182.
In a zero-sum game, the gains by one player will be exactly offset by the losses of the
other.
183.
In repeated games, players may be willing to accept lower payoffs in the short run in
exchange for greater net payoffs over the long run.
184.
In repeated games, credible threats are necessary for the players to reach a Nash
equilibrium.
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Di fficu l t y :
03 Hard
Learning Objective: 14–06 Utilize additional game-theory terminology and demonstrate
how to find Nash equilibriums in both simultaneous and sequential games.
Test Bank: I
Topic:
Game Theory and Strategic Behavior
185.
The first mover in a sequential game always has the advantage over the second mover.
Multiple Choice Questions
186.
Which two market structures tend to be more commonly observed in the real world?
A.
pure competition and pure monopoly
187.
Firms must consider the possible reaction of rivals to their own decisions and actions in
A.
monopolistic competition only.
188.
A defining characteristic of an oligopolistic market is that there are
A.
many buyers.
189.
The characteristic most closely associated with oligopoly is
D.
no control over price.
190.
The product in an oligopolistic market
A.
is assumed to be homogeneous.
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191.
The consumer Wi–Fi-service providers’ market is best described as a
A.
monopolistic competition.
192.
In the US market, people often refer to the “Big Three” in autos and the “Big Four” in
accounting.These terms suggest that these two industries are
A.
purely competitive.
193.
A unique feature of an oligopolistic industry is
A.
low barriers to entry.
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C.
diminishing marginal returns.
D. mutual interdependence.
194.
Mutual interdependence does not refer to which of the following?
A.
A firm must consider how rival firms would respond to its own decisions and actions.
195.
Mergers of firms in an industry tend to
A. transform monopolistic competition into pure competition.
196.
A major distinction between a monopolistically competitive firm and an oligopolistic
firm is that
A. one is a price taker and the other is a price maker.
197.
In which set of market models are there the most significant barriers to entry?
A.
monopolistic competition and pure competition
198.
Mutual interdependence means that each firm in an oligopoly
A. faces a perfectly inelastic demand for its product.
199.
Mutual interdependence means that
D.
a firm‘s revenues are affected by other firms‘ demand for its product.
200.
In which market model is there mutual interdependence?
A.
monopolistic competition
201.
A firm in an oligopoly is similar to a monopoly in that
A. both firms do not face competition from others.
202.
Which cannot be a characteristic of an oligopolistic industry?
A.
differentiated products
203.
Which statement about oligopoly is false?
D.
One firm‘s behavior is a function of what its rivals do.
204.
A high concentration ratio indicates that
A.
the industry is highly profitable.
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Topic:
Oligopoly
205.
A low concentration ratio means that
A.
there is a low probability of entering the industry.
206.
The larger the Herfindahl index, the
A.
less the degree of import competition in an industry.
207.
The increased use of plastic bags instead of paper bags in grocery stores and retail shops
is an example of
A.
overt collusion.
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Learning Objective: 14–01 Describe the characteristics of oligopoly.
Test Bank: II
Topic:
Oligopoly
208.
Assume that an industry is significantly affected by import competition from foreign
suppliers. Taking this factor into account, it would mean that
A. the Herfindahl index would be significantly higher in that industry because there are more
firms in the industry.
209.
The Herfindahl index is a measure of
A.
profitability in an industry.
210.
You are told that the four-firm concentration ratio in an industry is 20. Based on this
information you can conclude that
A.
each of the top four firms has 20 percent of industry sales.
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Di fficu l t y :
02 Medium
Learning Objective: 14–01 Describe the characteristics of oligopoly.
Test Bank: II
Topic:
Oligopoly
211.
Industry Y is dominated by five large firms that hold market shares of 20, 20, 25, 25, and
10. The Herfindahl index for this industry is
A. 1,560.
212.
Industry Y is dominated by five large firms that hold market shares of 20, 25, 15, 10, and
25 percent. The four-firm concentration ratio for this industry is
A.
70 percent.
213.
The Herfindahl index for an industry is 2,550. Which of the following sets of market
shares and industry with four firms would produce such an index?
A. 20, 20, 30, and 30
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B. 25, 25, 25, and 25
C. 20, 25, 25, and 30
D. 10, 20, 30, and 40
214.
Which of the following has not contributed to the development of oligopolies in the U.S.
economy?
A.
mergers
215.
Interindustry competition refers to the fact that
A.
oligopolistic producers establish a common price for their products.
216.
One major problem with four-firm concentration ratios is that they fail to take into
account
D.
mutual interdependence.
217.
The four–firm concentration ratio for the national industry does not capture the effects of
all of the following, except
A.
localized markets when transportation costs are high.
218.
An oligopolistic firm tends to have less control over its own pricing decisions than a firm
in
A. pure competition or monopolistic competition.
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Di fficu l t y :
02 Medium
Learning Objective: 14–01 Describe the characteristics of oligopoly.
Test Bank: II
Topic:
Oligopoly
219.
The study of how people behave and decide in strategic situations is called
D.
product differentiation.
220.
When firms in an industry reach an agreement to fix prices, divide up market share, or
otherwise restrict competition, they are practicing the strategy of
A.
interindustry competition.
221.
Game theory, which is used in studying oligopoly behavior, originated from the study of
games such as the following, except
D.
bridge.
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Learning Objective: 14–02 Discuss how game theory relates to oligopoly.
Test Bank: II
Topic:
Oligopoly Behavior: A Game-Theory Overview
222.
Collusion refers to a situation where rival firms decide to
A.
compete aggressively against each other.
223.
In game theory, each player is assumed to have the following, except
A.
alternative strategies or actions.
224.
In game theory, a “payoff matrix” is a table that shows the following, except
A. the profits to each firm or player that would result from various strategycombinations.
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others.
225.
Which one of the following is not illustrated by the so-called Prisoner’s Dilemma?
A. Each player in the game ends up with results that depend on the other player’s action.
226.
In a duopoly, if one firm increases its price, then the other firm can
D.
decrease its price and thus decrease its market share.
227.
Answer the question based on the payoff matrix for a duopoly in which the numbers indicate
the profit in millions of dollars for each firm. If Firm A adopts the low-price strategy,
then
Firm B would adopt the
228.
Answer the question based on the payoff matrix for a duopoly in which the numbers indicate
the profit in millions of dollars for each firm. Assume that firm B adopts a low-price
strategy,
while firm A maintains a high-price strategy. Compared to the results from a high-price
strategy for both firms, firm B will now
A.
lose $75 million in profit and firm A will gain $50 million in profit.
229.
Answer the question based on the payoff matrix for a duopoly in which the numbers indicate
the profit in millions of dollars for each firm. If the two firms collude to maximize joint
profits, the total profits for the two firms will be
A.
$350 million.
230.
Answer the question based on the payoff matrix for a duopoly in which the numbers indicate
the profit in millions of dollars for each firm. If the two firms collude to maximize joint
profits,
A.
there will be an incentive for Firm A to cheat and earn more if Firm B does not switch
strategies.