246)
After participating members of a cartel form an agreement on common prices and output quotas,
then an individual firm can increase its own profits by
246)
A)
increasing prices.
B)
increasing production.
C)
leaving the cartel.
D)
incurring higher input costs.
247)
Cartel agreements are more likely to break down when
247)
A)
participating firms earn huge profits.
B)
there are few variations in market demand.
C)
new firms enter the market.
D)
none of the above.
C
248)
A tendency for a good to come into favor with consumers because other consumers have chosen to
buy the item is
248)
A)
price–leadership.
B)
negative–sum game.
C)
positive market feedback.
D)
negative market feedback.
C
249)
The merger of two pizza restaurant chains would be an example of
249)
A)
a horizontal merger.
B)
a conglomerate merger.
C)
an independent merger.
D)
a vertical merger.
A
250)
In a cartel, firms jointly act as
250)
A)
a monopolistic competitive firm.
B)
an oligopolistic firm.
C)
a perfectly competitive firm.
D)
a monopoly firm.
D
B
251)
In which market structures does a firm have at least some ability to set the market price?
251)
A)
monopolistic competition, oligopoly and monopoly
B)
perfect competition and monopolistic competition
C)
oligopoly and monopoly
D)
monopolistic competition and oligopoly
252)
A local utility is an example of
252)
A)
perfect competition.
B)
oligopoly.
C)
monopoly.
D)
monopolistic competition.
C
Explanation:
253)
Within a game theory model, if a change in decision–making raises corporation A’s profits by $50
and lowers corporation B’s profits by $60, the game is a
253)
A)
positive–sum game.
B)
zero–sum game.
C)
cooperative game.
D)
negative–sum game.
D
Explanation:
254)
The number of firms in an oligopolistic industry
254)
A)
must be small enough that firms are interdependent.
B)
must be large enough for firms to be independent.
C)
must be less than 10.
D)
must be less than 20.
A
Explanation:
255)
Oligopoly is a situation when there
255)
A)
are too many firms in the industry and there is excess capacity.
B)
are a few large firms in the industry.
C)
is one firm in the industry that is fairly large.
D)
is one giant firm and many smaller firms forming a competitive fringe.
B
Explanation:
A
Explanation:
256)
The college textbooks market is an example of
256)
A)
perfect competition.
B)
oligopoly.
C)
monopoly.
D)
monopolistic competition.
257)
If five firms of similar sizes join to form a cartel, then it is most likely that
257)
A)
they will collectively produce less than before.
B)
all five firms as a group will have falling profits, but increased output.
C)
all five firms will earn the same profits as before.
D)
they will charge a common, lower market price.
A
258)
Game theory would classify a cartel under the topic of
258)
A)
noncooperative games.
B)
dominant–strategy games.
C)
zero–sum games.
D)
cooperative games.
D
259)
In industries in which strong network effects exist, which industry structure is likely to emerge?
259)
A)
monopoly
B)
oligopoly
C)
perfect competition
D)
monopolistic competition
B
260)
Which of the following is a characteristic of oligopoly?
260)
A)
only a few firms in the industry
B)
zero economic profits in the short run
C)
mutual firm independence
D)
marginal cost pricing
A
B
261)
Sunil has decided not to purchase another can of Stosh because his friends laughed at him the last
time he purchased some. Stosh is no longer a popular item. Sunil’s action is known as
261)
A)
negative–sum game.
B)
price–leadership.
C)
positive market feedback.
D)
negative market feedback.
262)
All of the following are characteristics of an oligopoly EXCEPT
262)
A)
small number of firms.
B)
high barriers to entry.
C)
interdependence.
D)
diseconomies of scale over all ranges of output.
D
263)
The analytical framework in which two or more firms compete for certain payoffs that depend on
the strategy that the others employ is
263)
A)
network effect.
B)
a horizontal merger.
C)
game theory.
D)
the concentration ratio.
C
264)
All of the following are reasons for an oligopoly to occur EXCEPT
264)
A)
economies to scale.
B)
barriers to entry.
C)
merger.
D)
independence among firms.
D
D
265)
Refer to above figure, which represents a duopoly industry. What would be the likely total industry
payoff or profit?
265)
A)
$9 million
B)
$14 million
C)
$10 million
D)
$8 million
E)
zero
266)
In which market structures is the firm able to earn long–run economic profits?
266)
A)
perfect competition and monopolistic competition
B)
oligopoly and monopoly
C)
monopolistic competition and oligopoly
D)
monopolistic competition, oligopoly and monopoly
267)
Horizontal merger occurs when
267)
A)
two firms merge where one had sold its output to the other as an input.
B)
the merger moves the combined firm onto the horizontal portion of its long–run average cost
curve.
C)
two firms producing a similar product merge.
D)
two firms merge where each is about the same size.
268)
After participating members of a cartel form an agreement on common prices and output quotas,
then an individual firm can increase its own profits by
268)
A)
paying its employees higher wages.
B)
advertising.
C)
decreasing production.
D)
decreasing prices.
269)
Which of the following statements concerning the prisoner’s dilemma is TRUE?
