76.
Refer to the diagram for a non collusive oligopolist. We assume that the firm is initially in
equilibrium at point E, where the equilibrium price and quantity are P and Q. If the firm‘s
rivals will ignore any price increase but match any price reduction, the firm‘s marginal revenue
curve will be (moving from left to right)
A. D1ED2.
77.
Refer to the diagram for a noncollusive oligopolist. We assume that the firm is initially in
equilibrium at point E, where the equilibrium price and quantity are P and Q. If the firm’s
rivals will ignore any price increase but match any price reduction, over what range might
marginal cost rise without disturbing equilibrium price and output?
A. bE
78.
The diagram portrays
A.
pure competition.
79.
Refer to the diagram. Equilibrium output is
A.
j.
80.
Refer to the diagram. Equilibrium price is
A. e.
81.
Refer to the diagram. This firm’s demand and marginal revenue curves are based on the
assumption that
A.
the firm has no immediate rivals.
14–47
82.
Refer to the diagram. In equilibrium the firm
C.
is incurring a loss.
D.
is realizing an economic profit of bd per unit.
83.
OPEC provides an example of
A.
an unwritten, informal understanding.
14–48
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written consent of McGraw-Hill Education.
D. a monopolistically competitive industry.
84.
Oligopolistic firms engage in collusion to
A.
minimize unit costs of production.
85.
The likelihood of a cartel being successful is greater when
A. firms are producing a differentiated, rather than a homogeneous, product.
86.
Cartels are difficult to maintain in the long run because
A. they are illegal in all industrialized countries.
87.
Three major means of collusion by oligopolists are
D.
informal understandings, P = MC pricing, and mutual interdependence.
88.
If the firms in an oligopolistic industry can establish an effective cartel, the resulting output
and price will approximate those of
D.
an industry with a low four-firm concentration ratio.
14–50
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written consent of McGraw-Hill Education.
kinked-demand theory, collusive pricing, and price leadership.
Test Bank: I
Topic:
Three Oligopoly Models
89.
In the United States cartels are
A. quite common in industries that produce nondurable goods.
90.
One would expect that collusion among oligopolistic producers would be easiest to
achieve in which of the following cases?
A.
a rather large number of firms producing a differentiated product
91.
Suppose the only three existing manufacturers of video game players signed a written
contract by which each agreed to charge the same price for products and to distribute their
products only in the geographical area assigned them in the contract. This best describes
A.
cost-plus pricing.
14–51
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written consent of McGraw-Hill Education.
D. price leadership.
92.
Suppose firms in a collusive oligopoly decide to establish their prices at a level that
discourages new rivals from entering the industry. This is called
A.
mutual interdependence.
93.
If the several oligopolistic firms that compose an industry behave collusively, the resulting
price and output will most likely resemble those of
A. bilateral monopoly.
94.
Other things equal, cartels and similar collusive arrangements are easier to establish and
maintain
D.
when the number of firms is relatively large.
95.
A breakdown in price leadership leading to successive rounds of price cuts is known as
D.
price discrimination.
96.
Which of the following nations is not a member of the OPEC oil cartel?
A.
Iraq
14–53
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written consent of McGraw-Hill Education.
Blooms: Understand
Di f fi c ul t y :
02 Medium
Learning Objective: 14–03 Explain the three main models of oligopoly pricing and output:
kinked-demand theory, collusive pricing, and price leadership.
Test Bank: I
Topic:
Three Oligopoly Models
97.
Which of the following companies was not fined in 2011 for attempting to run an
international cartel and fix prices?
D.
Whirlpool
98.
Secret conspiracies to fix prices are examples of
A.
cartels.
99.
In 2014, advertising expenditures in the United States were
14–54
D. about $539 billion.
100.
Advertising can enhance economic efficiency when it
A.
increases brand loyalty.
101.
Advertising can enhance economic efficiency when it
A. increases brand loyalty.
102.
Advertising can impede economic efficiency when it
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written consent of McGraw-Hill Education.
A. increases entry barriers.
B.
reduces brand loyalty.
C.
enables firms to achieve substantial economies of scale.
D.
increases consumer awareness of substitute products.
103.
Advertising can impede economic efficiency when it
A.
reduces entry barriers.
104.
We would expect a cartel to achieve
A.
both allocative efficiency and productive efficiency.
14–56
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written consent of McGraw-Hill Education.
Test Bank: I
Topic:
Oligopoly and Efficiency
105.
Suppose that a particular industry has a four-firm concentration ratio of 85 and a
Herfindahl index of 3,000. Most likely, this industry would achieve
A.
both productive efficiency and allocative efficiency.
106.
Suppose that an industry is characterized by a few firms and price leadership. We would
expect that
D. marginal revenue would exceed marginal cost.
107.
The conclusion that oligopoly is inefficient relative to the competitive ideal must be
qualified because
A. industry price leaders often select a price equal to marginal cost.
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written consent of McGraw-Hill Education.
caused by monopoly power.
D.
many oligopolists sell their products in monopolistically competitive or even purely
competitive industries.
108.
A simultaneous game is said to exist when
A. firms are playing pricing games in different markets at the same time.
109.
A positive-sum game occurs
D.
whenever the payoffs to the two players are equal.
110.
The payoff matrix represents
A.
a zero-sum game.
111.
In this payoff matrix,
D.
Beta has a dominant strategy, but Alpha does not.
112.
In the payoff matrix shown,
A.
neither firm has a dominant strategy.