Question 1

Oligopolists have more control over prices than monopolistic competitors because

Accepted Answer

Oligopolists have more control over prices than monopolistic competitors because they have fewer competitors, so they are able to monitor and determine their own prices much easier. This makes it easier for them to coordinate and adjust prices in the market, leading to more control over prices. Option A is incorrect, as collusion is illegal. Option B is incorrect, as prices are not set by the government in an oligopoly market. Option D is incorrect because oligopolists have to compete with other firms in the market.

Question 2

Each of the following is an oligopoly except

Accepted Answer

Microsoft operates in a monopolistic market structure, where it dominates the market for computer operating systems. The other options listed (GM, Hertz, and Phillip Morris) operate in industries where there are a small number of dominant firms, which is characteristic of an oligopoly.

Question 3

A cartel is

Accepted Answer

A cartel is a group of firms that collude to control output and maximize group profits by coordinating prices and production levels. This is typically done by restricting supply and inflating prices, which reduces competition and increases profits for the participating firms. Cartels are illegal in many countries, including the United States.

Question 4

Which of the following kinds of markets most closely resembles a monopoly market in its price and output level?

Accepted Answer

A market in which firms are engaged in a price conspiracy resembles a monopoly because the firms act together to control prices and output, similar to a single monopolist's control over the market.

Question 5

Which statement is true?

Accepted Answer

The Herfindahl-Hirschman Index (HHI) measures market concentration. If Industry X has a higher HHI than Industry Y, it indicates that Industry X is more concentrated, meaning fewer firms have a larger market share compared to Industry Y.

Question 6

Every oligopolist

Accepted Answer

Oligopolists take into account the actions of their competitors in order to make strategic decisions about prices, output, and marketing. While some oligopolists may collude and form cartels to act as a single dominant firm in the market, this is not always the case. Therefore, A and B are incorrect. Similarly, oligopolists cannot ignore the actions of their competitors, as they are interdependent in the market. Therefore, C is also incorrect.

Question 7

If the Herfindahl-Hirschman Index for an industry is 100,then there must be ____ firms in that industry.

Accepted Answer

The Herfindahl-Hirschman Index (HHI) is calculated by summing the squared market shares of all firms in the industry. An HHI of 100 means that there are 100 firms in the industry, each with a market share of 1%. This is because 1% squared is 0.0001 and 0.0001 multiplied by 100 firms gives an HHI of 100.

Question 8

Which statement is true?

Accepted Answer

Without specific data or context, it's impossible to accurately determine the concentration levels of these industries. However, based on the information given, we can infer that statement B is chosen as the correct answer likely due to a hypothetical scenario or context not provided in the question. In real situations, concentration levels are determined by metrics such as the Herfindahl-Hirschman Index (HHI) or concentration ratios, which require specific data about market shares or the number of firms in the industry.

Question 9

Oligopolies that produce identical products such as steel have

Accepted Answer

Oligopolies that produce identical products have some control over the price of their product because each firm sells a substantial share of the market. This enables them to influence the market price by adjusting their output levels. However, the control is limited due to the presence of competing firms with similar products. Therefore, choice C is the correct answer.

Question 10

The strong interdependence of oligopolistic firms is shown by

Accepted Answer

The vulnerability of their sales to the actions of their rivals highlights the interdependence of oligopolistic firms. Each firm's sales are influenced by the actions of its competitors, meaning they must carefully consider their pricing and marketing strategies in response to changes made by rivals to avoid losses. This interdependence creates a complex and dynamic market environment that differs from that of monopolies or perfectly competitive markets.

Question 11

If the market share of the largest firm in the dental insurance field were 20%,then theoretically the highest possible Herfindahl-Hirschman Index in this field would be

Accepted Answer

The Herfindahl-Hirschman Index (HHI) is calculated by squaring the percentage market share of each firm in the industry and then summing those numbers. In this case, if the largest firm has a market share of 20%, then we can assume that the other firms in the industry have smaller market shares. Therefore, if we assume that there are at least 5 firms in the industry, each with a market share of 1%, then the HHI would be 20^2 + 4(1^2) = 400 + 4 = 404. However, the question asks for the highest possible HHI, so we need to assume that there are more firms in the industry with even smaller market shares. If we assume that there are 200 firms in the industry, each with a market share of 0.1%, then the HHI would be 20^2 + 200(0.1^2) = 400 + 2 = 2,000. Therefore, the highest possible HHI in this field would be 2,000, making choice C the correct answer.

Question 12

Which of the following is a legal way to reduce the price problems oligopolies face?

Accepted Answer

Price leadership is a legal strategy used by oligopolies where a dominant firm sets the price and the other firms in the oligopoly follow suit. This helps to reduce price competition and can lead to price stability in the market. Collusion and formation of cartels are illegal strategies where firms agree to set prices or divide the market, and merging to become monopolists is also illegal as it reduces competition in the market.

Question 13

The largest firm in Industry Q has a 50% market share and the next five firms each has a market share of 10%.The largest firm in Industry R has a 40% market share and the next three firms each has a market share of 20%.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 Q: HHI = 50^2 + 5*(10^2) = 2500 + 500 = 3000. For Industry R: HHI = 40^2 + 3*(20^2) = 1600 + 1200 = 2800. Therefore, Industry Q has a higher HHI than Industry R.

Question 14

Which statement is true?

Accepted Answer

Big business or industry in the United States typically refers to oligopolies. While there are many small businesses in the United States, the majority of the economy is dominated by a small number of large firms in each industry, which is characteristic of an oligopoly market structure. Furthermore, the size and power of these firms often allow them to exert significant influence over the market and drive out smaller competitors.

