SCAN0816_000 - Chapter Fifteen. Name: Date: 1. In an...

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Unformatted text preview: Chapter Fifteen. Name: Date: 1. 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. 2. Oligopoly is a market structure that is characterized by a: A) small number of interdependent firms producing identical or differentiated products. B) small number of independent firms producing identical or differentiated products. C) large number of relatively small independent firms producing differentiated products. D) large number of relatively small independent films producing identical products. 3. Oligopoly is a market stlucture characterized by: A) independence in decision making. B) uncertainty about the behavior of rival firms. C) substantial diseconomies of scale. D) a large number of small firms. 4. In oligopoly, a firm must realize that: A) what it does has no effect on the other firms in the industry. B) it must pursue policies while always remembering those policies will be ignored by other firms in the industry. C) it is in an industry in which another major firm may dominate, and the firm will need to judge its actions accordingly. D) collusion was made legal in 2004. 5. Which of the following scenarios 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 college has one bookstore selling textbooks to students. 6. Assume 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(n): A) monopoty. B) oligopoly. C) monopolistic competition. D) perfect competition. Chapter Fifteen Page 1 10. ll. 12. 13. . An industry with two firms producing is generaliy called: A) amonopoly. B) monopolistic competition. C) aduopoly. D) perfect competition. . An extreme case of oligopoly in which firms collude to raise joint profits is known as a: A) duopoly. B) cartel. C) dominant producer. D) price war. . When firms openly agree on price, output, and other decisions aimed at achieving monopoly profits, those firms are practicing: A) overt collusion. B) tacit coliusion. C) leadership price. D) competitive game. A cartel is an example of: A) price extortion. B) price leadership. C) overt coliusion. D) tacit collusion. When oligopolistic firms face production capacity constraints they: A) are more likely to engage in price competition. B) are more likely to engage in quantity competition. C) are likely to set price equal to marginal cost. D) will be unable to make positive economic profits. Game theory is commonly used to explain behavior in oligopolies, because oligopolies are characterized by: A) iarge profits in the long run. B) either homogeneous or heterogeneous products. C) interdependence. D) imperfect competition. The kinked demand curve model assumes that: A) rivals will follow a price increase but not a price decrease. B) rivals will follow a price decrease but not a price increase. C) the firm with the kicked demand curve will always behave noncooperativeiy. D) the firm with the kinked demand curve will always adopt a tit~for~tat strategy. Chapter Fifteen Page 2 14. 15. 16. 17. 18. 19. 20. Tacit collusion in practice is made more difficult to achieve: A) the larger the number of firms in the industry. B) the fewer the number of products being sold. C) the more similar the marginal costs of each firm. D) if customers have little or no bargaining power. When one firm responds to a rival's cheating by cheating and to a rival‘s cooperation by cooperating, that fnm is practicing a: A) dominant strategy. B) trigger strategy. C) c0nclusive Strategy. D) tit—for—tat strategy. Unwritten or unspoken understandings through which firms collude to restrict competition are called: A) cartelization. B) oligopolization. C) overt collusion. D) tacit collusion. Which of the following is true? A) Once an industry has achieved tacit collusion producers have an incentive to raise prices. Tacit collusion is legal in the United States. The fact that one firm changes its price shortly after another firm does is proof of tacit collusion. It is difficult to determine how much tacit collusion exists in a particular industry, hence tacit collusion remains hard to prosecute in the United States. B) C) D) A well-known example of an intemationai cartel is: A) Japan. B) OPEC. C) Exxon. D) General Motors. The study of behavior in situations of interdependence is known as: A) dominant strategies. B) game theory. C) Nash equilibrium. D) tacit collusion. Tacit coilusion’ is limited by which of the following factors? A) iarge numbers of firms B) simple products and pricing C) bargaining power of buyers D) large numbers of firms and bargaining power of buyers Chapter Fifteen Page 3 21. Price leadership occurs if: A) smaller films in an industry silently agree to charge the same price as the largest firm. B) two or more firms in an industry agree to fix the price at a given level. C) competition among a large number of small firms generates a stable market price. D) competition among a large number of small firms generates similar, but slightly different, prices. 22. Market power in the United States was often gained in the latter part of the nineteenth century by: A) formng trusts. B) the growth of competition. C) international arrangements with Russian and Japanese firms. D) opening up more industries to international trade. 23. The first law designed to curb monopoly power in the United States was the Act. A) Sherman Antitrust B) Clayton C) Federal Trade Commission D) Robinson-Patman 24. A major application of the Sherman Antitrust Act was in against A) 1880; the Ford Motor Company B) 1889; Bell C) 191 1; Standard Oil D) 1889; Bell and Standard Oil 25. In the U.S. economy, oligopoly is rare. A) True B) False 26. Cartels are illegal in the United States. A) True B) False 27. Each firm in a cartel has an incentive to break its word and produce more than the agreed quantity. A) True B) False 28. Antitrust policy refers to government: A) attempts to prevent the acquisition of monopoly power. B) attempts to encourage the exercise of monopoly power. C) encouragement of collusion in the marketplace. D) attempts to limit private enterprise. Chapter Fifteen Page 4 ...
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This note was uploaded on 02/03/2012 for the course ECONOMICS 202 taught by Professor Black during the Spring '08 term at Boise State.

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SCAN0816_000 - Chapter Fifteen. Name: Date: 1. In an...

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