Question 1

The term oligopoly indicates

Accepted Answer

Oligopoly refers to a market structure where a few firms dominate the industry, and these firms can produce similar (homogeneous) or different (differentiated) products.

Question 2

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

Accepted Answer

Oligopoly is characterized by a market where a few companies have significant market power, but it is more competitive than a pure monopoly, where only one company dominates. It is less competitive than monopolistic competition, where many companies compete with differentiated products, and pure competition, where there are many competitors offering identical products. Thus, the correct order from lowest to highest degree of competition is pure monopoly, oligopoly, monopolistic competition, and pure competition.

Question 3

Which of the following is an illustration of differentiated oligopoly?

Accepted Answer

Differentiated oligopoly refers to a market structure where a few firms dominate the market, but they offer products that are distinct from each other in some way, such as branding or quality. The soft drink industry is a classic example of this, with major players like Coca-Cola and Pepsi offering similar products that are differentiated mainly through branding and marketing.

Question 4

In an oligopolistic market,

Accepted Answer

In an oligopolistic market, firms may offer products that are either standardized (homogeneous) or differentiated. This characteristic allows for a variety of strategies in competition and marketing, distinguishing oligopolies from perfect competition (where products are standardized) and monopolistic competition (where products are differentiated but there are many small firms).

Question 5

Which of the following is the best example of oligopoly?

Accepted Answer

Automobile manufacturing is the best example of an oligopoly because it is an industry characterized by a small number of large firms that dominate the market, which is a key feature of oligopolistic markets. These firms have significant market power and can influence prices and production, unlike in more competitive or fragmented industries.

Question 6

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

Accepted Answer

These industries are examples of differentiated oligopoly because they consist of a few large firms that sell similar but not identical products, allowing for product differentiation.

Question 7

Differentiated oligopoly exists where a small number of firms are

Accepted Answer

Differentiated oligopoly is characterized by a small number of firms producing goods that are similar but differentiated from each other in terms of quality, design, or some other features. This allows firms to have some degree of market power and avoid perfect competition.

Question 8

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

Accepted Answer

In a pure competition market model, demand and marginal revenue do not diverge because the firm faces a perfectly elastic demand curve at the market price, meaning that it can sell any quantity of its product at the prevailing market price. This results in the marginal revenue being equal to the price.

Question 9

Mutual interdependence means that each oligopolistic firm

Accepted Answer

Mutual interdependence in the context of oligopolies means that each firm must take into account the potential reactions of its competitors when making decisions about pricing, output, and other strategic variables. This is because the actions of one firm can significantly impact the market position and profitability of all other firms in the oligopoly.

Question 10

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

Pittsburgh Plate Glass operates in an industry that is highly concentrated and produces a product (glass) that is largely homogeneous, meaning it is similar across different producers. This fits the definition of a homogeneous oligopoly, where a few companies dominate the market and sell products that are very similar, if not identical.

Question 11

Homogeneous oligopoly exists where a small number of firms are

Accepted Answer

Homogeneous oligopoly refers to a market structure where a small number of firms produce virtually identical products, making the products from each firm perfect substitutes for the others.

Question 12

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

Accepted Answer

In a homogeneous oligopoly, the products offered by different firms are essentially the same. The aluminum industry is an example of this, as companies within this sector produce a very similar product that is largely indistinguishable from one company to another, based on physical and chemical properties.

Question 13

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 an example of a differentiated oligopolist because it operates in the automotive industry, which is characterized by a few large firms that sell similar but differentiated products. These companies compete on factors other than price, such as product features, quality, and branding.

Question 14

Which of the following is a unique feature of oligopoly?

Accepted Answer

Mutual interdependence is a unique feature of oligopoly because firms in an oligopolistic market are highly sensitive to the actions of other firms in the same market, such as changes in price, output, and advertising strategies. This is not typically seen to the same extent in other market structures.

Question 15

The mutual interdependence that characterizes oligopoly arises because

Accepted Answer

In an oligopoly, firms are highly interdependent because each firm's decisions (such as pricing, output levels, and product development) significantly affect the market and thus the potential actions and reactions of rival firms. This interdependence is due to the small number of firms and the significant market share each holds, making the actions of one firm impactful on the others.

Question 16

Oligopoly is more difficult to analyze than other market models because

Accepted Answer

Oligopoly is characterized by a few firms that are interdependent, making the market outcomes less predictable compared to other market models where firms act independently.

Question 17

Oligopolistic industries are characterized by

Accepted Answer

Oligopolistic industries are characterized by a few dominant firms that control a large portion of the market share and substantial barriers to entry, which prevent new competitors from easily entering the market.

Question 18

Prices are likely to be least flexible

Accepted Answer

In an oligopoly, a few firms dominate the market, and they may avoid changing prices to maintain stability and avoid price wars, leading to less flexible prices.

Question 19

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

Accepted Answer

The copper, aluminum, cement, and industrial alcohol industries are examples of homogeneous oligopoly because they produce similar or identical products, which is characteristic of a homogeneous oligopoly market structure.

Question 20

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

Accepted Answer

Economies of scale mean that as a firm increases its production, its average cost of producing each unit decreases. Therefore, a larger firm, which produces more, can often produce at a lower unit cost than a smaller firm.

Quiz 14: Oligopoly and Strategic Behavior