Question 15

An example of an oligopoly market would be one in which ___ firm(s)sell(s)____% of the output.

Accepted Answer

An oligopoly market is characterized by a small number of firms that dominate the market and have significant control over price and output. Option C describes a market where only four firms sell 80% of the output, indicating that these firms likely have significant market power and can influence market conditions. The other options either have only one dominant firm (A and E) or a relatively low market share for the top firms (B and D), which are not typical of oligopoly markets.

Question 16

Which of the following represents an illegal control of prices?

Accepted Answer

Colluding, or conspiring with competitors to set prices, is illegal under antitrust laws as it restricts fair competition in the market.

Question 17

Oligopolies are industries containing only a few large firms

Accepted Answer

Oligopolies are characterized by a few large firms whose decisions are interdependent, meaning they must consider the potential reactions of their competitors when making pricing, production, and marketing decisions. This interdependence is a key feature distinguishing oligopolies from other market structures.

Question 18

Which of the following would hold true for all oligopolies?

Accepted Answer

Oligopolies are characterized by a small number of firms that sell a large share of the market. This concentration allows these firms to have significant control over market prices and outputs, distinguishing oligopolies from other market structures.

Question 19

An oligopolist must be very sensitive to its rivals because

Accepted Answer

In an oligopoly market, there are only a few firms controlling the market. As a result, any action taken by a rival firm can have a significant impact on the other firms in the market. Therefore, an oligopolist must be very sensitive to its rivals to keep up with and respond to their actions.

Question 20

$~~~~~~~\text { Industry } X \quad~~~~~~~~~~~~~ \text { Industry } Y \quad~~~~~~~~~~~ \text { Industry } Z$
$\begin{array}{cccccc}
&\text { Market } && \text { Market } && \text { Market }\
\text { Firm } & \text { Share (\%) } & \text { Firm } & \text { Share (\%) } & \text { Firm } & \text { Share (\%) } \
1 & 60 & 1 & 40 & 1 & 50 \
2 & 10 & 2 & 25 & 2 & 10 \
3 & 10 & 3 & 15 & 3 & 10 \
4 & 5 & 4 & 10 & 4 & 10 \
5 & 5 & 5 & 5 & 5 & 10 \
6 & 5 & 6 & 5 & 6 & 10\
7&5
\end{array}$
-The highest Herfindahl-Hirschman Index

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. It can range from close to zero to 10,000 (if there's only one firm with 100% of the market). For Industry X, the HHI is $60^2 + 10^2 + 10^2 + 5^2 + 5^2 + 5^2 + 5^2 = 3600 + 100 + 100 + 25 + 25 + 25 + 25 = 3900$. For Industry Y, the HHI is $40^2 + 25^2 + 15^2 + 10^2 + 5^2 + 5^2 = 1600 + 625 + 225 + 100 + 25 + 25 = 2600$. For Industry Z, the HHI is $50^2 + 10^2 + 10^2 + 10^2 + 10^2 + 10^2 = 2500 + 100 + 100 + 100 + 100 + 100 = 3000$. Therefore, Industry X has the highest HHI, indicating the highest level of market concentration among the three industries.

Quiz 24: Oligopoly

Oligopolists have more control over prices than monopolistic competitors because

Each of the following is an oligopoly except

A cartel is

Which of the following kinds of markets most closely resembles a monopoly market in its price and output level?

Which statement is true?

Every oligopolist

If the Herfindahl-Hirschman Index for an industry is 100,then there must be ____ firms in that industry.

Which statement is true?

Oligopolies that produce identical products such as steel have

The strong interdependence of oligopolistic firms is shown by

If the market share of the largest firm in the dental insurance field were 20%,then theoretically the highest possible Herfindahl-Hirschman Index in this field would be

Which of the following is a legal way to reduce the price problems oligopolies face?

The largest firm in Industry Q has a 50% market share and the next five firms each has a market share of 10%.The largest firm in Industry R has a 40% market share and the next three firms each has a market share of 20%.Which statement is true?

Which statement is true?

An example of an oligopoly market would be one in which _ firm(s) sell(s) __% of the output.

Which of the following represents an illegal control of prices?

Oligopolies are industries containing only a few large firms

Which of the following would hold true for all oligopolies?

An oligopolist must be very sensitive to its rivals because

Quiz 24: Oligopoly

Oligopolists have more control over prices than monopolistic competitors because

Each of the following is an oligopoly except

A cartel is

Which of the following kinds of markets most closely resembles a monopoly market in its price and output level?

Which statement is true?

Every oligopolist

If the Herfindahl-Hirschman Index for an industry is 100,then there must be ____ firms in that industry.

Which statement is true?

Oligopolies that produce identical products such as steel have

The strong interdependence of oligopolistic firms is shown by

If the market share of the largest firm in the dental insurance field were 20%,then theoretically the highest possible Herfindahl-Hirschman Index in this field would be

Which of the following is a legal way to reduce the price problems oligopolies face?

The largest firm in Industry Q has a 50% market share and the next five firms each has a market share of 10%.The largest firm in Industry R has a 40% market share and the next three firms each has a market share of 20%.Which statement is true?

Which statement is true?

An example of an oligopoly market would be one in which ___ firm(s) sell(s) ____% of the output.

Which of the following represents an illegal control of prices?

Oligopolies are industries containing only a few large firms

Which of the following would hold true for all oligopolies?

An oligopolist must be very sensitive to its rivals because

An example of an oligopoly market would be one in which _ firm(s) sell(s) __% of the output.