Question 1

Oligopoly is a market structure that is characterized by a _____ number of _____ firms that produce _____ products.
A) large;relatively small and independent;identical
B) small;independent;identical or differentiated
C) large;relatively small and independent;differentiated
D) small;interdependent;identical or differentiated

Accepted Answer

In an oligopoly market structure, there are a small number of interdependent firms that can produce either identical or differentiated products. Choice A is incorrect because all firms in an oligopoly are not necessarily independent. Choice B is incorrect because firms in an oligopoly market are not necessarily independent, and the products can be either identical or differentiated. Choice C is incorrect because a large number of firms would make it a monopolistic competition, not an oligopoly.

Question 2

Which scenario BEST describes an oligopolistic industry?
A) A single cable company serves customers in a small town.
B) Thousands of soybean farmers sell their output in a global commodities market.
C) Coca-Cola and Pepsi sell most of the soft drinks consumed around the world.
D) A university has one bookstore selling textbooks to students.

Accepted Answer

An oligopolistic industry is characterized by a small number of firms dominating the market, which is the case with Coca-Cola and Pepsi in the soft drink industry. Options A, B, and D describe industries with only one or a large number of small firms, which do not fit the definition of an oligopoly.

Question 3

The sum of the squared market shares of each firm in an industry is the:
A) concentration ratio.
B) employment rate.
C) Herfindahl-Hirschman index.
D) market number.

Accepted Answer

The sum of the squared market shares of each firm in an industry is the Herfindahl-Hirschman index, which is a measure of industry concentration. The concentration ratio measures the market share of the largest firms in an industry, not the total market share, so A is incorrect. B and D are unrelated to market concentration ratios.

Question 4

A firm that is in an oligopoly knows that its _____ affect its _____ and that the _____ of its rivals will affect it.
A) actions;rivals;reactions
B) price changes;total revenue in a positive way;reactions
C) actions rarely;rivals;actions
D) price increases;total revenue in the long run only;large but not small price changes

Accepted Answer

In an oligopoly, firms typically have a small number of competitors and are therefore interdependent. This means that a firm's actions will have an impact on its rivals' reactions and vice versa. Therefore, the best option is A, which states that a firm's actions will affect its rivals' reactions and that its rivals' actions will affect the firm. Option B is incorrect because it only mentions the positive effects of price changes on total revenue, without acknowledging the potential negative effects on rivals. Option C is incorrect because it suggests that a firm's actions rarely affect its rivals, which is not accurate in an oligopoly. Option D is incorrect because it only mentions the impact of price increases on total revenue and does not acknowledge the potential reactions of rivals to even small price changes.

Question 5

An industry characterized by a few interdependent firms and by barriers to entry is called:
A) perfect competition.
B) monopolistic competition.
C) monopoly.
D) oligopoly.

Accepted Answer

An oligopoly is an industry where a few large firms dominate the market, and there are barriers to entry for new firms. These firms often have a significant influence on pricing and output decisions, and competition tends to be more limited than in a monopolistic or perfect competition market.

Question 6

Oligopoly is a market structure that is characterized by a _____ number of _____ firms producing _____ products.
A) small;interdependent;identical or differentiated
B) small;independent;identical or differentiated
C) large;relatively small and independent;differentiated
D) large;relatively small and independent;identical

Accepted Answer

Oligopoly is characterized by a small number of interdependent firms producing either identical or differentiated products. This means that each firm's actions have an impact on the prices, outputs, and other decisions of the other firms in the market.

Question 7

Which Herfindahl-Hirschman index is MOST likely to indicate a perfectly competitive market?
A) 100
B) 1 800
C) 10 000
D) 100 000

Accepted Answer

The Herfindahl-Hirschman index measures the degree of market concentration. A perfectly competitive market would have a large number of firms with each firm having a negligible market share. This would result in a low concentration ratio and a low Herfindahl-Hirschman index. An index of 100 indicates a perfectly competitive market.

Question 8

An industry is dominated by a few firms.Each of these firms acknowledges that its own choices affect the choices of its rivals.Each firm also recognizes that its rivals' choices affect the decisions it makes.This industry is an example of:
A) a monopoly.
B) an oligopoly.
C) monopolistic competition.
D) perfect competition.

