Chap13OligMkt-1

Chap13OligMkt-1 - Chapter 13 STRATEGIC DECISION MAKING IN...

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Chapter 13: STRATEGIC DECISION MAKING IN OLIGOPOLY MARKETS Multiple Choice 13-1 What is the most important characteristic of oligopoly? a. firms have market power b. product differentiation c. barriers to entry d. interdependence of profits e. none of the above 13-2 In an oligopoly market, a. a firm must lower price in order to sell more output. b. each firm faces a demand curve that depends on how the firm’s rivals behave. c. a few firms account for a large portion of industry sales. d. both a and b e. all of the above 13-3 Oligopolists face interdependent profits because a. there are few firms in the market. b. the product is differentiated. c. industry sales are large. d. all of the above 13-4 Actions taken by oligopolists to plan for and react to actions of rival firms represent a. strategic behavior. b. interdependence. c. cooperative behavior. d. game theory. e. all of the above. 13-5 In game theory, a dominant strategy is a. a strategy used by a large firm to compete against smaller firms. b. a strategy followed by the price leader. c. a strategy involving a high risk but also a high return. d. a strategy that leads to the best outcome no matter what a rival does. e. none of the above 13-6 In game theory, what is a dominant strategy? a. A strategy that leads to the best possible outcome for both firms. b. Any strategy that leads to a Nash equilibrium. c. A strategy that yields a minimax outcome. d. A strategy that leads to the best outcome for a firm no matter what strategy the other chooses. e. none of the above Chapter 13 : STRATEGIC DECISION MAKING IN OLIGOPOLY MARKETS 253
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13-7 When participants in a game choose to take actions that represent a Nash equilibrium, a. no single participant has an incentive to change its action. b. each participant has chosen the best action possible, given what the others have chosen. c. no other set of actions could make ALL participants better off. d. both a and b e. all of the above 13-8 Interdependence occurs when a. firms take the actions of other firms into account when making price and output decisions. b. all firms in an industry are affected by the same general economic conditions, like consumer incomes and the unemployment rate. c. firms cooperate to increase profit. d. both a and b e. all of the above 13-9 Which of the following is an example of strategic entry deterrence? a. price reductions b. building excess capacity c. economies of scale d. both b and c e. both a and b 13-10 In a duopoly situation with two firms A and B, A's best-response curve a. gives A's profit-maximizing price given B's anticipated price. b. gives A's minimax solution. c. is derived based upon the underlying interdependence of firms A and B. d. both a and c e. all of the above 13-11 A form of strategic entry deterrence is a. forming a cartel.
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