CHAPTER 16 - Chapter16 Oligopoly 1 industry consisting...

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Chapter 16 Oligopoly 1. The commercial jetliner industry, consisting of Boeing and  Airbus, represents a. perfect competition. b. monopolistic competition. c. oligopoly. d. pure monopoly. ANSWER: c oligopoly. SECTION: 1 OBJECTIVE: 1 2. Which of the following  is a characteristic of oligopoly but NOT perfect competition? a. advertising and  sales promotion b. profit maximization  according  to the MR = MC rule c. firms being price takers rather than  price makers d. horizontal demand  curve and  marginal revenue  curve ANSWER: a advertising and  sales promotion SECTION: 1 OBJECTIVE: 1 3. Imperfectly competitive firms are characterized  by a. horizontal demand  curves. b. standardized  products. c. a large number  of small firms. d. price making ability. ANSWER: d price making ability. SECTION: 1 OBJECTIVE: 1 4. A firm in a monopolistically competitive market is similar to a monopolist in the sense that it a. must overcome significant barriers to entry. b. faces a downward- sloping demand  curve. c. has no barriers to entry or exit. d. it is only one seller of the good. ANSWER: b faces a downward- sloping demand  curve. SECTION: 1 OBJECTIVE: 1 5. The U.S. market for locomotives is divided  between  two producers: General Electric has 70 percent  of the market and  General Motors has 30 percent. This market is an example of a. monopolistic competition. b. a collusive monopoly. c. a duopoly. d. a cartel. ANSWER: c duopoly. SECTION: 1 OBJECTIVE: 1 93
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94 Chapter 16/Oligopoly 6. The cigarette industry  consists of large firms that compete vigorously by advertising heavily,  which is directed  at creating fantasy and  image. Economists would  characterize this industry  as a. perfectly competitive. b. monopolistically competitive. c. oligopoly. d. monopoly. ANSWER: c oligopoly. SECTION: 1 OBJECTIVE: 1 7. Cartels in the United  States are a. legal if price is competitively determined. b. legal if all firms in the industry  agree to the terms of the cartel. c. legal if all conditions of the cartel are made  public. d. illegal. ANSWER: d illegal. SECTION: 2 OBJECTIVE: 2 8. The application of game theory to economics allows us to understand  firm behavior in some forms  of oligopoly. Game theory suggests that in a two-firm industry, each firm will a. avoid pricing high when  the other prices low. b.
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CHAPTER 16 - Chapter16 Oligopoly 1 industry consisting...

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