Accepted Answer

The industry described is an oligopoly, as there are only a few dominant firms and each firm's choices affect its rivals' decisions. In a monopoly, there is only one dominant firm and no competition, while monopolistic competition involves many small firms selling differentiated products, and perfect competition involves many small firms selling identical products.

Question 9

An industry that is dominated by a few firms,each of which recognizes that its own choices can affect the choices of its rivals and vice versa,is:
A) a monopoly.
B) an oligopoly.
C) characterized by monopolistic competition.
D) characterized by perfect competition.

Accepted Answer

An oligopoly is an industry where a few firms dominate the market. In this market setting, each firm's decisions can have a significant impact on its rivals' decisions, and vice versa. This often leads to strategic behavior by firms as they try to maximize their own profits while taking into account the actions of their competitors. Monopolistic competition refers to an industry where there are many firms competing, but each has a slightly differentiated product. A monopoly is an industry where there is only one firm, and perfect competition refers to a market where there are many small firms, each selling an identical product, with no barriers to entry.

Question 10

The Herfindahl-Hirschman index is a measure of concentration found by:
A) squaring the percentage market share of each firm in the industry.
B) squaring the percentage market share of each firm in the industry and then summing the squared market shares.
C) summing the percentage market shares of each firm in the industry.
D) squaring the sums of the concentration ratios found in an industry survey of the largest four and largest eight firms.

Accepted Answer

The Herfindahl-Hirschman index (HHI) is calculated by squaring the percentage market share of each firm in the industry and summing the squared market shares. This measure provides an indication of the level of concentration in the industry. The higher the HHI, the more concentrated the industry is. Thus, option B is the correct choice since it includes squaring and summing of the market shares to measure concentration.

Question 11

To be called an oligopoly,an industry must have:
A) independence in decision making.
B) a horizontal demand curve.
C) a small number of interdependent firms.
D) relatively easy entry and exit.

Accepted Answer

An oligopoly is characterized by a small number of interdependent firms, meaning that the decisions made by one firm will affect the decisions and actions of the other firms in the industry. This interdependence often leads to strategic behavior and can result in collusion or the formation of cartels. Therefore, options A, B, and D are not necessary conditions for an oligopoly.

Question 12

The largest Herfindahl-Hirschman index possible is _____,and the industry is a(n)_____.
A) 10;monopoly
B) 10 000;monopoly
C) 100 000;monopoly
D) 100 000;oligopoly

Accepted Answer

The largest Herfindahl-Hirschman Index (HHI) possible is 10,000, indicating a monopoly. This occurs when a single firm controls the entire market, resulting in an HHI of 10,000, which is calculated as the sum of the squares of the market shares of all firms in the industry (in this case, 100^2).

Question 13

In oligopoly,a firm must realize that:
A) what it does has no effect on the other firms in the industry.
B) its behaviour will be ignored by other firms in the industry.
C) another major firm may dominate choices in the industry,and it will have to behave accordingly.
D) collusion was made legal in 2014.

Accepted Answer

In oligopoly, another major firm may have significant influence on the choices the firm makes. This is because a few major firms dominate the industry, and their actions will have an impact on the entire market. Therefore, a firm must behave in a way that takes into consideration the actions of its competitors and the dominant players in the market. Options A and B are incorrect as a firm's behavior will have an impact on the industry, and other firms will not ignore it. Option D is incorrect as collusion is still illegal in most countries, and its legality does not change the fact that firms need to make strategic decisions based on the actions of their competitors.

Question 14

To calculate the Herfindahl-Hirschman index (HHI),one must _____ market share(s)of _____ in the industry.
A) sum the;the four largest firms
B) sum the;all of the firms
C) divide the;the largest firm by the sum of the four largest firms
D) sum the squared;all of the firms

Accepted Answer

The Herfindahl-Hirschman index (HHI) is calculated by summing the squares of the market shares of all the firms in the industry. This method accounts for both the size of firms and the distribution of market shares among them, providing a measure of market concentration.

Question 15

The MOST important source of oligopoly in an industry is:
A) economies of scale.
B) government regulation.
C) technological inferiority.
D) ownership of plentiful resources.

Accepted Answer

Economies of scale refer to the cost advantages that come with producing a large quantity of a good or service. This can make it difficult for new firms to enter the industry and compete with existing firms. As a result, a few large companies can dominate the market, creating an oligopoly. Government regulation, technological inferiority, and ownership of resources can all play a role in market concentration, but none are as significant as economies of scale.