269)
A)
The player who moves last will always win.
B)
Confessing is the dominant strategy for both players.
C)
The player who moves first will always win.
D)
Neither player will pick the dominant strategy.
B
270)
In which market structures do firms earn long–term profits of zero?
270)
A)
perfect competition and monopolistic competition
B)
monopolistic competition and oligopoly
C)
oligopoly and monopoly
D)
perfect competition and monopoly
A
271)
Joe’s hotdog stand merges with a company that supplies the condiments to Joe’s. This is an example
of
271)
A)
horizontal merger.
B)
vertical merger.
C)
concentration ratio.
D)
conglomerate merger.
B
D
272)
Refer to the above table. The four–firm concentration ratio is
272)
A)
59.2 percent.
B)
85.8 percent.
C)
72.5 percent.
D)
75 percent.
273)
The market power of a firm refers to its ability to
273)
A)
affect the market price for its industry’s output.
B)
make a profit even when other firms in the industry are making losses.
C)
control its own output level while keeping its price the same as the prices charged by other
firms.
D)
erect entry barriers in the industry.
274)
Refer to the above payoff matrix (in years of sentence) for two people (Bo and Max) charged for
robbery. Which of the following is the outcome of the dominant strategy without cooperation?
274)
A)
Bo confesses while Max does not confess.
B)
Both Bo and Max do not confess.
C)
Bo does not confess while Max confesses.
D)
Both Bo and Max confess.
275)
An online dating firm is
275)
A)
an end user in a matchmaking market.
B)
an end user in a shared–input market.
C)
a platform in a shared–input market.
D)
a platform in a matchmaking market.
276)
When network effects are important, then an industry can experience
276)
A)
prince–leadership.
B)
a zero–sum game.
C)
a vertical merger.
D)
positive market feedback.
277)
In which market structure does a firm have the LEAST influence over the market price?
277)
A)
monopolistic competition
B)
perfect competition
C)
monopoly
D)
oligopoly
278)
An action that is the best choice under all conditions is known as the
278)
A)
profit–maximizing strategy.
B)
prisoner’s dilemma.
C)
dominant strategy.
D)
tit–for–tat strategy.
279)
As the definition of products narrows (i.e., becomes more specific), the concentration ratio
279)
A)
is not valid.
B)
does not change in any predictable manner.
C)
tends to decrease.
D)
tends to increase.
280)
A cartel most likely forms in
280)
A)
a perfectly competitive market.
B)
a heavily regulated industry.
C)
an oligopolistic market.
D)
a monopolistically competitive market.
281)
An oligopoly is a market situation in which
281)
A)
there are very few sellers and they recognize their strategic dependence on one another.
B)
all the sellers act independently of the others.
C)
there are many firms producing differentiated products.
D)
there is a single firm producing several varieties of a product.
282)
If a firm is an oligopolist, which is NOT true?
282)
A)
It is one of a relatively small number of firms dominating its industry.
B)
It is engaged in a strategic game.
C)
It can sell all the units it wants at the going market price.
D)
It must pay attention to other firms’ prices.
283)
When oligopolistic firms in an industry form a cartel, then it is most likely that
283)
A)
both industry output and prices will decrease.
B)
industry output will decrease while prices will increase.
C)
both industry output and prices will increase.
D)
industry output will increase while prices will decrease.
284)
Any rule that is used to make a choice is
284)
A)
positive–sum game.
B)
zero–sum game.
C)
strategy.
D)
negative–sum game.
285)
In which market structures do firms engage in nonprice competition?
285)
A)
perfect competition and monopolistic competition
B)
monopolistic competition and oligopoly
C)
oligopoly and monopoly
D)
perfect competition and monopoly
286)
When Goodyear increases its production when Michelin reduces its production, Goodyear is
playing a
286)
A)
non–cooperative game.
B)
reaction function game.
C)
cooperative game.
D)
negative–sum game.
287)
If three firms of similar sizes join to form a cartel, then it is most likely that
287)
A)
all three firms will earn zero profits.
B)
all three firms will stop producing.
C)
they will charge a common, higher market price.
D)
they will collectively produce more than before.
288)
A noncooperative game is
288)
A)
the manner in which one oligopolist reacts to a change in price made by another oligopolist in
the industry.
B)
companies colluding in order to make higher than competitive rates of return.
C)
a game in which firms will not negotiate in any way.
D)
when plans made by firms are known as game strategies.
289)
Unrestricted entry and exit into the market is found in
289)
A)
monopolistic competition and oligopoly.
B)
perfect competition, monopolistic competition and oligopoly.
C)
perfect competition and oligopoly.
D)
perfect competition and monopolistic competition.
290)
The joining of firms that are producing or selling a similar product is
290)
A)
a vertical merger.
B)
always an illegal merger.
C)
a horizontal merger.
D)
a conglomerate merger.
291)
Which of the following is LEAST likely to be a reason for firms to form a cartel?
291)
A)
to maximize profits of the cartel
B)
to set common prices among firms in the cartel
C)
to cut back output of the cartel
D)
to raise competition among firms in the cartel