Question 1

-Refer to the above figure. The figure gives the payoff matrix for two individuals who are being accused of robbing a bank together. What is dominant strategy for Bob?

Accepted Answer

A)  Confess.
B)  Don't confess.
C)  Flip a coin to decide what to do.
D)  There is no dominant strategy.E) B) and C)
F) A) and D)

Question 2

When a consumer's willingness to buy a good or service is influenced by the number of people who have purchased that good or service, this is called

Accepted Answer

A)  a switching cost.
B)  an opportunity cost.
C)  a network effect.
D)  an advertising gimmick.E) None of the above
F) A) and C)

Question 3

In a two-sided market, a firm that provides services that link together groups of consumers and producers is called a(n)

Accepted Answer

A)  end user.
B)  platform.
C)  monopoly.
D)  tit-tat.E) A) and B)
F) None of the above

Question 4

Which of the following is not true about a cartel?

Accepted Answer

A)  Members earn economic profits.
B)  Members experience large economies to scale relative to industry demand.
C)  Cartels will set common prices for their members.
D)  Members of a cartel will have production quotas.E) B) and C)
F) A) and C)

Question 5

Distinguish between a horizontal merger and a vertical merger.

Accepted Answer

A horizontal merger is a merge...

Question 6

In industries in which strong network effects exist, which industry structure is likely to emerge?

Accepted Answer

A)  Perfect competition
B)  Monopoly
C)  Monopolistic competition
D)  OligopolyE) None of the above
F) B) and D)

Question 7

-Refer to the above figure. Ajax and Greenco are oligopolists. Above you are given the payoff matrix for the two firms giving the payoff associated with different pricing strategies. What is the best strategy for Greenco if Ajax decides on charging a low price?

Accepted Answer

A)  High price.
B)  Low price.
C)  There is no best strategy.
D)  Not enough information is given to determine the best strategy.E) A) and B)
F) C) and D)

Question 8

-Refer to the above table. The four-firm concentration ratio is

Accepted Answer

A)  85.8 percent.
B)  75 percent.
C)  72.5 percent.
D)  59.2 percent.E) A) and B)
F) C) and D)

Question 9

A game in which all the players are worse off at the end of the game is a

Accepted Answer

A)  negative-sum game.
B)  dominant strategy game.
C)  positive-sum game.
D)  noncooperative game.E) A) and C)
F) None of the above

Question 10

The prisoners' dilemma is a game in which

Accepted Answer

A)  the dominant strategy for all participants is to choose a strategy that makes them all worse off.
B)  the dominant strategy is to cooperate.
C)  only one of the firms is able to make above-normal profits.
D)  each firm, in making decisions on the basis of its own self-interest, also makes decisions that benefit the group as a whole.E) A) and C)
F) All of the above

Question 11

Which of the following is true of an oligopoly?

Accepted Answer

A)  They engage in nonprice competition.
B)  They do not react to actions of their competitors.
C)  Each firm produces a small portion of the total output.
D)  Firms do not care what their competitors do.E) All of the above
F) A) and B)

Question 12

Long-run economic profits are possible under

Accepted Answer

A)  perfect competition and oligopoly.
B)  monopolistic competition and monopoly.
C)  oligopoly and monopoly.
D)  monopolistic competition and oligopoly.E) B) and D)
F) A) and C)

Question 13

In a two-sided market, the platform may different prices to different group of end users due to

Accepted Answer

A)  the budget constraints of end users.
B)  substitution effects between the end users and the platform.
C)  different network effects between groups of end users.
D)  a lack of product differentiation in the products sold.E) B) and C)
F) A) and D)

Question 14

In oligopoly, any action by one firm to change price, output, or quality causes

Accepted Answer

A)  a reaction by other firms.
B)  no reaction from the other firms.
C)  a profit gain for the other firms.
D)  loss of market share by the acting firm.E) B) and C)
F) A) and D)

Question 15

The situation of oligopoly suggests

Accepted Answer

A)  many firms compete in an industry.
B)  mergers have not occurred.
C)  interdependence among firms.
D)  no barriers to entry exist.E) A) and B)
F) None of the above

Question 16

Based on the table below, the four-firm concentration ratio equals what percentage of annual sales?

Accepted Answer

A)  33 percent
B)  40 percent
C)  60 percent
D)  100 percentE) A) and C)
F) A) and B)

Question 17

Which of the following does NOT help explain why oligopolies exist?

Accepted Answer

A)  Economies of scale
B)  Mergers
C)  Product homogeneity
D)  Barriers to entryE) B) and C)
F) None of the above

Question 18

Which of the following statements about concentration ratios is correct?

Accepted Answer

A)  A high concentration ratio indicates that the industry is a monopoly.
B)  A high concentration ratio indicates that the industry is monopolistically competitive.
C)  A high concentration ratio suggests that the industry is characterized by strategic independence.
D)  A high concentration ratio suggests that the industry is characterized by strategic dependence.E) B) and C)
F) None of the above

Question 19

As the definition of products narrows (i.e., becomes more specific) , the concentration ratio

Accepted Answer

A)  is not valid.
B)  tends to decrease.
C)  tends to increase.
D)  does not change in any predictable manner.E) All of the above
F) A) and B)

Question 20

A tendency for a good to come into favor with consumers because other consumers have chosen to buy the item is

Accepted Answer

A)  price-leadership.
B)  negative-sum game.
C)  positive market feedback.
D)  negative market feedback.E) A) and B)
F) A) and C)

Exam 26: Oligopoly and Strategic Behavior

-Refer to the above figure. The figure gives the payoff matrix for two individuals who are being accused of robbing a bank together. What is dominant strategy for Bob?

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Long-run economic profits are possible under

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Distinguish between a horizontal merger and a vertical merger.

Correct AnswerverifiedA horizontal merger is a merge...View AnswerShow Answer

Which of the following is not true about a cartel?

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A game in which all the players are worse off at the end of the game is a

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In a two-sided market, a firm that provides services that link together groups of consumers and producers is called a(n)

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As the definition of products narrows (i.e., becomes more specific) , the concentration ratio

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-Refer to the above table. The four-firm concentration ratio is

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The situation of oligopoly suggests

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When a consumer's willingness to buy a good or service is influenced by the number of people who have purchased that good or service, this is called

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A tendency for a good to come into favor with consumers because other consumers have chosen to buy the item is

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In a two-sided market, the platform may different prices to different group of end users due to

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Based on the table below, the four-firm concentration ratio equals what percentage of annual sales?

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-Refer to the above figure. Ajax and Greenco are oligopolists. Above you are given the payoff matrix for the two firms giving the payoff associated with different pricing strategies. What is the best strategy for Greenco if Ajax decides on charging a low price?

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Which of the following statements about concentration ratios is correct?

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The prisoners' dilemma is a game in which

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In oligopoly, any action by one firm to change price, output, or quality causes

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Which of the following does NOT help explain why oligopolies exist?

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Which of the following is true of an oligopoly?

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In industries in which strong network effects exist, which industry structure is likely to emerge?

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A horizontal merger is a merge...
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