200810021151170 - Microeconomics Testbank 1,...

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Microeconomics – Testbank 1, (Hubbard/O’Brien) Chapter 13: Oligopoly: Firms in Less Competitive Markets MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Members of OPEC can increase their income by selling more oil than its output quota because: A) the demand for oil is perfectly elastic. B) by selling more at OPEC's cartel price, a member will automatically earn more income. C) each member's demand is more elastic than the total demand for oil. D) the demand for oil is inelastic, total revenue increases. Answer: C Diff: 3 Page Ref: 428 2) The prisoners' dilemma results in a noncooperative equilibrium because: A) each player is uncertain how other players will play the game. B) each player has a dominant strategy to play a certain way regardless of what other players do. C) each player had agreed before the game started to maximize total payoff. D) none of the above. Answer: B Diff: 2 Page Ref: 422 3) Oligopolies are difficult to analyze because: A) demand and cost curves do not exist for these types of industries. B) how oligopoly firms respond to a price change by a rival is uncertain. C) the firms are so large. D) oligopolies are a recent development so economists have not had time to develop models. Answer: B Diff: 2 Page Ref: 416 4) As word processing on personal computers expanded, sales of typewriters began to disappear due to: A) the threat of competition from new entrants. B) bargaining power of suppliers. C) competition from substitute goods or services. D) bargaining power of buyers. Answer: C Diff: 1 Page Ref: 430 5) Some firms are able to earn profits by competing with a dominant firm like Walmart by: A) finding "niches" that Walmart does not currently occupy. B) aggressively buying up smaller rivals to match Walmart in its buying power. C) moving into other industries that sell products that do not compete with Walmart. D) offering the same products and services. Answer: A Diff: 2 Page Ref: 434 6) A decision tree is good at analyzing: A) prisoners' dilemma games. B) repeatable games. C) sequential games. D) cooperative equilibrium games. Answer: C Diff: 2 Page Ref: 428
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7) A dominant strategy in a game theory analysis of oligopoly behavior is: A) the strategy that a firm is forced into following by government policy. B) colluding with rivals to maximize joint profits. C) a strategy that is the best for a firm, no matter what strategies other firms use. D) deciding what to do after all rivals have chosen their own strategies. Answer: C Diff: 2 Page Ref: 421 8) Important in determining the extent of competition in an industry is: A) the scale of plant where long run average cost is minimized relative to market demand.
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This note was uploaded on 05/10/2010 for the course ECO 201 taught by Professor Mikeadkins during the Spring '08 term at KCTCS.

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200810021151170 - Microeconomics Testbank 1,...

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