision-making and strategy is influenced by the actions of its competitors. In other words, a firm's profitability and success depend on the decisions and actions of its rivals, leading to a complex web of strategic interactions. While the other options, such as advertising expenditures, product differentiation and nonprice competition are common features of many market structures, mutual interdependence is specifically associated with oligopoly.

Question 2

Which of the following industries is an illustration of homogeneous oligopoly?

Accepted Answer

Homogeneous oligopoly refers to a market structure in which the firms produce a standardized or homogeneous product, and there is a small number of dominant firms. The aluminum industry is an example of this, as the product is standardized, and there are only a few major players in the market. Household laundry products, personal computers, and the auto industry do not fit the criteria of homogeneous oligopoly.

Question 3

Oligopoly is more difficult to analyze than other market models because

Accepted Answer

Oligopoly is difficult to analyze because of mutual interdependence, where the actions of one firm affect the others, and because the outcomes are less certain than in other market models. This makes it challenging to predict market behavior and determine equilibrium price and quantity. Additionally, firms may engage in strategic behavior, such as price-fixing, which can further complicate analysis.

Question 4

Use your basic knowledge and your understanding of market structures to answer this question.Which of the following companies most closely approximates a homogeneous oligopolist in a highly concentrated industry?

Accepted Answer

Homogeneous oligopolies are characterized by few firms offering identical or highly similar products. Pittsburgh Plate Glass operates in a highly concentrated market in which a small number of firms dominate and offer highly similar products, making it the best choice for a homogeneous oligopolist. Kellogg's, Ford, and Starbucks operate in markets with more differentiation among their products, making them less representative of a homogeneous oligopoly.

Question 5

In an oligopolistic market,

Accepted Answer

In an oligopolistic market, products may be standardized or differentiated. It is not necessary for one firm to be dominant, and the four largest firms may account for more than 20 percent of total sales. It is also not the same as a monopolistically competitive industry.

Question 6

Which of the following is an illustration of differentiated oligopoly?

Accepted Answer

The soft drink industry is an illustration of differentiated oligopoly because there are a few dominant firms (Coca-Cola, PepsiCo, etc.) that offer slightly different products (Coke, Pepsi, Sprite, etc.) and engage in non-price competition (advertising, promotions, product differentiation). The other options (aluminum industry, steel industry, retail stores in large cities) are not examples of differentiated oligopoly as they either have many competitors offering similar products (aluminum and steel) or have a large number of small firms competing (retail stores).

Question 7

Homogeneous oligopoly exists where a small number of firms are

Accepted Answer

Homogeneous oligopoly exists when firms are producing virtually identical products. This means that there is minimal differentiation in the product, and as a result, firms are likely to compete primarily on price rather than on product features.

Question 8

Oligopolistic industries are characterized by

Accepted Answer

Oligopolistic industries are characterized by a few dominant firms and substantial entry barriers. This means that there are only a few players in the market who hold a significant market share, and it is difficult for new firms to enter the market due to high barriers to entry, such as high startup costs or government regulations. Examples of oligopolistic industries include the telecommunications industry and the automobile industry.

Question 9

In which of the following market models do demand and marginal revenue not diverge?

Accepted Answer

The answer of In which of the following market models...

Question 10

Prices are likely to be least flexible

Accepted Answer

The answer of Prices are likely to be least flexible
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Question 11

Mutual interdependence means that each oligopolistic firm

Accepted Answer

Mutual interdependence refers to the fact that each oligopolistic firm must consider the reactions of its rivals when determining its price policy. This is because the actions of one firm will affect the market conditions and the strategies of the other firms in the industry. Therefore, firms must take into account how their competitors will react to their pricing decisions and adjust their strategies accordingly.

Question 12

The automobile, household appliance, and automobile tire industries are all illustrations of

Accepted Answer

The differentiated oligopoly model best fits these industries because there are a small number of large firms that produce differentiated products, such as different brands of cars, appliances, and tires, and each firm has some market power due to the perceived differences in their products.

Question 13

Differentiated oligopoly exists where a small number of firms are

Accepted Answer

The answer of Differentiated oligopoly exists where a small number...

Question 14

The term oligopoly indicates

Accepted Answer

Oligopoly refers to a market structure in which a few dominant firms control a significant share of the market. These firms may produce either a differentiated product (e.g. Coca-Cola and Pepsi in the soft drink industry) or a homogeneous product (e.g. OPEC countries in the oil industry). Therefore, option C accurately describes an oligopoly market structure. Option A refers to a monopoly, option B refers to monopolistic competition, and option D is incorrect because a low four-firm concentration ratio indicates a fragmented market structure, not an oligopoly.

Question 15

If there are significant economies of scale in an industry, then

Accepted Answer

Significant economies of scale mean that as a firm increases its production, its average total cost decreases. This allows larger firms to take advantage of lower unit costs, which can lead to a competitive advantage over smaller firms.

Question 16

The copper, aluminum, cement, and industrial alcohol industries are examples of

Accepted Answer

The answer of The copper, aluminum, cement, and industrial alcohol...

Question 17

The mutual interdependence that characterizes oligopoly arises because

Accepted Answer

In an oligopoly, firms depend on the pricing strategy of their rivals. Since there are only a few firms in the industry, they have a significant influence on each other's profits and market share. Therefore, each firm must consider its own price and output choices in light of how its rivals will react. This mutual interdependence leads to competition that is characterized by strategic behavior, such as price leadership, collusive agreements, and aggressive price-cutting. The degree of interdependence is affected by various factors, such as the degree of product differentiation, market concentration, and barriers to entry.

Question 18

Which of the following is the best example of oligopoly?

Accepted Answer

Automobile manufacturing is the best example of oligopoly because there are only a few major companies (such as Toyota, GM, Ford, etc.) that dominate the market and have significant influence over pricing and competition. The barriers to entry in this industry are high, making it difficult for new companies to enter and compete.

Question 19

Use your basic knowledge and your understanding of market structures to answer this question.Which of the following companies most closely approximates a differentiated oligopolist in a highly concentrated industry?

Accepted Answer

Ford Motor Company is the best choice as it operates in a highly concentrated industry, the automotive industry, which is dominated by a few large firms. As a differentiated oligopolist, Ford engages in non-price competition, such as advertising and product differentiation, to maintain its market share and distinguish itself from its competitors. The other companies listed do not operate in highly concentrated industries or do not exhibit the characteristics of a differentiated oligopolist.

Question 20

In which of these continuums of degrees of competition (lowest to highest) is oligopoly properly placed?

Accepted Answer

The answer of In which of these continuums of degrees...

Quiz 14: Oligopoly and Strategic Behavior