Question 16

The market structure characterized by a few interdependent firms and barriers to entry is called:
A) monopolistic competition.
B) perfect competition.
C) oligopoly.
D) monopoly.

Accepted Answer

An oligopoly is a market structure where there are only a few interdependent firms that dominate the market, and entry into the market is restricted due to barriers such as high start-up costs or intellectual property rights. This results in the firms having significant market power and the ability to manipulate prices and output.

Question 17

In an oligopoly:
A) there are many sellers.
B) there are no barriers to entry.
C) firms recognize their interdependence.
D) total surplus is maximized.

Accepted Answer

In an oligopoly, there are typically only a few large firms in the market, which means that their actions have a significant impact on each other's profits. Therefore, these firms recognize their interdependence and often engage in strategic behavior such as price collusion or aggressive advertising to gain market share. Choices A and B are incorrect because an oligopoly implies a small number of sellers, and entry barriers may exist. Choice D is incorrect because oligopolies can result in deadweight loss and not always lead to total surplus maximization.

Question 18

The Herfindahl-Hirschman index equals _____ when _____ have/has _____% of the market.
A) 10 000;four firms each;25
B) 5 000;three firms each;33
C) 5 000;two firms each;50
D) 100 000;one firm;100

Accepted Answer

The formula for the Herfindahl-Hirschman index is the sum of squared market shares of all firms in the market. For option C, with two firms each having 50% of the market, the index is (0.50)^2 + (0.50)^2 = 0.25 + 0.25 = 0.50, which gives a HHI of 5,000. Therefore, option C is the correct answer. Option A would have a HHI of 10,000 and option B would have a HHI of 3,333. Option D, with one firm having 100% of the market, would have a HHI of 100,000.

Question 19

Oligopoly is a market structure characterized by:
A) independence in decision making.
B) interdependence: each firm's decision affects the profit of the other firms.
C) substantial diseconomies of scale.
D) a large number of small firms.

Accepted Answer

Oligopoly is characterized by interdependence, where the decisions of each firm affect the profits of the other firms in the market. Independence in decision making is more characteristic of a monopolistic competition or a pure competition market structure. Diseconomies of scale are not necessarily present in an oligopoly, and a large number of small firms is not a defining characteristic of this market structure.

Question 20

The market structure that is characterized by only a small number of producers is:
A) oligopoly.
B) perfect competition.
C) monopoly.
D) monopolistic competition.

Accepted Answer

An oligopoly is a market structure where there are only a few dominant firms that control a significant share of the market. This leads to less competition and greater control over the prices and output of goods and services by these dominant firms. Therefore, oligopoly is the best choice that fits the given definition.

Quiz 14: Oligopoly

Oligopoly is a market structure that is characterized by a ___ number of _ firms that produce ___ products.

Which scenario BEST describes an oligopolistic industry?

The sum of the squared market shares of each firm in an industry is the:

A firm that is in an oligopoly knows that its ___ affect its _ and that the ___ of its rivals will affect it.

An industry characterized by a few interdependent firms and by barriers to entry is called:

Oligopoly is a market structure that is characterized by a ___ number of _ firms producing ___ products.

Which Herfindahl-Hirschman index is MOST likely to indicate a perfectly competitive market?

An industry is dominated by a few firms.Each of these firms acknowledges that its own choices affect the choices of its rivals.Each firm also recognizes that its rivals' choices affect the decisions it makes.This industry is an example of:

An industry that is dominated by a few firms,each of which recognizes that its own choices can affect the choices of its rivals and vice versa,is:

The Herfindahl-Hirschman index is a measure of concentration found by:

To be called an oligopoly,an industry must have:

The largest Herfindahl-Hirschman index possible is _,and the industry is a(n) _.

In oligopoly,a firm must realize that:

To calculate the Herfindahl-Hirschman index (HHI) ,one must _ market share(s) of _ in the industry.

The MOST important source of oligopoly in an industry is:

The market structure characterized by a few interdependent firms and barriers to entry is called:

In an oligopoly:

The Herfindahl-Hirschman index equals ___ when _ have/has ___% of the market.

Oligopoly is a market structure characterized by:

The market structure that is characterized by only a small number of producers is: